J.C. Moore Online

Current events from a science perspective.

The “Fair Tax” proposal would replace income taxes with a “revenue neutral” consumption tax. To fund our government at the current level would require a national sales tax of  30%. The Fair Tax proposal  might simplify our tax codes, but it would also have ripple effects across our economy with unknown consequences.

Economist Mike Moffatt has identified the likely winners and losers under the Fair Tax proposal. Winners would be people who are inclined to save, people who can shop in other countries, those who can avoid sales taxes by unscrupulous means, and the wealthiest one percent who will get an average tax cut of about $75,000.

The losers would be the working poor, families with incomes less than $200,000, people who derive income from the current system (tax accountants, IRS employees and income tax lawyers), and seniors who have already paid a lifetime of income taxes and would now be taxed on spending as well.

The “Fair Tax” proposal would shift more of the tax burden to middle and lower income groups, those groups already benefiting the least from recent tax cuts. Our present graduated income tax code is based on the ideas that those who profit most from our country’s wealth, resources, and opportunities should pay a greater share of their bounty in taxes. The current system seems fairer and more pragmatic than shifting taxes to those who could least afford to pay.

For more information and references, click Here.

Dan Boren (D-OK) has made a number of ads critical of his Democratic primary opponent, Jim Wilson.  It bothers many Oklahomans that Boren appears to be just camouflaging himself as a Democrat because his father was a highly respected Democratic Governor and Senator. It’s not clear whether the acorn fell really far from the tree or if Boren’s ads represent what a Democrat has to do to be elected in Oklahoma. One ad showed Boren in new camouflage gear, tags still attached, cocking a gun at his opponent. However, the ads have not gone over well as State Senator Wilson, who Boren chastises as Oklahoma’s “most liberal” senator, was a combat marine in Vietnam.

An article recently appeared in the Daily KOS containing a video making fun of Boren’s ads and criticizing him for supporting a “Flat Tax” scheme. (1) True to form, in the tree scene in the video, Boren is wearing the unofficial state color – camouflage. He is the  only Democrat among 61 Republicans in Congress supporting the “Flat Tax”(or “Fair Tax”) scheme.

Boren apparently hasn’t thought that Flat Tax scheme through. My Congressman, Frank Lucas (R-OK), also favors a “Fair Tax” scheme that would replace income taxes with a national sales tax ( a consumption tax) (2). Boren says it would be a sales tax of 30%. It  may need to be higher for it to be “revenue neutral” as we have to raise a certain amount of revenue to support our government and that would not change. What the “Fair Tax” would change is that more of the tax burden would shift to the middle and lower income groups, those  already benefiting the least from state and federal tax cuts. (3)

While many like the idea of the Fair Tax’s simplicity, that may turn out not to be the case. The Tax Reform Act of 1986 was supposed to bring us “simplification” of  our income taxes but there is little evidence that it has worked. Adopting a national sales tax will have a ripple effect across our economy with unknown consequences. For instance, we would have to tax internet purchases and raise import duties to keep the wealthy from shopping overseas for major purchases.

Economist Mike Moffatt has worked out who would be the likely winners and losers under the Fair Tax proposal: (4)

Winners:

• People who are inclined to save: People who do not consume as much will benefit from the plan.
• People who can shop in other countries: People who take a lot of overseas vacations or living near the Canadian or Mexican borders.
• People who can avoid sales taxes: Those who can exchange or barter services and goods, or the unscrupulous who can buy for personal use and claim as a business use.
• The wealthiest one percent: They will see an average tax cut of about $75,000 per person.

Losers:

• The Poor: The working poor pay little income tax but they must spend a larger proportion of their income to survive. They’d pay a larger percentage of their income in taxes than wealthier individuals.

• Families: Tax breaks such as dependent deductions, earned income credits and child care credits would disappear. It would hurt families with incomes less than $200,000 but help families with income above $200,000, due to the dramatic reduction in the top tax rate.

• Tax Accountants, IRS Employees and Income Tax Lawyers: Yes, but they’d survive somehow.

• Seniors: They’ve already paid a lifetime of income taxes and this would now tax them again on consumption as well. They would end up paying a disproportionate share of taxes.

Overall, the Fair Tax is fairer to some than to others, and it looks to be most fair to the wealthy. Our present graduated income tax code is based on the ideas that those who profit most from our country’s wealth, resources, and opportunities should pay a greater share of their bounty in taxes. The rich may not think that’s fair, but that’s fairer and more pragmatic than shifting more taxes to those who have little.

