Thursday, November 18, 2010

Tax Policy as an implement of change

Tax Policy as an implement of change


A short term tax source would be the taxing of the original mortgage lenders on all foreclosures and the taxing of the foreclosing party, as the empty homes are a blight to neighborhoods and make problems for local law enforcement. Local economies should tax vacant houses at a higher rate, due to the extra costs. All tax hikes go on the foreclosing parties, not the people being ousted. The idea here is to discourage bad loans at the inception, and collect taxes on the problems loans all down the line.

Another idea would be to discourage non producing investments like mortgage backed securities and ETFs, that tie up money and produce nothing except commissions and dividends. Tax the profits from these kinds of investment at a high rate and tax the losses also, as a drain on the system. No more tax credits for losses from non producing investments, real or fabricated. The government is rewarding these non good or service producing investments with tax breaks. The government even covered their losses with tax funded bailouts, instead of refunding to the original investors, who took a loss. There were other ways to prop up the pension funds.

Long term tax policy as a remedy for economic problems could include stabilizing population growth as a remedy for high unemployment. Lately the numbers of jobs available has not kept up with population growth, resulting in high unemployment rates and many unemployed young people.

Perhaps the tax policy should state 'one dependent per one adult' instead of huge tax breaks for people who have many children. Having more children actually costs the system, the schools, welfare, busing, meals, and other subsidies. Limiting the dependent credit to one per one would tend to discourage large families. The same would go for school tax credits and tuition subsidies. Manifest Destiny is certainly over and more population growth plus high unemployment will damage the prosperity of the citizenry.

As for the economic model that demands ever increasing growth for success is surely in for a disavowal as populations become more dense and physical supplies are strained or tenuous. Tax policy could slow down this 'population infill' before we have people living in doorways. Too many people are broke and unemployed while the amount of money the mega wealthy controls has ballooned.

Current tax policy uses the IRS as an arm of welfare, giving 'returns' to people who did not earn them like a once a year Santa. I suppose that gratis payments to low income people is easier to do this way than it would be if the legislative process were used to authorize these payments. It also attracts less political publicity. Payments to these people should be limited to one per one.

So now the IRS is to be used as an arm of insurance companies to force people to buy private health insurance? If the IRS is checking on this, then it must be a tax that you will be punished if you do not pay, just like income tax. A tax imposed on us by private companies is not sound policy. I am hearing stories of people who have to buy high deductable insurance because it is cheaper and then still don't get health care because they can't afford it. Anything to keep the IRS off your ass, right?

More on tax policy later.

Saturday, November 13, 2010

REVISE TAX CODE

1. Exchange-Traded Fund (ETF) Definition


Exchange-Traded Fund (ETF) - Definition of Exchange-Traded Fund (ETF) on Investopedia - A security that tracks an index, a commodity or a basket of assets ...

www.investopedia.com › Dictionary -



Exchange-Traded Funds are being discussed as the next scam like the mortgage backed securities debacle. It looks like another way to make money without investing in material jobs. This kind of investment does nothing to add to the economy, except for a few receiving commissions and a few receiving dividends. Money tied into these second tier investments produces no jobs, creates nothing material and freezes money out of circulation.

Carnival barkers rule. Taxes pick up their losses. Perhaps losses in investments that produce no jobs or material goods should not be tax deductable, which would discourage the practice. The prevention of future bailouts for these kinds of manipulative non producing funds must be a priority. Those subprime losses and the 'securities' losses should not even be tax deductable but instead were subsidized with tax money. Maybe these kinds of losses in 'non producing' investments should be taxed as a burden to the rest of the economy. Profits from non-producing investments should be heavily taxed also, in an effort to capitalize on and discourage non-producing investments.

Fannie and Freddy and any other of those who subsidize non producing investments like mortgage backed securities should lose funding. If the mortgage brokers go broke so be it. These people cannot control monetary policy and tax policy and all that would benefit them.

Our nation is becoming a playground for the rich for whom it is apparently easier to avoid messy investments that actually result in jobs producing something. Too much in the hands of the few did not bode well for other nations.

