Category Archives: Economy

Where are the Liberal Companies?

I was scrolling through the list of American businesses that have announced employee bonueses, wage increases, etc. after the Republican tax reform was signed into law. Something stands out… where are all of the liberal companies? Where is Google? Facebook? Twitter? Uber? Penzeys? Berkshire Hathaway? Microsoft? Progressive? GEICO? Apple? Etc.

Are the owners of these companies just going to stuff their tax savings in their pockets? Why aren’t they announcing plans to give that money to their employees? Or investing in their American facilities? Or giving some to charities?

Their absence is rather conspicuous.

Walmart Issuing Bonuses and Increasing Base Wages

Excellent news!

Walmart is boosting starting wages, providing a one-time bonus for employees and expanding benefits, the company said in a press release on Thursday, citing the tax cuts signed into law by President Trump last year. The plan benefits more than a million employees, the company told Axios.

Details: The bonus is based on length of service, with those who’ve worked 20 years eligible for $1,000. The company, which is the largest private employer in the U.S. and employs roughly 2.2 million people worldwide, is also raising its starting wage to $11 an hour. The current starting wage for store associates is $9 an hour. The company also said it plans to expand its maternity and paternity leave benefits.

We are on our way to wage growth and its companion, inflation. And not happening because of a government mandate. It’s happening because of a blossoming economy.

Come for the Jobs… Stay for the Cheese!

Come to Wisconsin!

Gov. Scott Walker’s job-creation agency has launched a push to convince Chicago-area millennials to leave the big city and relocate to Wisconsin in hopes of boosting the state’s workforce.

The Wisconsin Economic Development Corporation began its “Think-Make-Happen In Wisconsin” advertising campaign on Monday. The project is designed to attract more workers to Wisconsin.

CNN’s Spin

Wow. CNN can’t help themselves. They look like Eeyore to Trump’s Tigger.

cnnspin

Boeing to Invest in Employees and Charities with Tax Savings

More!

Shortly after Republicans officially passed their new tax plan, Boeing made an announcement stating that it will invest $300 million in employee-related and charitable causes.

Of the total amount, one-third will go to workforce development for things like ongoing training and education. Another third will be reserved for “workplace of the future” infrastructure improvements. The last $100 million will be invested in charities within Boeing’s focus areas such as education and support for veterans.

Comcast to Issue Bonuses After Tax Reform

Another!

Citing “the passage of tax reform and the FCC’s action on broadband” (aka the Dec. 14 vote to repeal net neutrality), Comcast chief Brian Roberts announced $1,000 bonuses would go to more than 100,000 front-line and non-executive employees.

Wells Fargo and Fifth Third Raise Wages After Tax Cut

More!

Wells Fargo, meanwhile, also said it would be boosting its minimum wage for employees to $15 an hour, which was prompted by the tax plan. The San Francisco-based bank also said it would target $400 million in donations to community and nonprofit organizations next year.

Cincinnati-based Fifth Third, the fifteenth largest U.S. bank by asset size, said the tax cut allowed it to re-evaluate its employee pay and pass along some of the windfall. Nearly 3,000 workers will see hourly wages rise to $15. The $1,000 one-time bonus is expected to be paid by the end of this year, the bank said, assuming President Donald Trump signs the bill into law by Christmas.

AT&T To Issue Bonuses After Tax Bill Signed

WOW.

AT&T was quick to respond to news of U.S. tax reform, announcing it would give some employees bonuses once the legislation is signed into law.

The telecom giant said in a press release Wednesday that it would give more than 200,000 of its U.S. workers who are union members a special bonus of $1,000. The company also increased its capital expenditures budget by $1 billion in the U.S.

Pushing Electric Vehicles

Heh. Is it too obvious why an electric company would be advocating for electric vehicles?

Still looking for tax benefits in 2017?

Plug-in electric vehicles (EVs) are now viable for most lifestyles and budgets with more than two dozen models now commercially available. If you buy a new, plug-in electric vehicle in 2017, you’re eligible for a federal tax credit of up to $7,500.

