Voters are right to think our addiction to federal deficit spending is killing our economy. A thorough new study from Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard University takes a look at the relationships among rising debt, inflation and economic growth for 44 developed and developing countries. The findings bode poorly for a spending-crazy Washington.
From 1946 through 2009, growth of developed countries (including the United States) stood at an annual rate of just shy of 4 percent when debt was no greater than 30 percent of gross domestic product. The picture gets bleaker for those countries holding debt above 30 but below 90 percent -- economic growth slowed down but still hovered around 3 percent to 3.5 percent per year. When debt rose to over 90 percent of GDP, average growth went negative. Reinhart and Rogoff found that when this worst-case scenario occurs in the U.S., economic growth rates go negative and the inflation rate goes to above 5.5 percent. According to the Heritage Foundation's Bill Beach, the International Monetary Fund and the Congressional Budget Office both predict U.S. sovereign debt is fast approaching 100 percent of GDP.
There's never been a better time for President Obama to put an end to the idea that he may be the next President Carter. He can head off inflation by taming federal spending and working with Congress to cut programs. And once that's done, he can cut taxes to stimulate the economy. Sadly, he won't. Obama sent a letter last week to leaders of the G-20, airing concerns over the decision of European leaders to start imposing austerity measures: "We should reaffirm our unity of purpose to provide the policy support necessary to keep economic growth strong."
Unity of purpose is the problem. For Greece and Spain to face financial disaster, politicians first had to give monopolistic unions lavish pensions and a hearty social welfare state. Austerity measures were the hard-bought, politically unpopular solution, so much so that protests against the measures turned to riots.
Congress passed rules earlier this year to prevent itself from spending money it doesn't have. But the same majority Democrats who voted for Pay-Go simply override those rules whenever they have to pass an actual spending bill. And on Saturday, Obama ripped opponents of his second stimulus, saying that they are endangering the jobs and unemployment benefits of millions of Americans. It's time to face reality and start cutting spending.
http://washingtonexaminer.com/opinion/editorials/spending-will-kill-not-save-our-recovery
Tuesday, July 19, 2011
Thursday, July 14, 2011
Geithner says hard times to continue for many
WASHINGTON (AP) — Treasury Secretary Timothy Geithner (GYT'-nur) says many Americans will face hard times for a long time to come.
He says President Barack Obama rescued the United States from a second Great Depression and will keep working to strengthen the economy. But Geithner says will be some time before many people feel like the country is recovering.
Geithner tells NBC's "Meet the Press" that it's a very tough economy. He says that for a lot of people "it's going to feel very hard, harder than anything they've experienced in their lifetime now, for a long time to come."
http://news.yahoo.com/geithner-says-hard-times-continue-many-150523958.html
EPA rule seeks to curb long-distance air pollution
Power plants would have to reduce sulfur dioxide and nitrogen oxide emissions
By Timothy B. Wheeler, The Baltimore Sun
In a sweeping move aimed at curbing long-distance air pollution that afflicts the health of 240 million Americans — including Marylanders — the Environmental Protection Agency is ordering power plants across much of the eastern United States to sharply curtail emissions.
The complete article can be viewed at:
http://www.baltimoresun.com/health/bs-gr-air-pollution-rule-20110707,0,2033988.story
By Timothy B. Wheeler, The Baltimore Sun
In a sweeping move aimed at curbing long-distance air pollution that afflicts the health of 240 million Americans — including Marylanders — the Environmental Protection Agency is ordering power plants across much of the eastern United States to sharply curtail emissions.
The complete article can be viewed at:
http://www.baltimoresun.com/health/bs-gr-air-pollution-rule-20110707,0,2033988.story
Thursday, July 7, 2011
Chesapeake Bay rules rile farmers, local officials
Over 40,000 U.S. water bodies have been identified as impaired. The federal clean water acts then demands that a TMDL (Total Maximum Daily Load) has to be developed in an attempt to improve them.
In most cases, we're not talking about human health. Instead, the problem is excess nutrients that causes algae blooms and eventually lack of oxygen in summer months.
Nutrients are both good and necessary in reasonable quantities. The environmentalists insist that only tiny quantities be allowed. It's hard not to believe that social engineering plays some part.
The question is, how many will ever improve enough to no longer be considered "impaired?" We're going to be watching and will let you know.
Chesapeake Bay rules rile farmers, local officials
State officials looking to clean up the Chesapeake Bay are weighing a series of new restrictions on how and when farmers can fertilize their fields — and on when municipal sewage treatment plants can spread their sludge on farmland.
Draft regulations drawn up by the Maryland Department of Agriculture are drawing fire from farmers and local officials, who say the limits being proposed are onerous, costly and unwarranted. But one scientist said they are backed by research and needed to reduce the pollution fouling the bay.
The rules, which have yet to be formally proposed, would, among other things, curtail the practice of fertilizing grain crops that are planted in the fall. They would also require farmers to keep livestock and fertilizer from 10 feet to 35 feet back from streams, ditches and ponds. And they would bar wintertime spreading of animal manure or sewage sludge, unless it's injected or worked into the soil to keep it from washing off.
