My Blog

Category: Finance

  • Cook County’s New Business Killers, a/k/a Taxes

    Cook County Board President Toni Preckwinkle’s proposed budget calls for a 1.25 percent tax on businesses that buy “non-titled” items like office supplies, equipment, building materials and even artwork from outside the county’s borders.  …

    County businesses would be allowed to purchase these goods up to $2,500 without any penalty, county officials said. The businesses are responsible for self-reporting the purchases to the county’s revenue department. A Preckwinkle spokesman said the county expects most businesses will comply.  …

    The tax is among several initiatives Preckwinkle announced Thursday during a budget presentation, which also called for an additional $1 tax per pack on cigarettes, a 5-cent tax on bullets and an additional $25 tax on gun purchases.

    “We’re proposing (these taxes) to subsidize health care,” Preckwinkle said. “Cigarette smoking is the No. 1 cause of preventable disease and gun violence is incredibly expensive.”

    The cigarette tax is expected to generate $25.6 million additional revenue in the coming year, and the taxes on guns and bullets are anticipated to bring the county an extra $1 million over the course of 2013.

    via Daily Herald.

    Shear insanity.  There are so many problems here it’s hard to know where to begin.

    As to the increase in the cigarette tax… this is a proven loser.  In 2006 the county earned over $200 million annually from cigarette taxes.  Then they doubled the tax.  Revenue fell to around $131 million.  Now she wants to raise the tax again… that’s the worst thing you can do.  If you want more revenue from cigarettes you need to LOWER the tax rate, not raise it.  The problem here is that Preckwinkle, like all Democrats, do not understand or even believe in the Laffer Curve.  They’re honestly just dumb that way.

    How about this tax on bullets?  Well I currently buy a box of 100 rounds out at the Wal-Mart in Villa Park for about $30 + sales tax, or around $33.  Now Preckwinkle wants to add $5 to that box.  Guess what Toni?  I will NOT be buying my ammo in Cook County anymore.  So you’re not going to raise $5 from me… you’re going to lose the $3 in sales tax.  Your “bullet tax” is going to cost the County money…. Lots of money.  Like the cigarette tax, this idea is a net loser.  You know what else, you won’t even be able to claim that I “use” the product (in this case bullets) in Cook County b/c pretty soon all the shooting ranges in the county will go out of business.  So I’ll go shoot in Indiana.  That will be more tax revenue lost.

    Lastly, what is up with this office supply tax?  Preckwinkle actually has the stones to call this tax “pro-business” thinking that people will simply comply and buy all there stuff from within the county.  That’s laughable.  She’s such a fool.  How about this Toni; ya think that someone might just open their business in Will, DuPage, or Lake county instead of Cook County?  Guess what Toni, you just made all the office buildings on the North side of Lake Cook road more valuable than the ones on the South side.  Same goes for 191st Street on the south.  You’re now creating another incentive for people to (a) open their businesses outside the county, and (b) move their businesses outside the county.  This tax will cost many many times more than whatever revenue it brings in.

    Cook County needs new leadership or it’s going to die.

     

  • Censorship: This is How it Begins

    Spain’s government is drafting a law that bans the photographing and filming of members of the police. The Interior Ministry assures they are not cracking down on freedom of expression, but protecting the lives of law enforcement officers.  …

    ­The new Citizen Safety Law will prohibit “the capture, reproduction and editing of images, sounds or information of members of the security or armed forces in the line of duty,” said the director general of the police, Ignacio Cosido. He added that this new bill seeks to “find a balance between the protection of citizens’ rights and those of security forces.”

    The dissemination of images and videos over social networks like Facebook will also be punishable under the legislation.

    via RT.

    “Oh it could never happen here.”  That’s what the Spanish used to think.  Now look at them.

    Note the language of the law. It’s the Citizen Safety Law.  Bullshit!  It has nothing to do with the safety of citizens.  It about making sure that people do not record the unlawful acts of their own government.

    In case you don’t know, Spain is going through a tough time right now because for years and years they spend more money than the had.  They go too far into debt and now they have to pay the bills.  The austerity measures are not very popular.  So people have been taking to the streets.  The government don’t like that.

    Keep this in mind as we start having to pay down our own debt.  Something is going to have to give… People are going to take to the streets.  There may very well be some violent confrontations between people and police.  Those confrontations need to be public.  Not limited to what the government, a/k/a The Ministry of Truth, tells us what happened.

    It can happen there… it can happen here.  Prepare yourself.

  • The Fiscal Entitlement Cliff

    The U.S. Census Bureau says 108 million Americans live in households where at least one person participates in a means-tested program. We estimate that 80 million are the primary recipients….

    Since the president took office:

    • Medicaid is up from 46.9 million to 56 million people.

    • Disability beneficiaries are up from 7.5 million to 8.8 million.

    • The food stamp program has grown from 32 million Americans to 47 million.

