Topic: Tax and Budget Policy

Don’t Shoot the Messenger

I’m sorry to bring bad tidings so close to the weekend, but apparently House and Senate conferees have reached agreement [$] on the broad outlines of a Farm Bill.

We will have to wait until Monday to get the full, disgusting details but broadly, we know this about the proposed bill:

  • it will raise the target prices and loan rates for northern crops (i.e., wheat, soybeans, other feedgrains) beginning in 2010
  • raise the sugar loan rate three-quarters of a cent
  • include a sugar-to-ethanol program (whereby the USDA would buy sugar that would otherwise threaten the domestic minimum price and sell it, presumably at a loss, to ethanol plants)
  • an additional $4 billion for conservation programs
  • $10.361 billion extra for domestic and international food aid programs
  • The bill also includes the new “permanent” disaster program (some thoughts on that here), albeit at $250 million less than the original $4 billion request

To pay for this, your representatives in Congress cut the $5.2 billion per year direct payments program (that is the program that pays farmers on the basis of past production and yields, regardless of what they produce now) by 2 percent per year for four years. Recall that the direct payments program, while an offence to taxpayers everywhere, is at least less trade distorting than the price-linked subsidies that the conferees have agreed to increase. And in the final year, when it really counts for purposes of planning future spending levels (i.e., the baseline), the direct payments will go back up again.

The one possible bright light at the end of this sewer-pipe: a presidential veto. No word from the administration on this latest deal, but it does not fit their past definition of an acceptable amount of reform and thus, assuming intestinal fortitude on the part of President Bush (I know, I know), would likely elicit a veto threat.

Happy weekend, everybody.

A “Crisis” of Their Own Making

A National Conference of State Legislatures report released today is sparking gloom-and-doom headlines about states in fiscal crises. Conspicuously absent from the news stories is any mention of the root cause of the “shortfalls” supposedly wrecking havoc in state capitols.  Over the last few years, state lawmakers forgot the lessons of the 1990s, and decided to add new programs and significantly expand general fund spending on existing programs.

Now, according to NCSL:

Current state fiscal conditions are being driven by weak revenue performance. State officials expected revenue growth to slow in FY 2008, but not as dramatically as it has. […] Because most FY 2008 budgets were built on revenue forecasts that are not materializing as expected, budget gaps have grown.

This reminds me of a short story by J.D. Salinger in which the main character describes the tragic lives of “bananafish:”

Well, they swim into a hole where there’s a lot of bananas. They’re very ordinary-looking fish when they swim in. But once they get in, they behave like pigs. […]  Naturally, after that they’re so fat they can’t get out of the hole again. Can’t fit through the door.

In FY 2007 alone, states raised general fund spending by 9.3 percent, well above the 30-year average of 6.4 percent.  18 states saw spending rise by at least 10 percent.  The only real news here is that state governments are finding themselves in a fiscal “hole” because they gorged on revenues when times were good, and now they have been fat so long they forgot how to go on a diet.

Yon Goicoechea Named Recipient of the 2008 Milton Friedman Prize for Advancing Liberty

Yon Goicoechea, leader of the pro-democracy student movement in Venezuela, has been awarded the 2008 Milton Friedman Prize for Advancing Liberty. Under Goicoechea’s leadership, the student movement organized mass opposition to the erosion of human and civil rights in Venezuela and played the key role in defeating Hugo Chávez’s bid for a constitutional reform that would have turned the country into a dictatorship. Goicoechea’s vision of optimism, tolerance, and modernity has breathed new life into efforts to defend basic freedoms in Venezuela and elsewhere in Latin America where freedom is threatened.

Full Details

Happy Tax Freedom Day!

Taxpayers can breathe a sign of relief. According to the Tax Foundation, April 23 is Tax Freedom Day. That means that the average American has finally earned enough to pay estimated federal, state, and local taxes for 2008. One of the most depressing finding in the Tax Foundation’s report is that Americans pay more in tax than they do for food, clothing, and shelter combined. To compensate for being the bearer of bad fiscal news, the Tax Foundation released an amusing video. It doesn’t quite equal this classic tax video, but it’s worth watching.

Money Meddling

Are you an entrepreneur who deposits a regular amount of your business revenues in the bank? Watch out, the government might come after you for illegal “structuring.”

Are you a high earner who regularly pulls out a substantial amount of cash from your bank account? Watch out, your bank could be sending ”suspicious activity reports” about you to the government, as former senator Bob Dole’s bank did.

Have you ever deposited or withdrawn more than $10,000 from your bank? Watch out, because your activities were recorded on a government database of “currency transaction reports,” which is growing by 16 million new reports each year.

Did you overstate your income on a loan form when you bought your house? Watch out, the government could nail you for both ”bank fraud” and “money laundering.”

Forbes focuses on government encroachments on our civil liberties in a series of articles this month. See here, here and here

As a tax wonk, the IRS angle in these articles caught my eye. But like many people, I find it very disturbing that continual expansions in federal power are shrinking the realm of privacy and individual automony in modern society.  

No District for Fishermen

The Washington Examiner reports on how carefully your taxpayer dollars are spent by both federal and local governments:

The District of Columbia has agreed to pay $1.75 million to head off a lawsuit alleging that the city bilked the federal government out of money to educate children who didn’t exist, The Examiner has learned.

For decades, District schools took in millions of dollars in grants to educate the children of migrant farmworkers and fishermen. But, as first reported by The Examiner in August, a 2005 audit discovered there were no such children in the system.

When Provider Networks Go Global

According to HealthLeaders Media:

South Carolina-based Companion Global Healthcare added three Singapore hospitals to its network. The deal now allows Americans access to medical and surgical services at ParkwayHealth operated hospitals at pre-negotiated, in-network rates lower than those of U.S. hospitals…

David Williams, consultant and cofounder of MedPharma Partners LLC[, notes,] “It may be a bit of a wake-up call to the local hospitals in South Carolina, putting them on notice that they are facing a broader set of competitors.”

More than one million members of Blue Cross Blue Shield and BlueChoice HealthPlan of South Carolina now have access to the three Singapore hospitals—Mount Elizabeth, Gleneagles, and East Shore—at preferred network rates. The hospitals are accredited by the Joint Commission International, the affiliate of The Joint Commission.

Competition is healthy.  (You know what?  That’s catchy.)