Combatting the Delusional Local Politicos

Local politicos and some screwy business leaders are blind to the obvious. They think business will relocate to Wisconsin simply because we have water availability thanks to Lake Michigan. Happily, Patrick McIlheran pointed out the fallacy of this type of thinking in an op-ed piece he wrote in Sunday’s local rag.

Some selected highlights. Any emphasis mine.

I wonder if this was what it felt like to own a polka-records company in 1977, telling yourself that with Elvis dead, the kids would forget rock and come back.

Keep waiting. Meanwhile, we’ve got lots of people saying Atlanta’s drought will be what sends ‘em all scurrying back to Milwaukee.

From the man on the street to essays in political journals, people living on the shores of the world’s largest, most beautiful backwater are figuring that the drift of people, money and power to the Sunbelt will surely end now. They want our water, so they’ll have to come back.

Even serious, thoughtful people say this. “This is a very big economic development tool for the Great Lakes region,” said Todd Ambs to Milwaukee business leaders last month. Ambs runs the water division for the Department of Natural Resources. He knows more about the flow of water than I ever will. The message, he says, is, “you can come back to the Great Lakes.”

Not going to happen, says John Kasarda, who knows more about the flow of economies than I ever will. Kasarda, who researches entrepreneurship and demographics at the University of North Carolina, says there’s simply no evidence that constrictions in water supply alone can torpedo a burgeoning region. Phoenix and Las Vegas, you might recall, thrive. The southeast isn’t short of water. It just doesn’t organize its distribution well - yet.

The people who think Atlanta’s drought will send people back here are buffoons. With telecommunications being what it is today, people can live just about anywhere they want. So, the jobs will go to where capital is welcomed and stay where it is treated fairly. As Kasarda points out:

The lake won’t save us. A new attitude might, suggests Kasarda. What made the Sunbelt as much as air conditioning was a pro-enterprise culture, he says - an encouraging attitude toward growth, a “flexible, non-union environment,” decent taxes. “They put out the red carpet for business,” he says, and it worked.

And here? “The attitude in Milwaukee toward business is awful, and you just don’t see it anywhere else,” Briggs and Stratton CEO John Shiely told a reporter this month. He and other executives had the temerity to say the same in public last winter and were excoriated as wanting “to return to the 19th century.” How dare they mouth off! Don’t they know their place?

Suppose Atlanta were rewound to some prior century - that its growth were halted. It’s gained a million people in six years; where might the next million go instead? Shiely contrasted Milwaukee with the welcoming attitude in Murray, Ky., and that should be a hint: There are lots of other Sunbelt towns. If Atlanta’s got too many people drawing from one little river, that’s solved as people spread to other rivers in the welcoming, low-tax South.

Think the above isn’t true? Guess what? Texas just surpassed New York as the state with the most “Fortune 500″ firms with 58 now in Texas.

Some of that was due to the growth of local firms but more was because of firms that relocated out of the high-tax, anti-business climates of states like the socialist shithole under Pol Pot Doyle Wisconsin. Seems to me Texas is not exactly known for having a lot of water. (As I side note, I paid $4.75/gal for avgas in Texas compared to $5.85/gal here.)

Until the negative attitudes toward business are reversed here, we’ll have plenty of water. No jobs, of course, but plenty of water.

Hey Libtards, Put Your Money Where Your Mouth Is!!

The Wall Street Journal points out something I didn’t see in the local rag this morning.

“We recently suggested that if Bill and Hillary Clinton are eager to pay more taxes, they should write a personal check to the U.S. Treasury to compensate for the lower tax rates they so frequently decry. And lo, here comes legislation to make it easier for the former first lady and other pseudo-populists to do just that.

I would add one thing to this bill. The “extra” would become public information. Let’s see how much the libtards, especially you, Brick Decker and you, Pol Pot Doyle, and you, Barack Hussein Obama. That means every “tax the rich” politico and blogger, too.

I don’t want to see a measly $100, either. Lead by example. Add 20% to your Federal and State tax bills and send it in.

Even if the bill passes, I doubt the libs will give the “extras” they keep wanting to take from all of us.

Had to Post It

Yeah, it’s all over the Cheddarsphere but I had to post it anyway. Frank Busalacchi, the terminally moronic transportation secretary in Madistan doesn’t think we’re paying enough at the pump. From Sykes.

