QUOTE OF THE DAY
Reason: Let Consumers Make Their Own Choices About Sugary Drinks
Earlier this week the Center for Science in the Public Interest (CSPI), a group that regularly pushes for increased food regulations and considers soda to be “a slow-acting but ruthlessly efficient bioweapon,” announced it would be launching “a major action regarding the regulation of soda and other sugar-sweetened beverages.”
The major action turned out to be a petition CSPI submitted to the FDA requesting that the agency take action to restrict the amount of added caloric sweeteners like sugar and high fructose corn syrup in soda, juices, and other beverages. In its petition, CSPI also urges the agency to take action to limit the presence of such sweeteners in non-beverage foods.
CSPI has a long history—if not a successful one—of exercising its First Amendment Freedom of Petition.
The group has previously petitioned the FDA to curtail sales of Quorn (having also promoted its arrival in America), to restrict the use of trans fats in various foods (after first downplaying any ill effects associated with its consumption), and to mandate a cap on the amount of salt that can appear in processed foods. The latter effort has dragged on for more than three decades. None of these petitions succeeded.
The Blaze: Manny Pacquiao says goodbye to boxing in US, blames high taxes
Boxer Manny Pacquiao has shocked the world of sports with the announcement that he will no longer fight in Las Vegas — or any U.S. city, for that matter — because federal taxes have become too burdensome.
Obviously, this means he won’t be fighting Juan Manuel Marquez in September at the MGM Grand in Las Vegas as originally planned.
“But while promoter Bob Arum wanted it to happen, Pacquiao is now calling it a ‘no go’ due to the 39.6 tax hit he would take from the federal government [emphasis added],” the Washington Examiner’s Paul Bedard notes.
The Grover Norquist-founded Americans for Tax Reform weighed in on the Pacquiao exodus.
“Pacquiao’s concerns lie with the federal income tax. As Nevada is one of the nine states that do not have an income tax, Las Vegas has grown to become the home for major bouts because fighters do not have to worry about the state taking a bite out of their winnings or purse,” they told Bedard.
“Unfortunately, Nevada’s economic benefit is now overshadowed by the federal income tax rate,” the group added.
WSJ: The Minority Youth Unemployment Act
One paradox of the Obama Presidency is how it has retained the support of young people and minorities despite the damage its policies have done to their economic prospects. In his latest attempt to increase the minority youth jobless rate, President Obama is proposing to raise the minimum wage.
In his State of the Union address, Mr. Obama proposed an increase to $9 an hour by 2015 from $7.25, and then indexing the minimum to inflation. "Employers may get a more stable workforce due to reduced turnover and increased productivity," the White House says. No doubt employers are slamming their foreheads wondering why they didn't think of that.
And don't worry about lost jobs. "A range of economic studies," a White House memo assures, "show that modestly raising the minimum wage increases earnings and reduces poverty without measurably reducing employment." Note the shifty adverbs, "modestly" and "measurably," which can paper over a lot of economic damage.
In the real world, setting a floor under the price of labor creates winners and losers. Some workers will get a $1.75 raise. Great. But others—typically the least educated and skilled—will be priced out of the job market and their pay won't rise to $9. It will be zero.
University of California at Irvine economist David Neumark has looked at more than 100 major academic studies on the minimum wage, and he says the White House claim of de minimis job losses "grossly misstates the weight of the evidence." About 85% of the studies "find a negative employment effect on low-skilled workers."
Carpe Diem: Let’s review the adverse effects of raising the minimum wage on teenagers when it increased 41% between 2007 and 2009
Now that Obama’s calling for a 24% increase in the minimum wage to $9 per hour, it might be instructive to review what happened the last time the minimum wage was increased – from $5.15 per hour in 2007 to $7.25 in 2009 (in three stages, see chart). Those most affected by increases in the minimum wage are the least skilled, least experienced, and least educated workers, i.e. teenage workers. As the Wall Street Journal pointed out in 2010:
“A higher minimum wage has the biggest impact on those with the least experience or the fewest skills. That means in particular those looking for entry-level jobs, especially teenagers. And sure enough, as nearly all economic models predict, the higher minimum has wreaked havoc with teenage job seekers, well beyond what you would expect even in a recession.”
