April 27, 2014

QUOTE OF THE DAY

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Forbes: If You Like Choice, Competition And Entrepreneurship, Obamacare Is Not For You

Gene Sperling, former director of President Obama’s National Economic Council and former Assistant to the President for Economic Policy, argues that Obamacare should appeal to those who desire competition and choice in health care. But the very nature of Obamacare fosters neither.

Sperling claims that the Obamacare exchanges are competitive: “On average, there are 8 different health insurers participating in each of the 36 Marketplaces being operated by HHS, with as many as 169 plans for consumers to choose from.”

It’s not clear how Sperling derives his number of participating insurers but the best way to measure insurer competition is by counting the number of parent companies selling insurance, excluding subsidiaries. For example, Buick and Cadillac—both subsidiaries of General Motors GM -1.32%—are not counted as two competitors in the auto market.

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Chicago Tribune: This week’s push for an Illinois ‘Fair Tax’ obscures a nasty surprise

Never mind the moribund Illinois economy or the uncommonly high jobless rate here: Democrats have spent 2014 focused instead on their various ideas for raising state income taxes. This week lawmakers may decide whether to put on the Nov. 4 ballot a constitutional amendment that would replace Illinois’ flat income tax with graduated rates tied to income brackets.

Democrats who’ve been pushing what they call the Fair Tax amendment have been marketing it as the path to a tax decrease for more than 90 percent of households. But they’re ignoring an inconvenient truth: For most people, income taxes would increase above the rate that Democrats have already written into state law for 2015.

First, the context:

•Gov. Pat Quinn wants to make permanent hefty increases in personal and corporate income tax rates — the rates Democrats insisted would be “temporary” when they passed them in 2011. But it’s unclear how many legislators will trot to Quinn’s whistle. House Speaker Michael Madigan says he doesn’t yet have enough votes in his chamber to make the temporary increase permanent. So, by the law Democrats alone enacted, the personal rate falls on Jan. 1 from 5 percent to 3.75 percent. (The total corporate rate drops from 9.5 percent to 7.75 percent.)

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Forbes: Minnesota Joins California In Legislating A Roach Motel For Residents

What does it take to be an official resident of a state?

A house or permanent address? A registered vehicle? Spending more than 183 days (i.e., over half the year) working or living within one state? With millions of Americans moving from one state to another each year, the criteria an individual or family must meet in order to establish residency in a particular state is continuing to expand.

While some states, such as Florida and Texas, don’t penalize those who choose to move outside of their state for work or any other number of reasons, other states are making it increasingly difficult for working men and women to permanently leave, own property, or even work on a temporary basis within their borders without paying an “exit fee,” better known as the state’s income tax. California, for instance, requires former residents to continue paying the Golden State’s high income tax rates until they have been outside of the state for 546 consecutive days, the equivalent of a year and a half. Only then can they officially be considered non-residents.

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Detroit Free Press: Detroit retiree panel reaches deal with city to cap pension losses

A new deal between Detroit and an official committee representing the city’s retirees would provide significant new caps on cuts to pension checks and guarantee lifetime health care stipends, officials involved in the agreement said late Friday.

Marking a significant advancement in bankruptcy negotiations, the committee said it reached the deal in principle to support emergency manager Kevyn Orr’s restructuring plan to pull the city out of bankruptcy, adding more leverage for an ultimate “cram down” of a bankruptcy settlement against creditors fighting big losses.

“It is a much better deal for retirees now,” said Sam Alberts, a lawyer representing the retiree committee, which was created as the city’s request to represent retirees in Detroit’s historic municipal bankruptcy.

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Wall Street Journal: In Illinois, Tax Increases Become an Article of Faith

In Illinois—a state plagued by epic budget woes, a pension crisis, byzantine taxes and the nation’s second-highest unemployment rate—politics is rarely associated with godliness. Four of the past seven governors, most recently Rod Blagojevich, have been sent to prison. Locals will tell you that corruption is practically a sport. But on April 8 more than 500 Illinoisans showed that they, at least, were keeping the faith.

Donning orange T-shirts reading “Faith in Action,” a coalition of religious groups flooded the state capitol in Springfield, singing hymns, shouting “Hallelujah,” and praying for higher taxes on the rich. Their goal: replacing the state’s long-standing flat income tax with a new, progressive “Fair Tax.”

“The gospel tells us that ‘For everyone to whom much is given, much will be required,’ ” Rev. Jason Coulter, a Chicago pastor and board member of the Community Renewal Society (which organized Faith in Action) told me. “I’m called by my faith tradition to speak truth to power when I see injustice being done. And a flat tax is an injustice.”

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Reuters: Facebook, McDonald’s and the divided American workforce

On Wednesday, Facebook released data on its performance in the first quarter of 2014, and the results were very impressive. The social network has succeeded in monetizing its enormous audience, having generated $642 million in profit on $2.5 billion in sales. The expectation is that Facebook profits will amount to 25 cents per share, quite a bit more than the 9 cents per share it generated last year.

McDonald’s, a much larger and older company, reported $6.7 billion in revenue in the first quarter, slightly higher than its revenue from last quarter. Yet its net income fell to $1.2 billion and its profits per share to $1.21, down from $1.26 last quarter. Analysts attribute McDonald’s lackluster performance to a modest decline in U.S. comparable store sales.

I mention Facebook and McDonald’s not just because they are both iconic American brands, but because they represent the contrasting poles of American business. Though both Facebook and McDonald’s are innovative firms operating in a competitive landscape, Facebook is a social media company that lives almost entirely in the cloud. McDonald’s, meanwhile, is the quintessential quick-service restaurant, which, like Wal-Mart, depends on an extensive, expensive and labor-intensive logistical apparatus to meet the needs of its franchises.

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CARTOON OF THE DAY

tax hike