Raising taxes is never an easy decision. For the good of the country, we have to make this investment.
- Transportation Secretary Frank Busalacchi, a member of the National Surface Transportation Policy and Revenue Study Commission, testifying before a House Appropriations subcommittee. Busalacchi pitched the commission’s plan to gradually raise the federal gas tax by 25 cents to 40 cents a gallon. Busalacchi argued, “Our (national) infrastructure is in terrible condition. We’re dealing with it every day in Wisconsin.”

Well, Frank, nice to see you’ve completely ignored the fact that Pol Pot Doyle raided the transportation fund to balance the budget.

Tell me Frank, how is raising taxes at the pump going to benefit the state. Why don’t you get some stones and tell Doyle to cut unnecessary spending?

Let me join in the other Wisconsin taxpayers by saying “Kiss my ass”.

Let me say the same to the MSM, for not reporting this.

Obama Doesn’t Get It

The Wall Street Journal had an excellent editorial today concerning Barack Hussein Obama’s plans to raise the capital gains taxes should he be elected President.

“Barack Obama recently released his tax records, and it was notable how little he and his wife appear to invest in the stock market. That may explain the Senator’s odd belief that a significant hike in the capital gains tax rate won’t matter to shareholders or harm the economy.

Or so Mr. Obama’s replied to CNBC’s Maria Bartiromo when she asked how much he’d increase the cap-gains tax, something he’s said is necessary to restore “fairness” to the tax code. Thanks to the 2003 tax cuts, the top rate is currently 15%.

“When I talk to people like Warren Buffett or others and I ask them, you know, what’s – how much of a difference is it going to be if it’s 20 or 25%, they say, look, if it’s within that range then it’s not going to distort, I think, economic decision making,” he said. He concluded that a higher rate would boost federal receipts, which would allow the government to redistribute “relief to middle class and working class families.”

With apologies to economists Buffett and Obama, the history of this tax isn’t on their side. The capital gains rate is crucial to investment decisions; higher rates make capital more expensive, dampening incentives to invest and reducing economic growth. John F. Kennedy understood this, as he proposed a capital gains tax cut. Bill Clinton joined with Republicans in 1997 to sign legislation lowering the rate to 20% from 28%.

Critics howled this would reduce tax revenues, and they howled when Republicans cut the rate to 15% in 2003. What followed in both cases was an enormous “unlocking” effect, as investors sold more stock and assets to take advantage of the lower rate. Capital gains realizations soared to an estimated $729 billion in 2006 from $269 billion in 2002. This goosed Treasury receipts from capital gains, to an estimated $110 billion in 2006 from $49 billion in 2002.

Mr. Obama doesn’t have to guess what sort of “distortion” would come from significantly raising the cap-gains rate. In 1986, the tax rate jumped to 28% from 20%, a 40% increase. Tax revenues spiked briefly in anticipation of the hike (as investors moved to cash in at the lower rate), then dropped precipitously. Four years later, in 1990, the federal government was still taking in 13% less revenue at the 28% rate than it did in 1985 at the 20% rate.

Now, most leftards will say “good, tax the rich” but an increase in the capital gains tax will hurt the “non-rich”, too. (Of course, you have to remember that the Dems consider anyone with an income of over about $33,000 to be “rich”.) Check this out, from the same editorial.

[...]“As for Mr. Obama’s implication that capital gains remain the privilege of the wealthy well, that’s yesterday. In recent decades, the U.S. has become a shareholder society, and average Americans increasingly rely on investment income to save for retirement or even to pay bills.

In 2005, according to the most recent data from the Internal Revenue Service, 8.5 million households paid taxes on capital gains. A hefty 47% of those tax filers reported income of less than $50,000, while 79% had income under $100,000. Keep in mind that capital gains themselves count as income and often are a one-time windfall from the sale of a small business or long-held stock. These working families would suffer a double whammy, both with a higher tax rate and lower stock prices – because financial markets factor higher taxes on stock profits into lower stock valuations.”[...]

Obama’s plan would hurt everyone in the market. You have to remember that the 8.5 million people reported in the IRS data are only those people who sold stock (or maybe declared dividends). My guess is that there were many more people in the same income brackets who did not declare capital gains as they sold no stock.

Finally, here’s something Obama and his economic advisors would do well to remember, again from the WSJ.