Agriculture Secretary Earl F. "Buddy" Hance said the regulations have been under development for the past year to help Maryland comply with the bay pollution "diet" established by the U.S. Environmental Protection Agency. The six states that drain into the Chesapeake are being required to reduce nitrogen, phosphorus and sediment getting into the water by 20 percent to 25 percent by 2025.
But representatives of the state's growers say the restrictions could drive more of them out of business, particularly dairy and livestock farmers.
"This aspect of Maryland's pollution diet will end up starving our farming community," Sen. Barry Glassman, a Harford County Republican, said. In a news release, he called it another example of the O'Malley administration's "war on rural Maryland," on top of proposals to restrict development using septic systems and to raise tolls on bridges, tunnels and highways.
"In the last 20 years we've lost half our dairy farms in the state," Glassman said in an interview. 'You can imagine what the extra cost of these regulations would be."
Valerie Connelly, director of government relations for the Maryland Farm Bureau, called the draft regulations "hugely problematic" and said they would make it impossible for some to farm.
The proposal to limit fertilizing of grain crops planted in the fall is meant to reduce the amount of nitrogen and phosphorus washing off fields in winter and early spring. The state has budgeted more than $16 million to pay farmers to plant "cover crops" in the fall, which would soak up any nutrients left in the fields after the main crop has been harvested. But some farmers also plant grains in the fall for sale the next spring, and often fertilize those fields in the belief it would ensure a more abundant harvest.
Research done at the University of Maryland, though, shows that farmers can get the same yield on crops planted in the fall if they wait until spring to fertilize when there's less risk of it washing into nearby waterways.
But Connelly said the farm bureau thinks more study is needed before imposing that restriction.
"We're not saying the research is wrong," she said, "but we're saying there are farmers who get a result when they use fall fertilizer."
Farmers also question other provisions limiting when they can apply manure to their fields and requiring them to leave 10- to 35-foot setbacks from water.
"The farm community is viewing it as making it more and more difficult to raise livestock in the state of Maryland,'' Connelly said.
While state and federal funds are available to pay for up to 87.5 percent of the costs of putting up fence to keep livestock out of streams and to provide watering systems for farm animals, Glassman said some farmers can't afford to pay any more right now, and they feel put upon to do more to clean up the bay.
"We feel like we're already doing our part," said Glassman, who says he raises maybe a dozen purebred sheep. "Farming's on the wane," he added. "We just feel like we're carrying a heavier load than everyone else."
But Russell Brinsfield, executive director of the University of Maryland's Center for Agro-Ecology near Queenstown, said the proposed curbs are generally warranted. He called it a "bold move" by the state to propose changing the "nutrient management" regulations, and said he's not surprised they're getting "substantial blowback."
"We've done the easy things," he said, to limit farm runoff. "Now we're doing things that are going to have to be a little painful."
Brinsfield, also a farmer, defended the research showing little need to fertilize fall grain crops, saying it's "pretty conclusive." He also predicted that the change would save the state money it's now paying farmers, at the rate of $25 an acre, to plant crops in the fall that they intend to harvest for sale in the spring. Pure "cover crops," which aren't fertilized, are killed back in the spring with herbicide to provide nutrients for the next crop that's planted.
He also defended the stream setback requirements, saying that even though livestock dropping manure in streams is not a huge source of the nutrient pollution fouling the bay, "It's just not a wise thing to do."
"[Speaking] as a scientist, they all make sense," Brinsfield said of the draft rules. "Now whether you've got the political will … that's a whole different debate."
Farmers wouldn't be the only ones affected by the draft rules. The draft regulation would force an end by 2016 to spreading sewage sludge on farm fields in winter and impose other limits on its application to land other times of year.
Operators of sewage treatment plants said the limits would effectively bar them from putting sewage sludge on farm fields most of the year, forcing them to build costly storage facilities, dispose of it in landfill space or truck it out of state. Many of the state's counties and municipalities contract to have the treated sludge from their sewage plants trucked away and spread as fertilizer on croplands.
Anne Arundel County, for instance, estimates it would have to spend $30 million to build a facility large enough to hold all the sludge its sewage plants generate in winter, according to a letter from the Maryland Association of Municipal Wastewater Authorities. While some might be disposed of in landfills, those facilities can't accommodate all that's generated, the group says.
Association President Julie Pippel argued that the restriction is unwarranted, because state-financed upgrades of the largest sewage plants are reducing the nutrient content of the sludge.
Hance acknowledged that there were "flaws in the language" of the draft rules that are leading some farmers to conclude, wrongly, that they wouldn't be allowed to put horses, cows and other livestock out to pasture in the winter. He said state agriculture officials will correct and clarify such issues and weigh feedback before deciding what regulations to go forward with.
The rules also would have to be scrutinized by a joint legislative committee before being formally proposed.