(1) http://www.dailykos.com/story/2010/7/3/881389/-Dan-BorenCongress-Worst-Democrat-Has-A-Primary

(2) For an in depth analysis of the consumption tax see:  http://mises.org/daily/1768

(3) For historical top tax rates see:

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213

(4) http://economics.about.com/cs/taxpolicy/a/fairtax_5.htm

Integrity in Politics: It is the purpose of this site to apply observation and reason to current events. Good government depends upon our Legislators and our voters having up-to-date and accurate information. Senator Tom Coburn is considered to be the best informed of the Oklahoma Legislators. However, some things he presented at his town hall meeting, though they play well with his base, are not supported by research. We feel that Senator Coburn should thoroughly research the topics upon which he votes and speaks and that he should provide his constituency with accurate information.

Supreme Court: When asked about the recent court appointments, Senator Coburn disparaged the latest Supreme Court Justice, Sonia Sotomayor, by claiming she had lied, a very serious accusation to make against a Supreme Court Justice – especially when wrong. Coburn said that Sotomayor had reneged on a promise made during her confirmation hearing not to use foreign law to interpret the Constitution of the United State. He used as evidence the ruling of the Supreme Court on the case of Graham v Florida, in which a juvenile offender had been sentenced to life in prison for nonhomicidal crimes.

After reading the Supreme Court response which was actually presented by Justice J. Kennedy, not Justice S. Sotomayor, it appears that Senator Coburn was actually not being honest in his presentation of the information. As shown in the section of the Supreme Court brief below, the only reference to foreign anything is that the practice has been rejected the world over. This does not refer to any foreign laws but merely reflects on our standing in how humanly we treat juvenile offenders compared to the global community to which we belong and by whom we are scrutinized and in no way reflected that any foreign law was used to interpret the United States Constitution.

This misleading charge by  Senator Coburn raises a concern about any information he uses to support his views and whether he is just another typical politician trying to manipulate his constituents with “smoke and mirrors”.  Additional support for the Court’s conclusion lies in the fact that the sentencing practice at issue has been rejected the world over: The United States is the only Nation that imposes this type of sentence. While the judgments of other nations and the international community are not dispositive as to the meaning of the Eighth Amendment , the Court has looked abroad to support its independent conclusion that a particular punishment is cruel and unusual. (See, e.g., Roper, supra , at 575–578. Pp. 29–31, 982 So. 2d 43, reversed and remanded. )

Elena Kagan: Senator Coburn also said he could not support the appointment of Elena Kagan to the court because she considers the Constitution to be a living document. Senator Coburn believes that the Constitution should be interpreted as the Founding Fathers meant it. That, however,  has been as an excuse used by some politicians and judges to interpret the Constitution as they wish and claim it is what the Founding Fathers actually meant. The Founding Fathers were wise enough to give us a mechanism for amending the Constitution and there are now 27 Amendments. The Constitution is alive and better for it.

Recess Appointments: When asked about President Obama’s recess appointment of Dr. Berwick to head the Center for Medicare and Medicaid Services (CMS), Coburn emphatically declared that it was wrong and  illegal. Yikes! Coburn should polish up on his history of the much-used recess appointment. By this same point in his Presidential career, George W. Bush had used this technique to make 15 appointments and he used it 179 times during his career. Where were those Republicans then? The last group of appointments will bring Obama’s total to 18. It has been noted that Bush was not facing the same level of obstruction.Currently, Obama has 189 nominations pending before congress and 28 have been on the floor for more than three months. Bush only had six nominees that had been waiting that long. It might also be an interesting FYI to note that even George Washington used the practice to appoint the then controversial judge John Rutledge to the Supreme Court after he had failed to be confirmed by the Senate.

Reccess Appointments are a legal practice granted to the President of the United States by the Constitution of the United States in Article II, section 2.

Some have indicated that they feel this power should only be used when the position becomes vacant during a recess but this has been adjudicated by The Eleventh Circuit, in an en banc decision in Evans v. Stephens which held that the Constitution permitted both intrasession recess appointments and recess appointments to fill vacancies that existed prior to the congressional recess.( Evans v. Stephens, 387 F.3d 1220 (11th Cir. 2004). ) Since the position filled by Dr. Berwick has been vacant since 2006 it fulfills the courts requirements and is clearly legal.

Health Care: Senator Coburn said he  objected to the appointment of Dr. Don Berwick to head the CMS as Dr. Berwick  promotes medical rationing. Coburn’s basis for this premise uses “cherry-picking“, a technique which picks out a quotation and presents it out of context. A statement that Dr. Berwick made in 2008 in an interview with the respected publication, Biotechology Healthcare has been “cherry-picked” and this partial quote has been publicized many times by zealous Republican in order to create the specter of medical rationing. Here is the partial quote Senator Coburn refers to: “The decision is not whether or not we will ration care. The decision is whether we ration care with our eyes open.”  But, here is the actual quote in context, “We make these decisions all of the time. The decision is not whether or not we will ration care. The decision is whether we ration care with our eyes open. And right now, we are doing it blindly.”