With the economy weak, this is an especially poor time to be talking up tax hikes. A higher rate, and its devaluing of U.S. assets, would hammer U.S. competitiveness, making it harder to attract global capital. America is increasingly isolated in taxing capital gains. Many industrialized competitors publicize a lower rate, and many (Germany, Switzerland, Austria, New Zealand) have no levy at all.

If Mr. Obama really wants to lift the economy – and those middle-class American shareholders – he’d advocate cutting the rate, or indexing it to inflation so investors aren’t taxed on phantom gains. That would violate the Democratic left’s faith that tax rates don’t matter to growth and that raising taxes on capital and “the rich” is good politics. We doubt members of America’s politically astute investor class agree.

If Obama is elected and his tax hikes go through, the economy will go into full-blown recession. (Whether we’re in one now is a subject for another post.) The “blood” from that will be on the hands of those who vote for raising the capital gains taxes and other taxes, as well.

Almost every country has learned that by cutting taxes, you increase investment and therefore growth. Here’s a little question for all you Dems who love to raise taxes:

Name one civilization or country that ever taxed its way into prosperity.

Why Worry When You Have Taxpayers?

The takeover of Bear Stearns by JP Morgan Chase got a little sweeter for Bear Stearns shareholders when Morgan upped the price to $10/share from the first offer of $2/share. The initial bid ran into opposition from Bear Stearns (BSC) shareholders, most of whom are still losing a great deal of money. (As of one year ago, BSC Was trading at about $150 share.)

Well, so what? You say. Well, here’s the rub. The Fed (via the taxpayers of course) will still continue to guarantee the $29 billion in BSC mortgage paper. In effect the taxpayers will continue to subsidize the “stupid penalty”. The stupid penalty is a necessary component of any financial transaction. It keeps firms and individuals honest and forces lenders and investors to closely measure the risk inherent in any financial transaction.

Now as the Wall Street Journal points out in another fine editorial, Morgan has every right to increase their bid and BSC has every right to reject the initial bid and take their chances.

Last week’s Fed-led sale of Bear at least had the virtue of sending a message that bad things happen to reckless investors. Bear took a highly leveraged flyer on the mortgage securities market, ran into a liquidity crisis as its creditors lost confidence, and had to ask the Fed for help to avoid bankruptcy. The $2 sale price was a shock to Bear employees and investors. But it was also condign market punishment for bad decisions, and a bracing lesson for future investors. Meanwhile, the Fed’s more troubling agreement to guarantee Bear’s mortgage paper could at least be justified in the name of avoiding a larger financial breakdown.

This week there’s no such “systemic” excuse. The Fed has since opened its discount window to broker-dealers like Lehman and Goldman Sachs, so there’s now a fire wall around any Bear Stearns failure. The credit markets have also calmed considerably.

If Bear holders don’t like the $2 price, they have every right to oppose it while taking their chances with customers and creditors. If Mr. Dimon wants to pay more for Bear, that’s also his prerogative, but then he shouldn’t demand that the Fed continue to guarantee his paper. He’s getting Bear at such a great price that he ought to accept the mortgage-backed securities risk almost as a public service. We suspect that’s what the J.P. Morgan of the Panic of 1907 would have done.

The Fed argues that it did negotiate somewhat better terms for its guarantee. J.P. Morgan agreed to take the risk for the first $1 billion in losses on that $30 billion in mortgage paper, while the Fed will reap any upside if it improves in value. Yet taxpayers are still on the hook for $29 billion. A guts player at the Fed or Treasury would have declared that a deal is a deal, and that if the merger failed then the Fed also had prerogatives — such as declaring that the $30 billion in collateral would be forfeit.

Worse, the Fed and Treasury missed an opportunity to drop the taxpayer guarantee and explain that its actions last week were an extraordinary, one-time intervention in a crisis. By keeping itself and taxpayers on the hook, the Fed risks setting a long-term precedent that will do considerable harm even if it never loses a dime of that $30 billion. That includes harm to the Fed itself, as the institution becomes increasingly seen not as an independent central bank but as a political arm of the Treasury — and, watch out down the road, of Congress. The price of this Fed intervention may well be far more regulation of our financial markets, not to mention a reduction in Fed independence.