Hance said many of the restrictions under consideration would not take effect for up to five years, giving farmers time to plan for them and adjust. As he often does, the agriculture secretary said farmers have already taken many steps voluntarily to reduce pollution from their fields and pasture. "But in this new age of [pollution diets], goals and deadlines," he added, "we're just trying to put in place a plan that helps the community reach its goals."
In most cases, we're not talking about human health. Instead, the problem is excess nutrients that causes algae blooms and eventually lack of oxygen in summer months.
Nutrients are both good and necessary in reasonable quantities. The environmentalists insist that only tiny quantities be allowed. It's hard not to believe that social engineering plays some part.
The question is, how many will ever improve enough to no longer be considered "impaired?" We're going to be watching and will let you know.
Chesapeake Bay rules rile farmers, local officials
State officials looking to clean up the Chesapeake Bay are weighing a series of new restrictions on how and when farmers can fertilize their fields — and on when municipal sewage treatment plants can spread their sludge on farmland.
Draft regulations drawn up by the Maryland Department of Agriculture are drawing fire from farmers and local officials, who say the limits being proposed are onerous, costly and unwarranted. But one scientist said they are backed by research and needed to reduce the pollution fouling the bay.
The rules, which have yet to be formally proposed, would, among other things, curtail the practice of fertilizing grain crops that are planted in the fall. They would also require farmers to keep livestock and fertilizer from 10 feet to 35 feet back from streams, ditches and ponds. And they would bar wintertime spreading of animal manure or sewage sludge, unless it's injected or worked into the soil to keep it from washing off.
Agriculture Secretary Earl F. "Buddy" Hance said the regulations have been under development for the past year to help Maryland comply with the bay pollution "diet" established by the U.S. Environmental Protection Agency. The six states that drain into the Chesapeake are being required to reduce nitrogen, phosphorus and sediment getting into the water by 20 percent to 25 percent by 2025.
But representatives of the state's growers say the restrictions could drive more of them out of business, particularly dairy and livestock farmers.
"This aspect of Maryland's pollution diet will end up starving our farming community," Sen. Barry Glassman, a Harford County Republican, said. In a news release, he called it another example of the O'Malley administration's "war on rural Maryland," on top of proposals to restrict development using septic systems and to raise tolls on bridges, tunnels and highways.
"In the last 20 years we've lost half our dairy farms in the state," Glassman said in an interview. 'You can imagine what the extra cost of these regulations would be."
Valerie Connelly, director of government relations for the Maryland Farm Bureau, called the draft regulations "hugely problematic" and said they would make it impossible for some to farm.
The proposal to limit fertilizing of grain crops planted in the fall is meant to reduce the amount of nitrogen and phosphorus washing off fields in winter and early spring. The state has budgeted more than $16 million to pay farmers to plant "cover crops" in the fall, which would soak up any nutrients left in the fields after the main crop has been harvested. But some farmers also plant grains in the fall for sale the next spring, and often fertilize those fields in the belief it would ensure a more abundant harvest.
Research done at the University of Maryland, though, shows that farmers can get the same yield on crops planted in the fall if they wait until spring to fertilize when there's less risk of it washing into nearby waterways.
But Connelly said the farm bureau thinks more study is needed before imposing that restriction.
"We're not saying the research is wrong," she said, "but we're saying there are farmers who get a result when they use fall fertilizer."
Farmers also question other provisions limiting when they can apply manure to their fields and requiring them to leave 10- to 35-foot setbacks from water.
"The farm community is viewing it as making it more and more difficult to raise livestock in the state of Maryland,'' Connelly said.
While state and federal funds are available to pay for up to 87.5 percent of the costs of putting up fence to keep livestock out of streams and to provide watering systems for farm animals, Glassman said some farmers can't afford to pay any more right now, and they feel put upon to do more to clean up the bay.
"We feel like we're already doing our part," said Glassman, who says he raises maybe a dozen purebred sheep. "Farming's on the wane," he added. "We just feel like we're carrying a heavier load than everyone else."
But Russell Brinsfield, executive director of the University of Maryland's Center for Agro-Ecology near Queenstown, said the proposed curbs are generally warranted. He called it a "bold move" by the state to propose changing the "nutrient management" regulations, and said he's not surprised they're getting "substantial blowback."
"We've done the easy things," he said, to limit farm runoff. "Now we're doing things that are going to have to be a little painful."
Brinsfield, also a farmer, defended the research showing little need to fertilize fall grain crops, saying it's "pretty conclusive." He also predicted that the change would save the state money it's now paying farmers, at the rate of $25 an acre, to plant crops in the fall that they intend to harvest for sale in the spring. Pure "cover crops," which aren't fertilized, are killed back in the spring with herbicide to provide nutrients for the next crop that's planted.
He also defended the stream setback requirements, saying that even though livestock dropping manure in streams is not a huge source of the nutrient pollution fouling the bay, "It's just not a wise thing to do."
"[Speaking] as a scientist, they all make sense," Brinsfield said of the draft rules. "Now whether you've got the political will … that's a whole different debate."
Farmers wouldn't be the only ones affected by the draft rules. The draft regulation would force an end by 2016 to spreading sewage sludge on farm fields in winter and impose other limits on its application to land other times of year.
