We Pray

Today our thoughts go out to the families of Chris Onufer and Steve Romeo.

There is nothing to say but to remember and pray, while you ponder perhaps you will learn from those who have gone before.

Track your Congressmen

Just found a great resource to track any Congressman, see what issue they are supporting and look at their voting history.  You can also follow legislation currently being proposed in either the House or the Senate.

TheVoterEffect.com

Check it out, this gives a simple and concise summary of legislation.

Is Sound Economic Policy an Option?

Where to start?  There are so many budget initiatives being proposed in various states that will damage local economies, put jobs at risk, leaving the middle class to foot the bill.  The Center on Budget and Policy Priorities has a comprehensive and introspective analysis of state initiatives being introduced, check it out.

Following the 2008 financial crisis many policy makers throughout the world quickly reverted to Keynesian economic policies in order to jump start devastated economies.  Most developed countries, China included, introduced large stimulus packages in order to jump start growth and delay morbid economic projections.
Germany may be the one exception.  One reason being they were not quite so optimistic that free market prosperity would continue indefinitely, leaving them better prepared economically for the downturn.  Three years later the DOW is riding high and the corporate world is showing record profits in many sectors.  This must mean that we are well on our way to recovery and the puppet's on the right insist we must reduce our federal deficit at what could be a critical time to continue federal spending.  Keynesian theories are quickly thrown out the window after only being carried halfway.  The resurgence of republicans in many states has led to proposed cuts that threaten education, social services and jobs.  Would continued federal stimulus targeted at sustaining programs needed to support state welfare and education help ease the burden of right wing attacks on the average American?  Are we attempting to balance our federal budget on the backs of middle class Americans?  Will the democrats ever show the backbone to stand up for what they know is just, as they did in Wisconsin?  Will they continue to play the right wing game of where to cut the budget rather then stand up for a sound economic policy they know is best?

Herbert Hoover attempted to use balanced budgets and tax cuts to offset the beginning of The Great Depression, where did those policies lead?  A rollback of New Deal policies in 1937 due to opposition  from the Conservative Coalition led to a 13 month setback in economic recovery erasing many gains realized by FDR's New Deal.  Are we reverting to monetarist policies (i.e. Alan Greenspan's policies) prematurely, at the expense of the average American?

The federal earned income tax credit is supplemented in 24 states by similar programs to help working families make ends meet.  Four states are currently introducing legislation to cut their earned income tax credit, or completely end the program in Michigan.  Yes, Michigan, one of the most economically repressed states in our nation wants to completely end their earned income tax credit in a time when working families need these breaks the most.  780,000 low income workers from Michigan qualified for this credit in 2009 for an average credit of $432.  Sources say that "every dollar of the federal earned income tax credit generated $1.67 in economic activity."  Does the state tax credit generate less, is this sound economic policy?

Wisconsin, Kansas and New Jersey are other states with budget proposals that include cuts to the earned income tax credit.  Here is a telling quote from Scott Walker:

"In a recent interview, Walker said he did not consider the change to the earned income tax credit a tax increase because most of the recipients have no state income tax liability and receive a check from the state.

"What you're essentially looking at is people being given money from other taxpayers," he said. "In this case, we're ultimately not raising taxes. It's how much money they get back from other taxpayers. But it's not raising what the tax is."

I wonder if citizens who receive these credits feel they have "no state income tax liability" when they look at the withholdings on their paycheck every other week.  What cant we expect from the man who also proposes to cut $9 million annually from the Homestead Tax Credit which provides tax rebates to homeowner's earning no more than $24,500 annually, many of them elderly.

One of the tools that we American citizens have in this age of information is to share valuable resources with like-minded rational citizens.  William Cronon is a Rhodes Scholar and professor at UW-Madison, his blog can tell us much about right wing tactics being employed in Wisconsin and some of the powerful lobbyists behind the power grabs occurring in many states.  The Nation has a great article on the McCarthyesque tactics being employed by the Wisconsin GOP in their attempt to silence him. Cronon can tell us much about the "American Legislative Exchange Council (ALEC), a corporate-funded group organized almost forty years ago by movement conservatives to influence lawmaking in the states."  They are major players in much of the recent legislation aimed at stripping the rights of average Americans, including the 2010 Arizona anti-immigration law.  The link above to The Center on Budget and Policy Priorities is also a great resource for information.  Beyond unions and blatant attempts to suppress the middle class are underlying themes of the erosion of our democratic process and the suppression of basic freedoms.