The immediate political message is also terribly damaging. Congress is already poised to overreact to the mortgage turmoil with a general bailout for subprime borrowers, and yesterday’s actions will only feed that beast. At least the $2 share price wasn’t a bailout for Bear shareholders; at $10 a share, that’s a harder argument to sell, especially when taxpayers are also still indemnifying those Bear-J.P. Morgan creditors. This makes us wonder if Treasury Secretary Hank Paulson isn’t already preparing to cave to Congress on the larger bailout.

As they like to say on Wall Street, the goal is to leave you with only your socks and a smile. New York Fed President Tim Geithner and Mr. Paulson were the main government decision-makers in dealing with Mr. Dimon, so we recommend they each buy raincoats. They’ll need something to wear when they and this bad deal for taxpayers get undressed a second time on Capitol Hill.

Frankly, this deal stinks for taxpayers. As much as I personally dislike government bailouts of anything, I can accept “one-off” deals in the spirit that it’s for the greater good. To shift the “stupid penalty” to taxpayers for ongoing transactions stinks. If the revamped takeover doesn’t work, it will be the taxpayers on the hook. Not JP Morgan Chase.

Same Old Crap

It’s always kind of funny (and frankly rather tragic) when the MJS Editorial Board writes about taxes. Take this editorial for example.

A tax that lowers costs? In the short run maybe, but certainly not long-term. Let me just add one other thing. The state Senate should be focused on cutting costs, not raising taxes. Decker and his toadies won’t do that though…that requires creative thinking…..something in short supply in the majority in the upper house in Madistan.

Remember the Main Platform of the Dems

I’ve said it before but it’s worth restating. Remember the platform of the Dems.

1. We’ve got everything it takes to take everything you have; and,
2. Is what we’re doing good for America and Americans? We don’t care!

If you don’t believe me, take a look at what Hillary wants to do to YOUR wages.

WASHINGTON - Democrat Hillary Rodham Clinton said Sunday she might be willing to garnish the wages of workers who refuse to buy health insurance to achieve coverage for all Americans.

If someone tried this on the street, it would be called armed robbery.

Poor Little Pol Pot Doyle

Poor little Jimmy “Pol Pot” Doyle. Faced with a revenue shortfall as income and sales taxes fall below expectations, Doyle and the rest of the Morons in Madistan will have to make some cuts. Tough. They could cut half the state budget and no one other than the deadwood in the state government would be affected.

It must be tough for the politicos to decide which things take priority when there isn’t enough to go around……you know, just like real people who can’t magically create money through the armed robbery of the tax code.

“When the economy slows like this, it’s going to be a real challenge. We’re going to be in a difficult time, and we’re going to ask people to make sacrifices, and do without some things and put some things off that we want to get done.” (said Doyle).

Gee Jimmy, why don’t you man up and make some decisions?

Business Climate in Milwaukee

Yesterday (1/20/0 the MJS ran an interesting Op-Ed piece on the business climate in Milwaukee. The article, tried to show how Milwaukee could benefit from following the Hong Kong Model. Entire article here.

As someone who has spent a LOT of time in HK in the old banking days and still continues to go there (3 times per year for about 7-10 days per visit) I would love to see Milwaukee become a Hong Kong. The author, a James Casey, Jr., a Shorewood native, is now a visiting professor in HK had some good ideas. Sadly, he missed a crucial point but the article had some points that are quite valid.

Perhaps the most crucial point in the article was the following:

“Hong Kong is not perfect and Milwaukee is not beyond hope. Hong Kong has its challenges in a booming part of the world. And Milwaukee has assets that other cities lack. But I will say this: Hong Kong is infused with an “entrepreneurial spirit of urgency” that has largely been lacking in Milwaukee for decades. Milwaukee seems to be coasting on the legacy of a dynamic 1948-1970 period.”

Well, that goes without saying. In Milwaukee, and in Madistan, people want to talk plan, form committees and study things ad-nauseum. By the time a decision is reached, the situation has radically changed and the cycle begins anew. People who run for office try and figure out how government can become more intrusive.

Two other key points were made as well.

Elected representatives - and the general public - need a sense of urgency: This sense of urgency is not just for fixing problems that have festered for 40 years, but is based upon recognizing that international pressures are becoming greater.