Operators of sewage treatment plants said the limits would effectively bar them from putting sewage sludge on farm fields most of the year, forcing them to build costly storage facilities, dispose of it in landfill space or truck it out of state. Many of the state's counties and municipalities contract to have the treated sludge from their sewage plants trucked away and spread as fertilizer on croplands.
Anne Arundel County, for instance, estimates it would have to spend $30 million to build a facility large enough to hold all the sludge its sewage plants generate in winter, according to a letter from the Maryland Association of Municipal Wastewater Authorities. While some might be disposed of in landfills, those facilities can't accommodate all that's generated, the group says.
Association President Julie Pippel argued that the restriction is unwarranted, because state-financed upgrades of the largest sewage plants are reducing the nutrient content of the sludge.
Hance acknowledged that there were "flaws in the language" of the draft rules that are leading some farmers to conclude, wrongly, that they wouldn't be allowed to put horses, cows and other livestock out to pasture in the winter. He said state agriculture officials will correct and clarify such issues and weigh feedback before deciding what regulations to go forward with.
The rules also would have to be scrutinized by a joint legislative committee before being formally proposed.
Hance said many of the restrictions under consideration would not take effect for up to five years, giving farmers time to plan for them and adjust. As he often does, the agriculture secretary said farmers have already taken many steps voluntarily to reduce pollution from their fields and pasture. "But in this new age of [pollution diets], goals and deadlines," he added, "we're just trying to put in place a plan that helps the community reach its goals."
Obama’s Economists: ‘Stimulus’ Has Cost $278,000 per Job
When the Obama administration releases a report on the Friday before a long weekend, it’s clearly not trying to draw attention to the report’s contents. Sure enough, the “Seventh Quarterly Report” on the economic impact of the “stimulus,” released on Friday, July 1, provides further evidence that President Obama’s economic “stimulus” did very little, if anything, to stimulate the economy, and a whole lot to stimulate the debt.
The report was written by the White House’s Council of Economic Advisors, a group of three economists who were all handpicked by Obama, and it chronicles the alleged success of the “stimulus” in adding or saving jobs. The council reports that, using “mainstream estimates of economic multipliers for the effects of fiscal stimulus” (which it describes as a “natural way to estimate the effects of” the legislation), the “stimulus” has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.
In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the “stimulus,” and taxpayers would have come out $427 billion ahead.
Furthermore, the council reports that, as of two quarters ago, the “stimulus” had added or saved just under 2.7 million jobs — or 288,000 more than it has now. In other words, over the past six months, the economy would have added or saved more jobs without the “stimulus” than it has with it. In comparison to how things would otherwise have been, the “stimulus” has been working in reverse over the past six months, causing the economy to shed jobs.
Again, this is the verdict of Obama’s own Council of Economic Advisors, which is about as much of a home-field ruling as anyone could ever ask for. In truth, it’s quite possible that by borrowing an amount greater than the regular defense budget or the annual cost of Medicare, and then spending it mostly on Democratic constituencies rather than in a manner genuinely designed to stimulate the economy, Obama’s “stimulus” has actually undermined the economy’s recovery — while leaving us (thus far) $666 billion deeper in debt.
The actual employment numbers from the administration’s own Bureau of Labor Statistics show that the unemployment rate was 7.3 percent when the “stimulus” was being debated. It has since risen to 9.1 percent. Meanwhile, the national debt at the end of 2008, when Obama was poised to take office, was $9.986 trillion (see Table S-9). It’s now $14.467 trillion — and counting.
All sides agree on these incriminating numbers — and now they also appear to agree on this important point: The economy would now be generating job growth at a faster rate if the Democrats hadn’t passed the “stimulus.”
http://www.weeklystandard.com/blogs/obama-s-economists-stimulus-has-cost-278000-job_576014.html
The report was written by the White House’s Council of Economic Advisors, a group of three economists who were all handpicked by Obama, and it chronicles the alleged success of the “stimulus” in adding or saving jobs. The council reports that, using “mainstream estimates of economic multipliers for the effects of fiscal stimulus” (which it describes as a “natural way to estimate the effects of” the legislation), the “stimulus” has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.
In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the “stimulus,” and taxpayers would have come out $427 billion ahead.
Furthermore, the council reports that, as of two quarters ago, the “stimulus” had added or saved just under 2.7 million jobs — or 288,000 more than it has now. In other words, over the past six months, the economy would have added or saved more jobs without the “stimulus” than it has with it. In comparison to how things would otherwise have been, the “stimulus” has been working in reverse over the past six months, causing the economy to shed jobs.
Again, this is the verdict of Obama’s own Council of Economic Advisors, which is about as much of a home-field ruling as anyone could ever ask for. In truth, it’s quite possible that by borrowing an amount greater than the regular defense budget or the annual cost of Medicare, and then spending it mostly on Democratic constituencies rather than in a manner genuinely designed to stimulate the economy, Obama’s “stimulus” has actually undermined the economy’s recovery — while leaving us (thus far) $666 billion deeper in debt.
