The Professor's Notes

The connectedness of… a newly selected nominee to the US Supreme Court, the abortion issue… Arizona immigration law… and a Pennsylvania tax amnesty commercial?

Privacy.  PRIVACY.  The RIGHT to PRIVACY.  Do you believe we should have a right to privacy?  Should we expect that our government will allow us to live our lives without surveillance, free from the need to check, to constantly look over our shoulders to see who from the government is watching?

As always the world is full of events occupying our time and driving the news.  And, as is usually the case, each story is presented in isolation.  Rarely does anyone discuss the connectedness of the stories or their implications.  Often, that means little, but occasionally the disconnectedness points to the dissonance in government when agencies pursue their agendas.  Once in a while the opportunity arises from this to view the conflict in “generalizable principles” that drive our government’s behavior. Read the rest of this entry »

I was listening to our local public radio station this morning, and they were discussing the reduction in revenues to fix PA highways and bridges because (as they said)  the price of gasoline is so low.  Of course, they correctly pointed out that the real reason for lower revenues was the reduction in consumption that was driven by a poor economy and high gas prices over the summer.

Many callers talked about how we need to raise the gas taxes, not only to provide funds to repair the highways, but to get people to learn to conserve, and to support alternative fuels. In fact several callers felt we needed a tax “floor” implemented immediately.  A “tax floor” would mean that if the price of gas dropped below a threshold (most said $3/gallon) then the price would stay at $3, and the government would scarf up the difference.  In that way, the government would reap the “windfall profits” of low prices (instead of the consumer).  (see my past discussions regarding windfall profits here.)

Interestingly, if the price rises and falls in part due to fluctuations in demand (and demand changes relative to price) would the price charged ever get much below three, if the gas stations knew they would have to just “give” that to the government?

So I want to know, what is YOUR opinion about gas taxes?  Are you in favor of a higher gas tax?

Look forward to your answers.

Just yesterday an impromptu discussion in taxation and representation occured over at Community College Dean’s blog.  Apparently “anonymous‘s” comment was “uncalled for” when anonymous (in response to the question about including tax-payers in selecting a college’s Board of Trustees) suggested that taxpayer has less of a say than does the voter (and I would agree, these two concepts are not synonymous!)

Having just made made my estimated tax payment (late, yet again, I know…) was reading through the IRS 1040 ES tax pamphlet, and came across a list of list of expiring tax benefits.  I have (using the power of the Jing Project!) excerpted from that document that list:

Why would I list this?  Well, I find it quite interesting that, as part of the Democrats efforts to eliminate Bush’s “tax cuts for the rich” they are letting these evil tax cuts die.  You know the ones..  That credit for encouraging energy efficiency?  Oh, and that pesky credit for research (darn those tax-evading scientists!)¹

Interestingly, despite his obvious leftist leanings, Dean Dad hasn’t commented on the expiration of the tax benefit called “Tuition and fees deduction.”  He also hasn’t commented on the loss of the educator deduction from the AGI.  I wonder why?

So my question for you, dear readers is this:  Why were these tax cuts/benefits evil, and how do they only help the rich?

¹ Interestingly, several of the podcasts I have listened to lately have applauded the Obama election, and talked about the expectation that the floodgates of funding will be swinging wide. Hmm… at the same time that we remove the tax credit for conducting research? Apparently (and I just surmise here) the only “good science” is that which is directly funded by the government.  Ahh, yes, suckling…

I have written previously about the energy policies of the candidates, and I specifically wrote about the proposals from Obama and Clinton to create a “windfall profits” tax.  At the time I pointed out that, when attempted previously, windfall profit taxes failed to achieve their stated goals.

One more thing:  the last time this was done, under Carter, the expected revenues just didn’t materialize.  According to the report published in 2006 by the Congressional Research Service (CRS), “The $80 billion in gross revenues generated by the WPT between 1980 and 1988 was significantly less than the $393 billion projected. Due to the deductibility of the WPT against the income tax, cumulative net WPT revenues were about $38 billion, significantly less than the $175 billion projected.”