    Add to that 80 million beneficiaries 40 million Americans age 65 or older on Social Security and Medicare (9 million of the 49 million on Medicare, including some under age 65, also receive means-tested benefits).

    That 120 million does not include the numerous smaller entitlement programs.

    Put them all together, and a number approaching half of the country participates in an entitlement program.

    Now add in the 16 million new Medicaid beneficiaries, thanks to ObamaCare, plus an estimated 12 million people who enter the health insurance exchanges by 2014, where most will receive federal subsidies.

    The budget implications of these programs are huge. For fiscal 2012, America spent $2.2 trillion of its $3.7 trillion budget on entitlement programs — $400 billion less than the $2.6 trillion in gross annual revenues.

    Oh, and interest on the federal debt was $220 billion.

    Thus, the cost of entitlement programs plus interest on the debt are nearly equal to total federal revenues today.

    Virtually everything else the government does is with borrowed, or printed, money.

    via Investors.com.

    I realize that this is all a little hard to understand for a lot of people.  So to put it in easy to understand terms:

    This is like living on a credit card — spending 50% more money than you actually earn — and then dying and leaving the bill for your kids.

  • CTA Scam Sucks Millions in Taxpayer Funds

    It is after all the Chicago way.

    The CTA has potentially inflated by up to $150 million the federal taxpayer money it received since as far back as 1982 by “fraudulently over-reporting” the number of miles CTA buses travel while in service, according to a new report by a little-known watchdog group.

    In its report, titled “A bus tour of Chicago-style fraud,” Washington-based Cause of Action alleged that CTA officials reaped millions in extra federal money that the agency was not entitled to by improperly including “deadhead,” or out-of-service bus miles, along with funding-eligible revenue bus miles when applying for money from the Federal Transit Administration.  …

    But Cause of Action, which said it based its findings on “insider audit information” from six years ago, said the CTA likely continues to get away with its inaccurate mileage reporting, with the knowledge of the U.S. government, because of the transit agency’s political connections stretching from Chicago to Washington.

    It cited the clout of Valerie Jarrett, who is senior adviser to President Barack Obama and also a former chairwoman of the CTA (1995 to 2003), and Robert Rivkin, general counsel at the U.S. Department of Transportation. From 2001 to 2004, Rivkin was general counsel at the CTA.

    Officials at Cause of Action said they brought the matter to the attention of the U.S. Department of Transportation inspector general, the U.S. attorney general and Congress, but no action was taken.

    via Chicago Tribune.

    Surprise Surprise Surprise!!

    The good citizens of Chicago are naturally shocked and appalled that Valerie Jarrett and other stooges of The Machine have engaged in taxpayer fraud. Shocked and appalled.

    This sounds like a Qui Tam lawsuit in the making.  Someone going to get on that?

     

  • U.S. Postal Service is Dying, Why You Should Care

    The USPS has been teetering on the brink of bankruptcy. A key reason was a 2006 law that required the postal service to make annual payments of about $5.5 billion for 10 years to pay for future retiree health benefits.  …

    In the three months that ended June 30, the agency reported net losses of $5.2 billion.

    via CNN.

    People like to point out why the post office is suffering a slow cancerous death.  eMail, electronic bill pay, faxes, etc.  But that’s all garbage.  The U.S.P.S. is dying because it failed to meet the realities of the marketplace and because it overpays it’s workers,  a/k/a  bad management.

    Compare the USPS which LOST $5.2 billion in the 2Q 2012 to UPS which made $1.12 billion in the same period.  Or FedEx which made $459 million in the 3 months ending 08/12.

    Years ago I read Jim Rogers‘ book Investment Biker.  In it he tells the story of being in the USSR and mailing some packages back to the UK.  Long story short, the communist government charged less to mail letters and package than it cost.  This was because it was popular with the people.  The people wanted to be able to send letters cheaply and the government obliged.  But it was but one example of several (cited in the book) showing how and why the USSR would fail.  A government cannot continue to offer services for less than what they cost.

    No entity can continue to offer services for less than their cost.  The USPS is not exception.  It must either figure out how to charge enough for the service it provides or get out of the business.  But right now the taxpayers are on the hook to massive amounts of USPS debt.  That’s not right.

    Lastly, you should care… greatly.  The government is now just starting to take over the nations health care.  It too will be run with the same level of efficiency and forward thinking as the USPS, or maybe the State of Illinois DMV.

    Health care in this country will follow the USPS in bankruptcy.  And that’s not going to be good for anyone.

  • Chicago’s Pension Time-Bomb

    While Emanuel can coast for two more years, the city in 2015 is required by law to set aside an additional $700 million a year for two of its four pension funds, all of which are woefully underfunded: That year’s budget will include a total of $1.2 billion for the retirement accounts of teachers, police, fire and municipal workers. Such a steep ramp-up threatens to gobble city resources for everything from parks to schools to transportation.

    via Chicago Tribune.