And that’s exactly what happened when the minimum wage rose by 41% between 2007 and 2009 – it had a disastrous effect on teenagers. The jobless rate for 16-19 year olds increased by ten percentage points, from about 16% in 2007 to more than 26% in 2009. Of course, the overall US jobless rate was increasing at the same time, from about 5% to 10%. Therefore, the graph attempts to better isolate the effects of the minimum wage increases between 2007 and 2009 on teenagers by plotting the difference between the teenage jobless rate and the overall jobless rate, i.e. “excess teen unemployment,” and the minimum wage.
During the 2002-2007 period when the minimum wage was $5.15 per hour, teenage unemployment exceeded the national jobless rate by about 11% on average. Each of the three minimum wage increases was accompanied by a 2 percentage point increase in the amount that the teenage jobless rate exceeded the overall rate, from 11 to 13% after the 2007 increase from $5.15 to $5.85 per hour, from 13% to 15% following the second hike to $6.55 per hour, and from 15% to 17% following the last increase to $7.25. The 17.5% “excess teen unemployment” in October 2009 was the highest on record, going back to at least 1972, and was almost 5 percent higher than the peak teen jobless rate gap following the last recession (12.7% in June 2003).
Jim Pethokoukis: Are high-deductible health plans helping slow down healthcare spending?
Real spending on healthcare services has grown at only a 2.1% annual rate since the recession ended, notes a new JPMorgan report. That’s about a full percentage point slower than the pace that prevailed in the decade before the recession began.
Does the economic slowdown explain the the decline, or are there non-macroeconomic factors at play? I wrote the other day about the latter: a) lots of breakthrough drugs from the 1980s and 1990s became widely available in generic form in the 2000s; b) health insurance plans became more diverse, giving consumers more choice, such as health savings accounts; c) the IT and networking revolution has improved disease management.
The JPM analysis focuses particularly on the increase in high-deductible, employer-provided health insurance, frequently paired with a health savings account. In 2012, 9% of workers with insurance from an employer were enrolled in a high-deductible plan — more than double the percentage from just three years ago.
Businessweek: Facebook Gets a Multibillion-Dollar Tax Break
It hasn’t drawn much attention, but Facebook’s first annual earnings report contains an accounting gem: a multibillion-dollar tax deduction for the cost of executive stock options and share awards.
Even though Facebook (FB) reported $1.1 billion in pre-tax profits from U.S. operations in 2012, it will probably pay zero federal and state taxes—and even receive a federal tax refund of about $429 million—according to a Feb. 14 statement from Citizens for Tax Justice.
The tax-research and -lobbying organization says companies such as Facebook should treat stock options the same in their reports to shareholders as they do in their tax filings. Citizens for Tax Justice calls the tax footnotes in Facebook’s Jan. 30 financial statement “an amazing admission,” but there’s nothing illegal about the breaks the company is claiming. Companies like Facebook are allowed to treat the cost of non-cash compensation, such as stock options, as an expense that reduces profits, essentially the way they treat cash compensation such as salaries.
The difference is that Facebook—unlike, say, General Motors (GM)—relies heavily on stock options and restricted stock units as a form of compensation. It paid out a lot during its years as a private company that it must now recognize on its income statement and balance sheet.
You won’t find any $429 million tax refund in Facebook’s financial statements. Indeed, the company says it had a $559 million federal tax liability in 2012. But that liability isn’t an actual payment. In a footnote, the company also said that it had a $1.03 billion “excess tax benefit” last year related to “stock option exercises and other equity awards.” That benefit is what flips the federal tax liability into a refund. (A small portion is applied against state taxes.)
Facebook says that it anticipates reducing its tax liability in the future by an additional $2.17 billion by using further net operating loss carry-forwards that it has banked.
New York Times: In His Hometown of Chicago, a Policy Speech by Obama Turns Personal
President Obama came home on Friday for a policy speech that inevitably turned personal: He spoke of teaching law nearby, meeting his wife, Michelle, raising their daughters less than a mile away and then, most recently, watching the first lady return for the funeral of a vivacious teenager gunned down in a park.