That got me thinking.  What people are really saying is not that they want to tax “windfall profits” (defined at the Financial Dictionary as “A sudden unexpected profit uncontrolled by the profiting party.”) but rather people are upset that the oil companies are making money by charging the consumer a higher price than they used to. Yup.  It apparently is unfair to charge a price that the market will bear.

Hillary Clinton, on May 1st is quoted as saying “The oil companies have made out like bandits, and there is no basis for them to have these huge profits.”

That said, I started to look around and see what other companies are earning these sort of “obscene” profits, during what has been described by Obama as “a recession, or worse.” So, first, I looked at the percentage profits earned by Exxon the most-oft used target of opportunity by the left.  For that past three years, Exxon has earned between 9 and 10 % profits (computed by dividing their “net income” into “total Revenue”–all data from http://finance.yahoo.com the hotlinks on the company names will take you to those pages)

Exxon
Net Income    Total Revenue    ”% Profit”
2005 36130              370680           9.75%
2006 39500              377635         10.46%
2007 40610              404552         10.04%

So, that doesn’t seem unreasonable to me, but perhaps I missed something.  Perhaps that 10% return in unmatched by any other company.  So, I decided to look at another company.  Yes, I had a biased selection.  I chose Apple, Inc, for two reasons.  First, Apple has had strong success making in-roads into several markets (computers, cell-phones, music), and secondly, because it seems Apple tends to be the computer platform of choice by those on the left.  Read the rest of this entry »

I have been hearing now for weeks about all the “gimmicks” that McCain is proposing.  The gas tax holiday is a gimmick, since it only saves the average American $30 (see my previous posts here and here for why that analysis is flawed.)  In addition, any proposal for increasing domestic production is met not only with cries that it is harmful to the environment, but that it is not a near term solution–that “do (sic) not provide immediate relief.”  And yet, this same solution is chastised for not being a long term solution either!

In addition, Obama’s attacks McCain’s proposal to offer a $300M prize for battery development

“to improve battery technology for full commercial development of plug-in hybrid and fully electric automobiles” to leapfrog currently available batteries and would have to build “more than one” advanced battery at 30 percent of current costs.

(In fact, in that same article Michigan Sen. Debbie Stabenow, D-Lansing, is quoted as saying “We don’t need a game show,” which, while making a great sound bite, seems to ignore the tremendous innovation currently seen through the use of prizes even at government expense, such as the X-Prize.  See here, here, here, and here.)

In several other stories we see the McCain has proposed immediate, near, mid and long term solutions.  Generally speaking, what Obama is calling gimmicks, we call a strategy.  He is working to alleviate (or at least reduce) the immediate pain at the pump, while seeking to ameliorate the overall energy situation through investing, and rewarding, innovation.

Obama’s plan?  Well, he really doesn’t seem to have a targeted one.  He supports a second round of stimulus tax rebates.  He also supports taxing “big oil” for making their record profits (which, by the way, are a far lower percentage of revenue than the much beloved Apple Inc.  If you don’t trust me, just challenge me.  I did the math…)  He also has called for higher fuel efficiency standards to double fuel economy by 2027!  (is that a near term solution?) And he supports alternative sources, such as solar, wind, and biofuels.

So does this add up to a coherent strategic plan that addresses the immediate needs, as well as the mid- to long-term needs?  What does Obama himself have to say about this:

Obama admitted that his own plan will not immediately affect gas prices but said his proposal for a second stimulus package will offer overall financial relief. “I wish I could wave a magic wand and make gas prices go down, but I can’t,” he said. “What I can do – and what I will do – is push for a second stimulus package that will send out another round of rebate checks to the American people.”

So, what is Obama’s plan for today?  He and McCain seem to agree on the long-term.  And the need for change.  But Senator Obama, do we really have 10 to 20 years to wait?

So, readers, I ask this.  If you were putting together a comprehensive strategy, what would be your:

• immediate term solution for lowering the price at the pumps today
• near/mid term solution for keeping costs down
• long term solution for weaning Americans off a dependence not just on foreign oil, but oil.

By now everyone has heard Obama’s plan

“I’ll make oil companies like Exxon pay a tax on their windfall profits, and we’ll use the money to help families pay for their skyrocketing energy costs and other bills,” the Illinois senator said.