Despite what Senator Coburn might claim, that statement isn’t particularly radical. Rationing currently occurs in our health-care system as resources are limited, and medicine and medical procedures are approved or disapproved by insurance companies regardless of whether that system is privately or publicly funded. “Blindly” as used by Dr. Berwick indicates we are currently doing it badly and not with an eye to the best practices to be used for the good of the patient; and not with an eye to which practices are unnecessary and therefore unnecessarily costly; and not with an eye to what medicines, tests and equipment are provided unnecessarily and sometimes even to the detriment of the patient.

“Ezra Klein, a blogger for the Washington Post, notes that Berwick’s statement is no different than a statement from Republican Rep. Paul Ryan of Wisconsin (seen as an up-and-coming leader within the GOP), who said with respect to health care, “Rationing happens today! The question is who will do it?” www.cbsnews.com/8301-504763_162-20009880-10391704.html.
Here is another more honest Republican’s statement on Berwick’s appointment. Tom Scully, who ran the CMS under President George W. Bush, noted, “You could nominate Gandhi to be head of CMS and that would be controversial right now.” http://www.newsweek.com/blogs/the-gaggle/2010/07/07/don-berwick-appointed-to-drive-health-care-changes-sidestepping-congress.html

With the use of the “cherry-picking” technique, some Republicans appear to be using medical rationing as a scare tactic to gain support in the up-coming elections without regard for what is actually good for the patient, I mean constituents. And to make matters even worse, Senator Coburn is a doctor. He also  said that other countries have national health care at lower cost because they ration health care. He says you and your family are responsible for paying for your own health care. Isn’t that just rationing health care by using money. If you, or your family can’t pay, would he just let you die?

By Guest Author: Barbara Moore

Congressman Frank Lucas (R-OK), in Frankly Speaking (3/10/2010), wants to rein in what he calls “the EPA power grab” to limit carbon emissions. That is hardly the case. The Supreme Court, in Massachusetts v. EPA, ordered the environmental protection agency to make a determination as to whether carbon dioxide is a pollutant. The EPA has found, based on the best scientific evidence, that CO2 is an endangerment to public health and has moved forward as instructed.

If Congress had acted to develop a sound energy policy and to curb pollution, the  EPA would not be forced to act in the matter. Regulation of carbon emissions would fall mainly on the coal industry and would favor a shift to petroleum and natural gas, both abundant in Oklahoma. However, all our  Republican Congressmen sat out the process and let the Democrats from coal producing states load up the cap-and-trade bill with perks for coal producing states. Some of  leaders see that limiting carbon emissions could be favorable to the Oklahoma economy, but apparently, our elected representatives have not caught on yet.

It is not just about the CO2 or climate change. Along with the 30 billion tons of CO2 we put into the air annually are large amounts of mercury, lead, cadmium, arsenic, sulfur oxides, nitrogen oxides, particulates, and radioactive isotopes of radon. Those end up in the air, the water, and the food chain. We are now finding mercury in fish and some places have limits on consumption. The oceans are now 20% more acidic and economically important fisheries are threatened. Whether we cap pollution, tax it, or strictly regulate it, something must be done and soon.

Petroleum geologist John Brock asks, “Can we really stop climate change?” (1) and concludes we can’t. I agree with him that using geo- engineering to reduce global warming is a bad idea but I strongly disagree with the idea that we can’t do anything about it. The Tulsa World article, “Turn up the Savings.”(2) lists a number of things you can do to cut global warming and also reduce your energy bill.

 Geo-engineering would  have unintended consequences, and it would not address the underlying problem.  Burning fossil fuels puts 30 billion tons of CO2 into the air annually along with mercury, lead, cadmium, arsenic, nitrogen oxides, sulfur oxides, and radioactive isotopes. Much of those end up in the environment and in the food chain. Like carbonated water, the oceans are now 20% more acidic than a century ago (3) and the mercury level in tuna has gone up 30% since 1990 (4).

 NASA’s data shows that the past decade has been the hottest on record and that the Earth is now 1.2° warmer than it was a century ago. Global warming, like a fever of 99.8, is only a sign that something is wrong. The warming has not been caused by volcanoes, sunspots, changes in solar output, or cosmic rays from the stars, and it is not part of the natural cycle of nature. It’s caused by us and it is up to us to do something about it. 