The apathy of many voters in midterm elections has enabled the right wing power grab that we are witnessing in many states throughout the nation.  Events in Wisconsin and other states have raised awareness as to the true intention of the GOP and we must continue to watch, to speak out and to stand up for the values we hold dear.  We must not allow ourselves to blindly follow the fast moving mass media who will quickly move to the next hot topic and flood us with enough garbage that basic issues become muddled and forgotten.  We must continue to raise awareness of issues we care for and keep fighting for what we believe in.  We must organize and put some backbone into our Democratic constituents who continue to posture in turf wars that the GOP has dictated.  They are better organized and increasingly radical, we must show that the people are willing to stand up for their rights as they are doing in Wisconsin.

Letter to the Editor-Milwaukee Journal Sentinel

Hello,

     I have spent a significant portion of this week going over Governor Walker's budget proposal as I feel the current course of politics in your state will have an impact on the entire nation.  Recently I have been researching angel investment tax credits in relation to the Governor's proposal to include tax option corporations in these tax credits and make this move retroactive to Dec. 31, 2007.  I find issue with tax credits that are issued to investor's for business development that has occurred up to three years ago.  Is this not a benefit only to the venture capitalist as these start-ups have already received investor dollars and any job creation has already happened?  In my research I came across more than a few references to Ohio, including one from your paper's editorial. 

    I have just begun to research Ohio's Third Frontier Program, but a comprehensive approach to business development such as this seems a far more viable tool.  The $700 million bond issue for the continuation of Ohio's Third Frontier Program was passed by a wide margin in 2010.  SRI International and Georgia Tech did a comprehensive study of the Third Frontier Program which I am still investigating.   Angel investment tax credits may not be a bad thing, however a realistic approach to promoting growth in a state's economy should use this as one of many resources. 

     I hope that your newspaper is making an effort to inform the public as to details of this budget proposal in a manner reflecting the intelligence of the citizens of Wisconsin.  I find so many single sentence statements in various media outlets as to specific legislation with little interpretation or detailed information.  I would love to hear any news that you may have in relation to this budget proposal.  Thank you for your consideration.



Here is some additional information on angel investing and Ohio's Third Frontier Program in Response to some comments:

     Hey thanks for your interest and your insight Matthew, it is much appreciated. Since my reply to your comment I have been researching the programs that have been in Ohio for almost a decade. Their Third Frontier Program could well be a model for business investment in many states.

     I firmly agree with you that tax dollars are needed to support business development and growth, I am only questioning the methods. Investor tax credits are part of the Ohio program but they have implemented a far more comprehensive approach which provides grant money directly to developing businesses in the initial and growth phases. I have not yet studied in depth the report by SRI International and Georgia Tech regarding the Ohio program but I am sure that if you check it out you could provide valuable insight into the nuances. Perhaps your state (Pennsylvania?) ought to look into a model such as this. What I have read tells me that this program has greatly helped to transform Ohio's economy from one of manufacturing to attracting more high tech related jobs. They have received just under $10 in return for every dollar spent. 41,300 jobs were created through this program with an average salary of about $58,000 per job. Last year Ohio passed a $700 million bond issue in a public vote with bipartisan support to keep this program moving forward.

      Angel investors are a much needed part of this economy as venture capitalists become more risk averse and are trending towards investing in more established businesses. Tax credits for these investors are not necessarily bad since the business and most of the time the investor are within the given states. There needs to be more done to directly provide developing businesses with funds at the seed stages. Capital gains tax breaks would seem to benefit a more established business.  An article addressing federal tax credits for angel investors poses some interesting questions regarding the viability of these tax credits in general.

      I would be surprised if your state does not have programs which connect angel investors with developing businesses such as your friend's. I have been saving most links that I find useful and would be happy to share them with you. I also found an article today in The Nation regarding national debt and some misconceptions as seen by the author William Mitchell. Good food for thought, you can find a link to the article at the bottom of my blog. Thanks again for your input, it is always appreciated, peace.

Wisconsin Budget Proposal Highlights

Here Are some items I found interesting in Scott Walker's budget proposal.
You can find the entire proposal here.

GPR (general purpose revenue) projections for the fiscal year 2012-2013:
Income Tax 51%, Corporate Tax 7%

"Economic Development

     With the enactment of the Wisconsin Economic Development Corporation during the recent special session on job creation, the state took a huge step forward in terms of its ability to increase economic development in Wisconsin. As a public-private authority, this entity will be more nimble, creative and most importantly, faster in its response to the needs of the businesses that Wisconsin is trying to retain, grow and attract from other states. To that end, the bill provides $98.8 million in fiscal year 2011-12 and $97.5 million in fiscal year 2012-13 to fund economic development programs and operations. This amount includes ongoing funding for regional economic development organizations.