I think it is far too easy for politicians to put governmental agencies in debt to give tax money to special interests who were making risky investments. That is not capitalism: It is parasitism. Tax the ass off these people and those non producing investments. Tax the original lender if a home is foreclosed, as it increases welfare and homeless. Tax the owner of record of a foreclosure at a higher rate than residents, because the empty house requires increased police patrols. Provide tax incentives for keeping the homes in the hands of the buyers, instead of tax incentives for eviction.

Tax policy is a tool and should not be a weapon. We need to work together to solve economic problems that are causing unemployment and scarcity of money. Stop passing the bubble around like a hot potato and let those who profited from the fraud fed bubble take the losses. Why not create tax policies to achieve this aim?

What kind of capitalism is being promoted by these archaic tax policies that reward making bad loans and eviction and tying up money? Special interests bailouts will make this monetary system a reversion to the wealthy oligarchies of the past where the masses are expected to absorb fewer jobs and a tax hike while more money is concentrated in the hands of a few? Taxes on the upper echelons should be increased, with easing provided for increasing employment in local sustainable businesses. Spending on increasing infrastructure should be avoided, with infrastructure maintenance to be encouraged as a source of jobs, but not the only designee for funding. The kinds of businesses that should be funded are those that build up a continuing business for example like a sewing business that imports fabric, sews it into something salable, sells it locally at a reasonable price that competes. Flip side would be that Pima cotton is once again grown here, thread is spun here, cloth made here, sewn here, sold here and elsewhere if there is a surplus. Pima cotton used to be famous and cotton seed oil is a commodity. This is an example of what could be accomplished. A cottage copper industry would create more long term jobs than a huge short term mining operation. Sustainable jobs should be the focus of tax break investments.

ADVICE TO THE POLITICIANS: GET BUSY AND MAKE SOME TAX CHANGES THAT BENEFIT MAINSTREET!





Sunday, November 07, 2010

The Rio Nuevo Debacle

Rio Nuevo Rundown


The issue of management must be addressed when considering the decisions made by the Rio Nuevo Board and the Tucson City Council and Mayor as of the TIF time period from inception to Q4 2010.

As of 2010, $230,000,000 was spent: $156,682,160 was spent as mostly borrowed cash on capital projects, of which most are grossly incomplete and another $70,000,000 was blown on other 'costs'. Future money was encumbered at an average interest of close to 50%, cutting in half the material value of the dollars invested in jobs and projects.

In 2010, Rio Nuevo spent over $15,000,000 on debt service of which $6,200,000 went for interest on five debts incurred by Rio Nuevo and passed by the City Council. The TIF revenue of $9,322,000 did not cover this payment. This huge debt payment is not covered by the total revenues of $13,000,000, even though the income from the TCC is also encumbered. Reserves of borrowed money are being used to make up the difference.

Using this train of fact, perhaps it is time to question the decision making that occurred that produced this unfortunate situation. The individuals involved were quite interested in possessing borrowed cash to pay out. They were so motivated to get the cash; they agreed that taxpayers would pay 50% interest. This reduces the value of the tax dollar by half. The moneylenders get half and the Rio Nuevo handlers get half and the taxpayers get to pay for it. Is this mismanagement?

I know the scheme was that the boom would be endless and properties would continue to escalate and the tax money would continue to flow and grow. Debts would be smaller because of increased value in equity. Instead, a recession intervened and closed the party down. Property is down only 40% if you're lucky and commercial and housing sits empty. Tucson is not booming. Tucson just turned down a tax hike for the city. Tucson has a history of real estate booms and busts. Was I the only one in town who knew this?

Poor decisions and a recession that was foreseeable by many of the cautious has put Tucson in the category of the family who just bought a new car and home and then lost their jobs. Default, anyone?

But it's not just the borrowing and spending, it's the way the cash was spent. According to the Rio Nuevo audit, the Rio Nuevo handlers played fast and loose like a sailor on shore leave with a pocket of cash. Evidently no spending plan existed beyond borrowing the future proceeds of the TIF and TCC and setting up payment plans. No attempt was made to pay for work incrementally. Everybody dreamed big but not in enough detail to actually fund most projects that were begun. Evidently, the spending was dictated by whim or friendship, instead of what could be afforded. Rio Nuevo would now need $449,530,501 and more to complete the projects they began.