The actual employment numbers from the administration’s own Bureau of Labor Statistics show that the unemployment rate was 7.3 percent when the “stimulus” was being debated. It has since risen to 9.1 percent. Meanwhile, the national debt at the end of 2008, when Obama was poised to take office, was $9.986 trillion (see Table S-9). It’s now $14.467 trillion — and counting.
All sides agree on these incriminating numbers — and now they also appear to agree on this important point: The economy would now be generating job growth at a faster rate if the Democrats hadn’t passed the “stimulus.”
http://www.weeklystandard.com/blogs/obama-s-economists-stimulus-has-cost-278000-job_576014.html
See just how abusive government can be.
George Pappas says he felt under attack the minute the state’s sales tax auditor walked through the door of his Forestview Restaurant in the Town of Lancaster.
“He was just ruthless,” Pappas said.
The auditor, according to the restaurateur, appeared to have presumed Pappas was skimming money and only was seeking some way to prove it.
Though Pappas said he was able to produce all his books, records and tapes — cash register reports that itemize each day’s sales — some copies of paper sales checks for individual sales made over the previous three years were missing.
“Do you think with a thousand people coming through my doors, a couple of checks aren’t going to go missing?” Pappas asked.
Sometimes, someone rips a check out of a pad to jot down a note or a phone number. Sometimes servers accidentally go home with the guest check pads in their aprons. Sometimes they get splashed with grease or water.
But the absence of some paper guest checks meant the auditor was able to declare Pappas had “inadequate records.” That opened the door to presuming Pappas had dodged taxes and to estimating a bill for what Pappas owed.
The estimate — $250,000 — means that tax authorities had concluded that Pappas had stolen or hidden $3 million in revenue.
“If I had that kind of money, would I have debt? Wouldn’t I be living in a palace?” Pappas asked. “I’ve been working just to pay lawyers for the last six years. I can barely pay my bills. I’m living on a line of credit.”
Pappas, who will bring his case before the state’s tax appeals tribunal in September, has spent $145,000 on legal bills since his first state audit six years ago.
Michael Hallac was in the middle of renovating his Clarence Dairy Queen franchise when what he calls his “nightmare” with state tax authorities began.
Like most bars and restaurants in the state, Dairy Queen uses electronic point-of-sales systems rather than old-fashioned paper checks. But even though he had met stringent record-keeping requirements and oversight set by the Dairy Queen Corp., the absence of those paper checks opened the door for an auditor to estimate a bill of “several thousand dollars” in unpaid taxes.
He now has hooked up journal printers to every cash register to produce individual sales checks that, with today’s technology, wouldn’t otherwise be created.
The fate of the owner of one small pizzeria hangs in the balance. Though he said he is barely scratching out a living, auditors used the
same “inadequate records” claim to estimate a tax bill that, with penalties and fees, will approach $30,000. If the amount — which he is appealing — stands, it will put him out of business.
Bar and restaurant owners repeat the same story: In a climate of fear and intimidation, auditors are using unfair methods to calculate imaginary sales tax.
Instead of revising tax laws written well before the digital age, tax enforcers are exploiting them to close budget gaps and justify their own salaries, critics allege.
“It’s like ‘The Sopranos,’ but they have a badge,” said the pizzeria owner, who asked not to be named for fear of retribution. “It’s extortion.”
The state itself has admitted it aims to review every business to make sure it is paying its fair share of sales tax. It has hired 330 new auditors with the goal of raising $220 million per year.
Claims follow story
But the state’s taxpayer advocate said great strides have been made to make the process fairer and keep auditors in line. After an article in The Buffalo News detailing claims by restaurant owners who believed they were unfairly targeted, the advocate’s office was flooded by calls from restaurateurs with similar stories.
“Clearly, improvements had to be made,” said Jack Trachtenberg, deputy commissioner and taxpayer rights advocate with the state Department of Taxation and Finance.
Some major sticking points, he said, have been resolved.
Statewide, auditors have gone back to class for retraining on the proper way to conduct audits. Auditors now are required to use business records for audit evaluations even if they would be ruled “technically inadequate” by paper era standards. Estimating a tax bill using other methods, such as comparing a bar’s price markups to national averages or comparing one day’s business with the same calendar day on a previous year, should be used only as a last resort.
“The rules can be very strict and cause people unintentional slip-ups,” he said. “That shouldn’t mean we rush to dismiss records and rush into estimating. If a company has substantive records, we should use them.”
If a business owner truly has insufficient records for a complete audit, auditors now are required to use several methods to estimate the amount owed. Even then, if the owner can show evidence of why the estimate is incorrect, auditors must be ready to make adjustments, taking into account such things as a restaurant’s size, location, prices and hours.
The department also put together an extensive bulletin for the food and beverage industry, posting specifics about what records owners need to keep and outlining exactly what adequate records mean. That definition, however, still includes paper sales checks.
The state also is working with the makers of point-of-sales systems to include mechanisms in cash registers that would assure tax enforcers that unethical business owners looking to cover up tax evasion cannot manipulate those records. Arguments for requiring paper sales checks include lack of trust in electronic records.