    The total budget for this year is $8.35 billion.  In two years the city has to find nearly another 10% more money… out of thin air.

    This is naturally in addition to the $86 billion (laughable that anyone still believes this number; it’s easily twice that) hole is the state pension funds.

    Get ready… something’s going to go BOOM pretty soon.

  • Businesses Expanding but Not Hiring

    A majority of owners of midsized businesses in the Chicago area plan to expand in the next three months, but only a third say they will hire more workers in that time, according to a new survey.  …

    The most recent poll … found that nearly 60 percent of surveyed businesses planned to expand in the next six months. …At the same time, just 30 percent plan to add staff in the next three months. In the spring survey, 42 percent said they planned to hire soon.

    via Crain’s Chicago Business.

    Businesses are terrified of the government.  So what do they do?  More as slowly as possible.  Hire as few as possible.  Be as conservative as possible.  Because the G is going to come and screw you up real bad at any minute.

    Business are terrified of Obamacare.  The costs associated with bringing on new people is dizzying.  Hire someone today and down the road you may just have to fire them because their health care costs are out of control.

    Running a business is hard.  Really hard.

    Any business that tells you that they”could use “help from the government” is so big that they are fully in bed with the government.  Much like GE, or GM.  Recall that GE paid no taxes on $14B in income in 2010.  The GM fiasco speaks for itself.

    The life blood of this country is in the small and medium sized businesses.  Right now these businesses are sick and we’re not nurturing them the way we should.  But they future is our future.

    This country is heading in the wrong direction.

  • $2M in Unemployment to Inmates

    More than 1,100 people have collected nearly $2 million in unemployment benefits while they were in county jails or state prisons, including $43,000 that went to a person in the Cook County Jail, a state agency said Tuesday.

    Now they may face state or federal criminal fraud charges as well as having to repay what they shouldn’t have taken in the first place, said Greg Rivara, spokesman for the Illinois Department of Employment Security.

    In Cook County alone, there were 296 inmates tied to $722,689 in wrongful payments. In Will County, 21 inmates collected $85,159. Lake County was another leader with 20 inmates collecting $84,533, the agency said.

    via Chicago Tribune.

    WT…?!  You couldn’t make this stuff up.

    #1. Where are the two wonder-twins of justice in this?  Nothing from Lisa Madigan or Anita Alvarez?  Why?  Where have they been?
    #2.  Who the hell is running this agency?  Jail and prison records are actually a matter of public record.  You’re telling me no one ever bothered to cross-check the payouts against another public record?

    #3.  It kinda makes you wonder how much fraud is really going on in the system.  After all, The Machine has their corrupt friends running all these agencies there is really no limit to how much might be missing.

    Certainly not last… This is just another fine example as to why any service run by the government is doomed to ultimately doomed to fail.  People are incentivized to cheat the system.  But government employees are also incentivized to get as many people as possible into the system so they can justify their jobs and get more jobs and thus become more politically powerful.  As such, no one is watching the money.
    The government that works the least is most often the government that works best.

  • Ald. Burke, Wrigley & Your Tax Dollars

    Ten years ago, Chicago’s most powerful alderman, Edward M. Burke, and the rest of the City Council signed off on a deal that promised $16 million in taxpayer subsidies to the Wm. Wrigley Jr. Co. to help it build a new corporate campus on Goose Island rather than move to the suburbs.

    Three years later, Burke’s law firm, retained by Wrigley, persuaded Cook County officials to lower the property assessments for two buildings the chewing gum giant had bought down the street from the new campus.

    Burke’s legal work helped Wrigley cut its property taxes by more than $412,000 between 2006 and 2008, records show.

    For that, the company says, it paid the alderman about $90,000 in legal fees.

    via Chicago Sun-Times.

    What the story fails to mention is that Wrigley also received millions in TIF money to build the hitherto unfinished building on Goose Island.

    The story is a good read (i.e. good read it) as it also talks about how Wrigley has been sold to Mars.  So now all the millions spent on top of the millions in lost revenue will likely never be recouped.

    Just embarrassing all around…. unless you’re The Machine.

  • Illinois Need to Cut COLAs

    The head of Illinois’ largest pension plan strongly suggested that cuts in cost-of-living benefits are inevitable for more than 360,000 teachers and retirees outside of Chicago.

    In an interview with Crain’s editors and reporters, Richard Ingram, executive director of the underfunded Illinois Teachers’ Retirement System, said state politicians will have few other options if they want to make meaningful progress on closing the gap between promised pension benefits and the available funding.

    via Crain’s Chicago Business.

    Well Duh!

    What’s missing from this article is any analysis as to how much longer the pensions can survive should the state cut or reduce the COLA.  Mark my words — cutting the COLA is NOT a FIX.  It is a band-aid at best.