The corporation will have responsibility for administering tax credit certification and the brownfields grant program. Rather than having every economic development grant and loan program enumerated in statutes, however, the corporation will establish by-laws that will direct the use of grant and loan resources."

Interpretation:  Corporations receiving grants and loans will direct the use of these dollars in whatever manner they see fit.  While there is some state oversight it seems to be retroactive and mostly consists of the state officials who have promoted these measures in addition to "individuals from the private sector."

  
  "First, the treatment of capital gains that are invested in Wisconsin-based businesses has been modified in two ways to make businesses in this state more attractive to investors. The first of these changes is providing a 100 percent exclusion for capital gains realized on Wisconsin-based capital assets held for five or more years. To qualify, a business must be certified by the Wisconsin Economic Development Corporation to have 50 percent or more of its payroll and property located in Wisconsin during three of the first five years of the period during which the asset is held. The Governor also recommends providing a 100 percent capital gains realization for gains reinvested in Wisconsin-based businesses at the time the investment is made to provide an incentive to investors who are realizing gains to reinvest in Wisconsin."

     "Second, the job tax credit, which is aimed at business attraction and expansion and is only available to certified businesses that increase new employment, is modified to delete the upper wage limit, but establish a maximum annual credit of $10,000 per job. As long as the state does not incur any additional cost, there is no reason to discourage companies with high-paying jobs from establishing their businesses in Wisconsin."

Interpretation:  Job tax credits are an interesting concept, i believe this is greater than the original maximum job tax credit which amounted to $1/day per new worker.  I will amend as I gather more information.  

   
"Third, to encourage private investment in entrepreneurial activities, the bill will allow tax-option corporations that are nonoperating entities to claim angel investments credits for investments in new business ventures. In addition, the holding period will be extended from one to three years for early stage seed or angel investments made after December 31, 2007."

 

Interpretation:  While there is certainly an argument for angel investment tax credits I believe there are also many fallacies in this model.  Last I checked Wisconsin had a 25% tax credit with a maximum credit of :

"(a) $4,000,000 in qualified investments for taxable years beginning before January 1, 2011(a) $4,000,000 in qualified investments for taxable years beginning before January 1, 2011."

"(b) $8,000,000 in qualified investments for taxable years beginning after December 31, 2010." source

The clause in this budget proposal includes LLC's and Sub-S corporations as qualifying for these credits, though they are by nature in a lower tax bracket than a regular corporations.  Here is a telling definition of an LLC from the irs, "Most states also permit “single member” LLCs, those having only one owner."  Yes Wisconsin is a state that allows single owner LLC's.  So is Governor Walker opening these tax credits to potential individual investor's?  another telling aspect is that he wishes to make this change retroactively to Jan 1, 2008.  Who stand to gain from this?  Are we now promoting bringing in new business which has potentially been established for three years.  That seems a loophole that again benefits only the banker?

     These are tax breaks that go directly to venture capitalist firms and from my viewpoint provide leverage for investors to use against state competing for business.  There is no benefit directly to the start-up companies seeking venture capitalist funds and only provide incentive for a venture capitalist to dictate where a start-up will locate their business.  These start-ups are subject to excessive  interest rates from these venture capital firms.  The venture capitalist by nature is not as risk averse as a standard lender, which dictates the higher interest rates he may charge.  Angel investments by nature are likely a good thing but when used to leverage competing states through tax credits I see it as a banker's tool for further profiting from the taxpayer's.  I will follow up on this as I collect more information on the nature and viability of angel investments. 

     I am also extremely dubious of Governor Walker's plans for debt appropriation and reallocation as well as some of the economic forecasts at the end of his proposal.  I am reminded of the California budget crisis and the direct relationship to mismanagement of debt.   I would love to hear any insight you may have, more to follow....

Don't Believe the Hype

It seems the GOP is determined to find out just how far they can push the American public.  We have answered, it is time to push back and stop the erosion of our society.  Our generation was instilled with the belief that we could achieve anything if we are willing to work for it.  That fantasy has been shattered in the past decade, to be replaced by the reality that most of us must fight just to survive.  The Corporado's brought us to the brink through a decade of rampant pillaging of our resources and our welfare.  The recent resurgence of the GOP has quickly shown us the true nature of their agenda.  I wholeheartedly applaud the Americans around the country who are standing up, let Egypt be an example to us of the true power of the people.  Now is the time to stand up and say enough.  Don't let your state government sell public utilities to Corporado's (see Enron and  the California energy crisis of 2001).  Please don't depend on your television as your only source, look beyond yahoo and reuters.  Place the basis of your position on facts, not rhetoric.