Other than litigation, taxpayers have been able to contest unfair auditing practices only through the Bureau of Conciliation and Mediation Services. But mediators sometimes had a tendency to side with auditors rather than taxpayers.
“I raised the issue early on that the conciliatory process was not working properly,” Trachtenberg said. “Kevin Law, who was appointed director of the [mediation services] has made a lot of changes.”
Over the past six months, the system has been revamped to ensure that mediators are not beholden to auditors.
But what about the reputation many auditors in Western New York have as bullies?
“I hope that’s not happening. But if it is, we need to hear from [business owners],” Trachtenberg said. “I know some people are afraid [of retribution], but if we don’t know about it, we can’t do anything about it.”
The state has mailed business owners the names of managers and supervisors to whom they can make complaints.
Business owners also are urged to contact the taxpayer advocate’s office if they have a problem with an auditor, the audit or estimation methods. Complaints can be kept confidential at the owner’s request.
Trachtenberg — who notes that he reports to the tax commissioner, not the enforcement office and so can remain impartial — insists the results speak for themselves.
Last year, he said, the advocate’s office took in 1,921 complaints from restaurant owners. Roughly 68 percent were resolved in the taxpayer’s favor, with some or all of the relief they requested being granted.
Owners finally triumph
The Buffalo Tap Room & Grill in the Town of Tonawanda — which, despite detailed records dating back to 1984, was slapped with a$330,000 tax bill last year — eventually triumphed. The bill was dismissed, with owners Dave Panaro and Dennis Nettina paying nothing.
Hallac admitted no wrongdoing at his Dairy Queen, but settled and paid a few thousand dollars through his mediation hearing, just to get things over with. Of course, now that opens him up to state and federal income tax bills, because that few thousand dollars will be considered undeclared income.
Panaro and Nettina have led the fight against unethical tax collection practices, urging business owners to band together and leaning on lawmakers to stand up for small businesses.
That does not win back the time and money they spent fighting their own battles. And it doesn’t restore their health to what it was before the state’s hammer came down. But they hope it will spare other companies similar ordeals.
And despite the reforms Trachtenberg says are being made, the voice mail boxes of sales tax compliance consultants such as David Gross continue to fill up with messages from teary, terrified clients.
Still, the state insists progress is being made.
“Clearly, audits could have been done better,” Trachtenberg said. “And we’re working to assure they’re done better going forward.”
http://www.buffalonews.com/business/local-business/article476514.ece
“He was just ruthless,” Pappas said.
The auditor, according to the restaurateur, appeared to have presumed Pappas was skimming money and only was seeking some way to prove it.
Though Pappas said he was able to produce all his books, records and tapes — cash register reports that itemize each day’s sales — some copies of paper sales checks for individual sales made over the previous three years were missing.
“Do you think with a thousand people coming through my doors, a couple of checks aren’t going to go missing?” Pappas asked.
Sometimes, someone rips a check out of a pad to jot down a note or a phone number. Sometimes servers accidentally go home with the guest check pads in their aprons. Sometimes they get splashed with grease or water.
But the absence of some paper guest checks meant the auditor was able to declare Pappas had “inadequate records.” That opened the door to presuming Pappas had dodged taxes and to estimating a bill for what Pappas owed.
The estimate — $250,000 — means that tax authorities had concluded that Pappas had stolen or hidden $3 million in revenue.
“If I had that kind of money, would I have debt? Wouldn’t I be living in a palace?” Pappas asked. “I’ve been working just to pay lawyers for the last six years. I can barely pay my bills. I’m living on a line of credit.”
Pappas, who will bring his case before the state’s tax appeals tribunal in September, has spent $145,000 on legal bills since his first state audit six years ago.
Michael Hallac was in the middle of renovating his Clarence Dairy Queen franchise when what he calls his “nightmare” with state tax authorities began.
Like most bars and restaurants in the state, Dairy Queen uses electronic point-of-sales systems rather than old-fashioned paper checks. But even though he had met stringent record-keeping requirements and oversight set by the Dairy Queen Corp., the absence of those paper checks opened the door for an auditor to estimate a bill of “several thousand dollars” in unpaid taxes.
He now has hooked up journal printers to every cash register to produce individual sales checks that, with today’s technology, wouldn’t otherwise be created.
The fate of the owner of one small pizzeria hangs in the balance. Though he said he is barely scratching out a living, auditors used the
same “inadequate records” claim to estimate a tax bill that, with penalties and fees, will approach $30,000. If the amount — which he is appealing — stands, it will put him out of business.
Bar and restaurant owners repeat the same story: In a climate of fear and intimidation, auditors are using unfair methods to calculate imaginary sales tax.
Instead of revising tax laws written well before the digital age, tax enforcers are exploiting them to close budget gaps and justify their own salaries, critics allege.
“It’s like ‘The Sopranos,’ but they have a badge,” said the pizzeria owner, who asked not to be named for fear of retribution. “It’s extortion.”