(1)   http://www.tulsaworld.com/opinion/article.aspx?subjectid=65&articleid=20091107_65_A17_Tebgni286922

(2)   http://www.tulsaworld.com/news/article.aspx?subjectid=11&articleid=20091109_15_A1_TlaWrd833051&archive=yes

(3)   http://observationsofanerd.blogspot.com/2009/10/climate-change-whats-worse-than-heat.html

(4)   http://soundwaves.usgs.gov/2009/08/

The proper role of government in health care has been the source of many recent arguments on health care reform.  A similar argument has been going on at the state level in Oklahoma. According to a recent Tulsa World article¹, “Workers comp proposal mulled “ , Oklahoma State Rep. Dan Sullivan wants to privatize CompSource Oklahoma because: “It’s a fundamental issue of what is the proper function of government . Is it to compete with private enterprise? We think not.”   According to Sullivan, the incentive behind the privatization is to lower workers’ compensation insurance rates as rates should fall because of increased competition.

 That rationalization seems weak. It would seem that providing workman’s comp to state workers is a proper function of  the state government.  CompSource Oklahoma  has been doing so for 76 years – apparently successfully. Many private businesses use CompSource. Why would they do so if private insurance companies can provide better service and lower rates?

 According to an expert in comp insurance ²: “ CompSourse  is an insurance carrier of last resort when all other insurance companies turn down a company for coverage.  If they privatize, the competing insurance companies cannot just dump the employers over to Compsource. I think there will be an overall price increase. Instead of having CompSource as a safety net, more companies will be put into the risk pool. The risk pool forces carriers to insure the higher risk employers.  This sounds good, except the downside is the rates are 40% -70% higher than the regular insurance market. “

 There you have it. If CompSource is privatized, it will cost the companies it now insures  and the State of Oklahoma more  to provide workman’s comp. That sounds like a bad idea. 

Privatization for ideological reasons often fails as a practical way to lower costs. Privatizing Social Security increased the cost to the government by 14% and created the infamous “donut hole“ that costs seniors an additional $25 billion annually. After the recent economic downturn, we should all be grateful that the plans to privatize Social Security failed.

Finally, Sullivan doesn’t know who would get the proceeds from the sale of CompSource. He says he plans to file a bill that its assets belong to the state in the hope that it will result in a lawsuit which will let the courts decide the matter. That seems like a stange plan from Sullivan, who promoted Tort Reform to end frivolous lawsuits.

(1)Tulsa World , August 7, 2009

(2) James Moore at J&L Risk Management

 Cap and trade reflects the “true cost” of using a resource as it includes the cost of cleaning up the environment and disposing of the waste. No one really knows what the cost of a cap-and-trade bill would be – or what the cost would be of doing nothing.  Cap-and-trade has worked successfully in the past to reduce acid rain blowing into Canada from Northeast power plants. It cost much, much less than the power companies claimed it would and even less than  the government estimated. Structured properly, cap-and-trade could actually be good for many sectors of the economy -including farmers.
 

For instance, Congressman Frank Lucas (R-OK) wrote in the Daily Oklahoman (6/21/09) that  cap-and- trade  is a tax and that  it would be especially bad for farmers. That isn’t necessarily so. The true cost of using a resource includes the cost of cleaning up the environment and disposing of the waste. Cap and trade isn’t a tax. It is a way of seeing  that those who  profit from a resource pay the “true cost”. Cap-and-trade  would require those who increase pollution to buy credits to do so while those who find ways to decrease pollution would receive credits. This would encourage entrepreneurship and provide the incentive for using our resources wisely.

 No one really knows what the cost of a cap-and-trade bill would be – or what the cost would be of doing nothing. There is one claim that it would cost each U.S. household $3,100 a year. That number was arrived at by doing additional math on a Massachusetts Institute of Technology study. However, John Reilly, the MIT economist who authored  the study, says that  number is wrong and is a misinterpretation of his work. There is also the claim that the cost of doing nothing will be higher in the long run because of resource scarcity and environmental damage. Its hard to put a cost on that. Either way, paying the true cost of hydrocarbon use is fair and would create incentives for renewable energy and energy efficiency.

  Cap-and-trade has worked successfully in the past. It was used to reduce the U.S. sulfur dioxide emissions that produced acid rain in Canada – and, it turned out to be much less expensive than either the industry or the government predicted. In Oklahoma, Western Farmers Electric Co-op has voluntarily used cap-and-trade to offset its carbon emissions by encouraging farming practices that reduced emission. Structured properly, cap-and-trade could actually be good for farmers. Farming practices that reduce energy usage would not only save money but could earn farmers  credits that would add to their  profit.