He of course hasn’t stated at what point profits become “windfall profits.” So off to the definer place I went (you know, a dictionary!) According to The Free Dictionary, windfall profits is: “profit that occurs unexpectedly as a consequence of some event not controlled by those who profit from it”

This has me wondering what (or who else) has profited unexpectedly and therefore should be taxed on th eir “windfall.” I have a few thoughts: Read the rest of this entry »

I last wrote about the numbers being a bit “off” on the gas tax. I stand by the “general” analysis, since the discussions in the media centered around the “average American” but I wanted to discuss a bit more in depth, some other confounding variables.

Of course, the first is the diesel tax. Most Americans don’t drive diesel cars. But virtually all tractor-trailer rigs run on diesel. And the tax on diesel is higher than on gasoline. And, of course, trucks put more miles on the road than general use automobiles. This does mean a larger share of the $10 billion in tax revenue comes from trucking than from automobiles, both in miles driven and cost per gallon. Read the rest of this entry »

Far be it for me to attack Obama. Hey, he’s the one Democratic candidate I have liked so far. But I have to go after what is quite honestly either the sloppiest math I have seen, or the most disingenuous campaign rhetoric to cross through this campaign cycle.

I was reading the blog over at “Imperfect Mommy” where I read, and at first accepted without questioning her comment “I read yesterday that suspending the gas tax would save the average American $30 over the course of the summer. $30.” Of course, then I felt rather guilty for not questioning the number. Not because I don’t trust her, but because it just seemed a bit “off.” At first I just figured “well, with almost 5 drivers in the family we are certainly not ‘average’” but then I realized–no one is.

My first thoughts, as a good researcher where: Read the rest of this entry »

Rarely do I write these short postings but…

It struck me today that “tax day” is perfectly placed for politicians.  Far enough ahead of election day that we forget the pain, and far enough after election day that we aren’t thinking about the pain quite yet.

Coincidence?

To follow-up on a previous posting (in re “I can’t pay my mortgage and I won’t move out“) I note the newest wrinkle: banks bribing squatters not to trash the house during an eviction.

To review the bidding, socio-politico-economic forces led us into a situation where pretty much everyone was happy with people buying homes they couldn’t afford, at terms they couldn’t meet, for properties that were carried on the books at more than they were worth [speculators, flippers, builders, race hustlers, municipalities, and regulators all joined in the fun].

This went on for several years, and everyone was happy. People got to live in better houses than they could afford, and pay very little for them. Builders sold properties (and built even more!). Banks and mortgage companies shifted risk into the future, secured by value that didn’t exist. Borrowers who wouldn’t normally get loans did. TV shows actually showed us how to buy homes on “interest only” notes as long as we could sell them before the ARM ballooned and make money on the artificial value increases. Prioperty tax revenues flowed into municipalities like rivers of milk and honey. Fund categories were created to continue the illusion; look, The Share Price Just Went Up!

The problem (as with *all* pyramid schemes) is that eventually we run out of new suckers to buy into the scam. At that point, the underlying value of what is being traded becomes important. If the “paper” value of the assets greatly exceeds the “actual” value of the assets (hmmm what happens to the value of a product when supply outstrips demand?). After decades of overbuilding, the “air was let out of the balloon” in many markets.

The same people who “made” $$$ all of a sudden “lost” $$$.

So here we are.

1. Experts are urging people to live in their foreclosed properties for up to a year and “slow roll” the eviction process [note: At least 8 months is possible in just about every state. Apparently, the key is to just stop making payments to your lender, and not acknowledge that anything is amiss. You don't even need a laywer in every case. It takes that long before someone with a gun actually shows up at your door.] ; and

2. An alarming trend of ex-homeowners trashing the homes on their way out has developed. Recent WSJ article noted that several banks/mortgage lenders are now hiring agents to go from home to home offering thousands of dollars to tenants to not trash the property while leaving.

So you simply sieze the property for up to a year and then demand a bribe so as to not reduce it’s value further.

AND WE WANT TO GIVE A BAILOUT TO THESE PEOPLE?!?!

the other steve