Less than two minutes into his remarks at the mostly African-American Hyde Park Academy high school, Mr. Obama paid tribute to 15-year-old Hadiya Pendleton, a girl who had been just a bit older than his daughter Malia, but who now represents Mr. Obama’s private connection to the gun violence that he has only begun to address in his second term.
Ms. Pendleton had attended a nearby high school until she was caught in what the police say was gang gunfire just days after she had marched in the president’s second inaugural parade. In the audience here were her parents, Cleopatra Cowley-Pendleton and Nathaniel Pendleton Sr., the latest involuntary activists for gun safety. On Tuesday, they sat with Mrs. Obama in the House gallery for Mr. Obama’s State of the Union address. When the president recognized them here on Friday, there was awkward applause, as if people were unsure whether losing a child was reason to clap.
“Unfortunately, what happened to Hadiya is not unique,” Mr. Obama said. “It’s not unique to Chicago. It’s not unique to this country. Too many of our children are being taken away from us.”
He spoke of Newtown, Conn., where 20 first graders and 6 of their guardians were massacred two months ago. But as profoundly tragic as their murders were, he said, “last year there were 443 murders with a firearm on the streets of this city, and 65 of those victims were 18 and under. So that’s the equivalent of a Newtown every four months. And that’s precisely why the overwhelming majority of Americans are asking for some common-sense proposals to make it harder for criminals to get their hands on a gun.”
Mr. Obama was met at the airport by Rahm Emanuel, Chicago’s mayor and the president’s first White House chief of staff. At the school, Mr. Obama’s speech was delayed while they privately talked with 16 students enrolled in a youth antiviolence program — some of them voluntarily and others not, according to officials.
The hometown visit was a risky political balancing act for Mr. Obama. He is under pressure to speak to the rise in gun homicides in Chicago, the nation’s third-largest city, just as he has comforted towns like Newtown and Aurora, Colo., which have seen mass shootings. “We need him to come here and address this gun violence. It’s terrible. I’ve got kids,” said a cabdriver, Serge Diop, when he learned that a passenger’s destination was the site for the president’s remarks.
Forbes: The Unsung, But Massive Obamacare Sales Tax Increase That Is On the Way
Today, America’s Health Insurance Plans (AHIP) President Karen Ignagni issued a press release in support of bipartisan legislation (H.R. 1370, S.1880) co-sponsored by Rep. Charles Boustany (R-LA) and Jim Matheson (D-UT) to repeal the Affordable Care Act’s (ACA) health insurance tax. While much of the dialogue on healthcare reform centers on the federal mandate of health coverage for all Americans – which many conservatives call the largest tax increase in U.S history – less attention is being given to the massive sales tax increase on the purchase of health insurance also implicit within the legislation that will dramatically escalate costs for employers and consumers.
In 2014, Obamacare will take effect, with many of the changes set to roll out over the next six months. The U.S Supreme Court narrowly upheld the legislation in a 5-4 ruling in June of last year, with Chief Justice John Roberts controversially justifying his affirmative decision by claiming that the federal mandate is a form of a federal tax, which the government is within its rights to enact. Indeed, there are a number of new taxes that the ACA will bring- twenty one to be exact- but the sales tax on the purchase of health insurance is by far the largest.
The Joint Committee on Taxation released a report to Committee of Ways and Means Chairman Dave Camp shortly after the Supreme Court ruling that recalculates the costs to insurers, consumers and businesses under the new plan. According to their report – which does not include updated scores for the individual mandate, the employer mandate, or certain other revenue effects – the tax increases that remain on the books will cost taxpayers more than $675 billion over the next ten years. Chief among these will be the sales tax on the purchase of health insurance, totaling $101.7 billion, and making it larger than all the other industry-specific taxes combined.
“The health insurance tax will add a financial burden on families and small businesses at a time when they can least afford it, and it should be repealed, ” says AHIP, a trade association representing health insurance industry providers, in today’s call for the repeal of the health insurance tax before it can take affect.
CARTOON OF THE DAY