The state itself has admitted it aims to review every business to make sure it is paying its fair share of sales tax. It has hired 330 new auditors with the goal of raising $220 million per year.
Claims follow story
But the state’s taxpayer advocate said great strides have been made to make the process fairer and keep auditors in line. After an article in The Buffalo News detailing claims by restaurant owners who believed they were unfairly targeted, the advocate’s office was flooded by calls from restaurateurs with similar stories.
“Clearly, improvements had to be made,” said Jack Trachtenberg, deputy commissioner and taxpayer rights advocate with the state Department of Taxation and Finance.
Some major sticking points, he said, have been resolved.
Statewide, auditors have gone back to class for retraining on the proper way to conduct audits. Auditors now are required to use business records for audit evaluations even if they would be ruled “technically inadequate” by paper era standards. Estimating a tax bill using other methods, such as comparing a bar’s price markups to national averages or comparing one day’s business with the same calendar day on a previous year, should be used only as a last resort.
“The rules can be very strict and cause people unintentional slip-ups,” he said. “That shouldn’t mean we rush to dismiss records and rush into estimating. If a company has substantive records, we should use them.”
If a business owner truly has insufficient records for a complete audit, auditors now are required to use several methods to estimate the amount owed. Even then, if the owner can show evidence of why the estimate is incorrect, auditors must be ready to make adjustments, taking into account such things as a restaurant’s size, location, prices and hours.
The department also put together an extensive bulletin for the food and beverage industry, posting specifics about what records owners need to keep and outlining exactly what adequate records mean. That definition, however, still includes paper sales checks.
The state also is working with the makers of point-of-sales systems to include mechanisms in cash registers that would assure tax enforcers that unethical business owners looking to cover up tax evasion cannot manipulate those records. Arguments for requiring paper sales checks include lack of trust in electronic records.
Other than litigation, taxpayers have been able to contest unfair auditing practices only through the Bureau of Conciliation and Mediation Services. But mediators sometimes had a tendency to side with auditors rather than taxpayers.
“I raised the issue early on that the conciliatory process was not working properly,” Trachtenberg said. “Kevin Law, who was appointed director of the [mediation services] has made a lot of changes.”
Over the past six months, the system has been revamped to ensure that mediators are not beholden to auditors.
But what about the reputation many auditors in Western New York have as bullies?
“I hope that’s not happening. But if it is, we need to hear from [business owners],” Trachtenberg said. “I know some people are afraid [of retribution], but if we don’t know about it, we can’t do anything about it.”
The state has mailed business owners the names of managers and supervisors to whom they can make complaints.
Business owners also are urged to contact the taxpayer advocate’s office if they have a problem with an auditor, the audit or estimation methods. Complaints can be kept confidential at the owner’s request.
Trachtenberg — who notes that he reports to the tax commissioner, not the enforcement office and so can remain impartial — insists the results speak for themselves.
Last year, he said, the advocate’s office took in 1,921 complaints from restaurant owners. Roughly 68 percent were resolved in the taxpayer’s favor, with some or all of the relief they requested being granted.
Owners finally triumph
The Buffalo Tap Room & Grill in the Town of Tonawanda — which, despite detailed records dating back to 1984, was slapped with a$330,000 tax bill last year — eventually triumphed. The bill was dismissed, with owners Dave Panaro and Dennis Nettina paying nothing.
Hallac admitted no wrongdoing at his Dairy Queen, but settled and paid a few thousand dollars through his mediation hearing, just to get things over with. Of course, now that opens him up to state and federal income tax bills, because that few thousand dollars will be considered undeclared income.
Panaro and Nettina have led the fight against unethical tax collection practices, urging business owners to band together and leaning on lawmakers to stand up for small businesses.
That does not win back the time and money they spent fighting their own battles. And it doesn’t restore their health to what it was before the state’s hammer came down. But they hope it will spare other companies similar ordeals.
And despite the reforms Trachtenberg says are being made, the voice mail boxes of sales tax compliance consultants such as David Gross continue to fill up with messages from teary, terrified clients.
Still, the state insists progress is being made.
“Clearly, audits could have been done better,” Trachtenberg said. “And we’re working to assure they’re done better going forward.”
http://www.buffalonews.com/business/local-business/article476514.ece
Saturday, July 2, 2011
Is Democracy Viable?
Nuclear weapons in the hands of the world's leading sponsor of international terrorism might seem to be something that would sober up even the most giddy members of the chattering class. But that chilling prospect cannot seem to compete for attention with cheap behavior by an immature Congressman, infatuated with himself.
A society that cannot or will not focus on matters of life and death is a society whose survival as a free nation is at least questionable. Hard as it may be to conceive how the kind of world that one has been used to, and taken for granted, can come to an end, it can happen in the lifetime of today's generation.
Those who founded the United States of America were keenly aware that they were making a radical departure in the kinds of governments under which human beings had lived over the centuries -- and that its success was by no means guaranteed. Monarchies in Europe had lasted for centuries and the Chinese dynasties for thousands of years. But a democratic republic was something else.