This scattershot approach resulted in millions of dollars wasted. I call this mismanagement. Even if the recession had not intervened, it would have been difficult to raise enough money to finish what they started. Looney tunes seems rational compared to this.

The Rio Nuevo audit revealed that few projects were actually completed. The Fox Theater restoration was completed but the operation of the theater is not profitable. The 'Presidio' generates no income. That brings me to another consideration. Apparently the TIF spending was supposed to be an economic stimulus. Projects should be revenue generating. Projects should not be infrastructure or housing. This was not a 'living space' project where housing is created and tenants pay rent and buy needs from area stores which generates tax revenues. The Rio Nuevo was supposed to be a new arena/stadium that held important big events, raised the cultural opportunities of locals and generated fat tax revenue. However, instead of focusing on the big event facility, a series of other derailments took place, with the money going to a hokey film and other frivolities that did nothing to create revenue. The tacking on of a glassy entrance to TCC did nothing to enhance revenue but did result in a substantial debt was a bad business decision. Architects collected millions in tax money. How about paying architects as the project is built, on an incremental basis? If the structure is not built, no payee to architect. We have been taken to the cleaners. We have no new arena nor do we have a world class museum, but we now have cash happy architects and outlandish designs and an out of state filmmaker has $800,000 in tax money. Is this mismanagement?

What happened to the bid process required by law? Why was this Rio Nuevo video not put out to bid? The city and Rio Nuevo paid the bills for this film so it should have been put out for bid. If the bid process was violated, the city charter says that those responsible will be removed from office. If more laws were violated, this should come to light. It has been suggested by the Rio Nuevo Audit that the payments to the U of A were in violation of state law. Legal problems, subverting the bidding process required by law, and lack of progress point to mismanagement. The bidding process for all spending needs to be documented.

The city matching funds projects for Rio Nuevo were transportation projects, some of which seemed that there was a bond issue for some time ago. What are the cost overruns on these transportation projects? Did these matching funds projects bring in revenue to the TIF? I know the premise is that good streets generate business but did this happen? What was allowable for matching funds? The Martin Luther King housing units downtown have been eating money but generating nothing after the tenants were ousted. The debt level will ensure the rents remain high.

The modern streetcar that lacks funding has already consumed millions in Rio Nuevo 'matching funds' , another fiasco designed to need a city subsidy to operate. Already deep into transit deficit spending to set up a situation projected to require a subsidy to operate is the ultimate foolishness. As for the streetcar projects, most of them take place out of state employing workers building streetcars while Arizona's unemployment rate remains high. If the Federal funding requires that our community export jobs, then perhaps this type of funding is simply too expensive for Arizona.

The new Rio Nuevo Board has been hiring lawyers and now wants to hire employees, even though Rio Nuevo is in deficit spending. I suggest this board nominate and elect one of their own to be treasurer. I also suggest that those with financial interests in the defunct hotel project resign over a conflict of interest. As a community, we need fresh ideas on the board and we also need a board that is willing to work in a transparent manner and one that is willing to work to salvage what is left of Rio Nuevo. We have from 2011 to 2025 to work towards solvency and material achievement. A hiring freeze is in effect, isn't it?

This bum on the street corner now wants you to buy him a new car when he's flat broke. Tell him no. Tell him to get busy and do the job as Rio Nuevo Board, instead of just claiming dubious prestige for the title.

The pattern of disorganized and whimsical spending without a reasonable budget for accomplishing material gain in the form of an arena or expanded TCC or even a viable project to generate revenue was an outstanding example of mismanagement that needs a full investigation. The gambler who is forever optimistic just continues on and on until he is bankrupt.

I say it is time for the gambler to fade away and a fiscal conservative to take his place.





IF YOU WANT MORE INFORMATION:

Rob O'dell wrote an interesting factual article on Rio Nuevo and the hiring of lawyers and what they were paid out of tax money:

http://azstarnet.com/news/local/govt-and-politics/article_522148bd-131f-5d86-bb90-5ac6c3867d11.html

Joe Higgens and Chris DeSimone wrote a good opinion piece on the Rio Nuevo Audit:

http://tucsongrowup.com/2010/11/06/those-responsible-for-rio-nuevo-must-face-consequences-wut-column-for-inside-tucson-business/