Transportation is critical: Not only are Chinese authorities expanding the MTR (subway) system, but they are building and expanding freeways. The Hong Kong region generally lacks the “paralysis by analysis” mindset cited by former Milwaukee County Transportation Director Robert Brannan in the 1970s (in reference to the freeway battles). It is an embarrassment that the KRM project is stalled and the Milwaukee County bus system is in such bad shape; those need to be fixed. But transportation improvements go beyond mass transit. The freeway system needs to be rebuilt and modernized, and the Stadium North Freeway gap needs to be completed. Milwaukee has been crippled by the failure to complete a basic, long-term freeway network. The people of Hong Kong have not bought into the argument that it is either freeways or mass transit. They are improving both, and they are not talking for decades about doing it.

The above points are also quite valid. The HK freeways and subways are excellent. Of course, there are about 6.75million people in HK so mass transit is far more critical than here in MKE. Mass transit takes many forms, including freeways.

As I pointed out earlier, the author missed one VERY KEY component in his article. The tax climate. HK has prospered as a business haven because of low taxes.
Now, HK sets its own tax rates independent of Beijing today and London during colonial times. Thus, the rates are “national” rates. But check it out this brief summary.

16% flat tax on salaries.
No capital gains taxes (but no deductions for losses, either)
No estate (death) taxes.
No taxes on income earned outside of Hong Kong (although you would have to deal with taxes in the country where the income was earned).
There are “stamp taxes” which cover a myriad of services, but these are minor, ususally about US$1.25 or so. The highest I ever paid was $10.00 when I sold some stocks I owned on the HK exchange.

Furthermore, HK does not give any tax credits for relocation. Why should they? People and companies WANT to go to Hong Kong in order to take advantage of the workforce and opportunity to keep what they make.

Compare that with the depressing climate as outlined in my earlier post.

When you make $1.0million in HK, people applaud. They don’t try and take it way from you.

The author made some fine points; sadly, few, if any of them will ever go into practice here.

Wonder What the Morons in Madistan and Washington Will Think of This

Do you think this will make a difference to Pol Pot Doyle or the other “tax the rich” morons who write our tax laws?

Democrats in Congress remain committed to raising taxes on grounds that tax rates don’t much matter to economic growth, and in any case they only help the rich. They may be the last public officials on the planet to believe this. In recent weeks alone, some of the unlikeliest political leaders have endorsed tax rate cuts in the name of making their economies better.

Start in Europe, where Socialist Party Prime Minister José Luis Rodríguez Zapatero pledged in December that if re-elected, “One of the first decisions I would take is to eliminate the wealth tax [up to 2.5%],” which he says is one of the highest in Europe and “punishes savings.” Mr. Zapatero is no conservative. But he’s joining the European march down the Laffer Curve on taxes, having already phased in reductions in Spain’s corporate tax rate to 30% from 35% and its personal income tax rate to 43% from 45%.

Like France and Germany, Spain is cutting rates because of the tax competition from their European Union neighbors such as Ireland and East Europe. There are now at least 11 nations formerly behind the Iron Curtain with flat rate taxes of 25% or lower. On January 1, a new flat tax of 10% became law in Bulgaria, replacing its progressive rate structure and as far as we know the lowest such rate in the world. The newly elected Polish parliament is also planning to cut taxes, though an earlier flat-tax proposal earned a veto threat from the president.

And this just in: In the Middle East, Kuwait has decided to slash its corporate income tax on foreign companies to 15% from 55%. Finance Minister Mostafa al-Shemali argued for the cut, noting that Kuwait attracted less than $300 million in foreign investment last year, compared to some $18 billion in lower-tax Saudi Arabia (which has a religious tax but no corporate or income tax on Saudi nationals). “This law will encourage foreign investors to enter Kuwait,” says Ahmed Baqer, head of the parliament’s finance panel.

It’s getting lonelier all the time at the top for America, which with a corporate tax rate of 35% is one of the few developed nations left with a rate of more than 30%. Economist Dan Mitchell tracks these trends for the Cato Institute, and he finds that 26 developed nations have cut either personal or corporate income tax rates since 2005. Since 1980, OECD nations have sliced their average personal income tax rate by 24 percentage points, to 40% from 64%. Corporate tax rates have fallen by more than 20 percentage points. Foreign leaders have learned that, in a world of easy global capital flows, high tax rates chase away investment and entrepreneurs.

Some of these tax-cutting nations — such as Estonia, Ireland, Russia and Spain — have seen revenues rise even as rates have fallen. This is what turns socialists into supply-siders in Spain, if regrettably not in the U.S.

I doubt this will have any effect in Washington. We already know the Morons in Madistan will pretend the actions described above are not “facts”.