While the convention that was writing the Constitution of the United States was still in session, a lady asked Benjamin Franklin what the delegation was creating. "A republic, madam," he said, "if you can keep it."
In the middle of the next century, Abraham Lincoln still posed it as a question whether "government of the people, by the people and for the people shall not perish from the earth." Years earlier, Lincoln had warned of the dangers to a free society from its own designing power-seekers -- and how only the vigilance, wisdom and dedication of the public could preserve their freedom.
But, today, few people seem to see such dangers, either internally or internationally.
A recent poll showed that nearly half the American public believes that the government should redistribute wealth. That so many people are so willing to blithely put such an enormous and dangerous arbitrary power in the hands of politicians -- risking their own freedom, in hopes of getting what someone else has -- is a painful sign of how far many citizens and voters fall short of what is needed to preserve a democratic republic.
The ease with which people with wealth can ship it overseas electronically, or put it in tax shelters at home, means that raising the tax rate on wealthy people is not going to bring in the kind of tax revenue that would enable wealth redistribution to provide the bonanza that some people are expecting.
In other words, people who are willing to give government more arbitrary power can give up their birthright of freedom without even getting the mess of pottage. Worse yet, they can give up their children's and their grandchildren's birthright of freedom.
Free and democratic societies have existed for a relatively short time, as history is measured -- and their staying power has always been open to question. So much depends on the wisdom of the voters that the franchise was always limited, in one way or another, so that voting would be confined to those with a stake in the viability and progress of the country, and the knowledge to cast their vote intelligently.
In our own times, however, voting has been seen as just one of the many "rights" to which everyone is supposed to be entitled. The emphasis has been on the voter, rather than on the momentous consequences of elections for the nation today and for generations yet unborn.
To those who see voting as more or less just a matter of self-expression, almost a recreational activity, there is no need to inform themselves on both sides of the issues before voting, much less sit down and think beyond the rhetoric to the realities that the rhetoric conceals.
Careless voters may be easily swayed by charisma and rhetoric, oblivious to the monumental disasters created around the world by 20th century leaders with charisma and rhetoric, such as Hitler.
Voters like this represent a danger of terminal frivolity for freedom and democracy.
http://townhall.com/columnists/thomassowell/2011/06/29/is_democracy_viable/page/2
A society that cannot or will not focus on matters of life and death is a society whose survival as a free nation is at least questionable. Hard as it may be to conceive how the kind of world that one has been used to, and taken for granted, can come to an end, it can happen in the lifetime of today's generation.
Those who founded the United States of America were keenly aware that they were making a radical departure in the kinds of governments under which human beings had lived over the centuries -- and that its success was by no means guaranteed. Monarchies in Europe had lasted for centuries and the Chinese dynasties for thousands of years. But a democratic republic was something else.
While the convention that was writing the Constitution of the United States was still in session, a lady asked Benjamin Franklin what the delegation was creating. "A republic, madam," he said, "if you can keep it."
In the middle of the next century, Abraham Lincoln still posed it as a question whether "government of the people, by the people and for the people shall not perish from the earth." Years earlier, Lincoln had warned of the dangers to a free society from its own designing power-seekers -- and how only the vigilance, wisdom and dedication of the public could preserve their freedom.
But, today, few people seem to see such dangers, either internally or internationally.
A recent poll showed that nearly half the American public believes that the government should redistribute wealth. That so many people are so willing to blithely put such an enormous and dangerous arbitrary power in the hands of politicians -- risking their own freedom, in hopes of getting what someone else has -- is a painful sign of how far many citizens and voters fall short of what is needed to preserve a democratic republic.
The ease with which people with wealth can ship it overseas electronically, or put it in tax shelters at home, means that raising the tax rate on wealthy people is not going to bring in the kind of tax revenue that would enable wealth redistribution to provide the bonanza that some people are expecting.
In other words, people who are willing to give government more arbitrary power can give up their birthright of freedom without even getting the mess of pottage. Worse yet, they can give up their children's and their grandchildren's birthright of freedom.
Free and democratic societies have existed for a relatively short time, as history is measured -- and their staying power has always been open to question. So much depends on the wisdom of the voters that the franchise was always limited, in one way or another, so that voting would be confined to those with a stake in the viability and progress of the country, and the knowledge to cast their vote intelligently.
In our own times, however, voting has been seen as just one of the many "rights" to which everyone is supposed to be entitled. The emphasis has been on the voter, rather than on the momentous consequences of elections for the nation today and for generations yet unborn.
To those who see voting as more or less just a matter of self-expression, almost a recreational activity, there is no need to inform themselves on both sides of the issues before voting, much less sit down and think beyond the rhetoric to the realities that the rhetoric conceals.
Careless voters may be easily swayed by charisma and rhetoric, oblivious to the monumental disasters created around the world by 20th century leaders with charisma and rhetoric, such as Hitler.
Voters like this represent a danger of terminal frivolity for freedom and democracy.
http://townhall.com/columnists/thomassowell/2011/06/29/is_democracy_viable/page/2
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