On average, fueling a car with electricity is roughly the same as fueling with gasoline at $1/gallon.  Nearly 600,000 Americans have made the switch to driving electric.

Target Buys Shipt

Interesting move.

The traditional brick-and-mortar retailer announced a $550 million purchase of Shipt, which it said will bring same-day delivery to about half of its stores by early 2018. By next year’s holiday shopping season, Target (TGT) expects to offer same-day delivery from a majority of its stores and in all major markets.

Shipt uses a network of over 20,000 personal shoppers to fulfill orders from various retailers, delivering them within hours in more than 72 markets. Until now, the company has been focused on delivering online grocery purchases, competing with Instacart, which offers shopping services from a variety of grocery chains. Shipt will continue to serve the retailers it already works with, some of which compete with Target’s grocery business.

DOL Proposes Rule Change Regarding Tips

Huh.

Published on the Federal Register on Tuesday, the new rule would rescind a regulation enacted during the Obama administration that mandates employers distribute tips to their tipped employees. Under the new rule, restaurants would be able to pool tips from servers and share them with untipped employees like dishwashers.

Heidi Shierholz, senior economist and director of policy at the Economic Policy institute (EPI), points to research that shows illegal wage theft exceeds $15 billion every year. “It seems obvious that when employers can legally pocket the tips earned by their employees, many will do so,” she said.

The DOL argues that tip pooling helps reward those who don’t normally get tips. Groups like the Oregon Restaurant and Lodging Association assert that this rule“would help decrease wage disparities between front-of-house and back-of-house employees.”

But labor advocates say the likely outcome would be employers pocketing those tips.

I’ll admit that I did not know that tip pooling was illegal. I see it occasionally when I’m out and about and it seems like a rather sensible practice in some cases. Take a car wash where they have people vacuum and dry your car… there are often several people who touch your car and you want to tip them all. But usually the customer only comes into contact with the first and last person. Tip pooling makes sense to make sure that all of the workers are tipped for delivering good service.

While I understand the worry about employers pocketing tips instead of distributing them, it seems to me that it’s a marginal risk. First, it is illegal and I’m certain that disgruntled employees who are getting screwed would have no problem reporting it – as they should. Even under the proposed rule, the employer can collect the tips to redistribute them, but they can’t keep the tips for themselves. It might be difficult to prove theft for cash tips, but in the age of ubiquitous cameras and credit cards, it wouldn’t be that hard to bust an employer who is stealing tips.

Second, if an employer steals their employees tips, they will have a very difficult time keeping employees. The costs for the employer would far outweigh whatever few bucks they get from stealing tips. Employees will quit and new ones have to be recruited and trained. Disgruntled employees will provide poor service and might take it into their own hands to steal back their lost tips. Etc. Only a stupid employer would steal their employees’ tips. I’m sure it happens, but stupid employers don’t generally stay employers for long.

The fears expressed regarding the proposed rule change seem overstated.

House, Senate need to find compromises on tax reform

My column for the Washington County Daily News is online. Here you go:

After a heated debate in the U.S. Senate where Wisconsin’s Senator Ron Johnson mounted a spirited effort to make the final bill more conservative, all but one Republican senator passed the most comprehensive and significant tax reform bill in decades. Now begins the process of reconciliation where the legislators will attempt to merge the tax reform bill already passed by the House of Representatives with that of the Senate to create a final bill. This will prove to be an arduous task as the House and Senate versions are considerably different.

Before delving into some of the details of the tax bills, two things must be remembered. First, there is a reason that our federal tax code is as large, complicated, and incomprehensible as it is. Behind every deduction, provision, exemption, rate, bracket, and classification is a person or group who benefits. Because of that, any attempt to change any of the tax code’s complexity will be met with passionate opposition by the person or group impacted by the change. Americans like to say that they want a simple tax code, but line up in opposition whenever their special interest is touched.

Second, as the next few weeks are filled with detailed debates over arcane tax policy items and the opponents engage in the predictable histrionics, we must not lose sight of the goal. The purpose of tax reform is to stimulate economic growth by allowing Americans and their businesses to keep more of their money to spend as they see fit. It is a fundamental faith in the fact that hundreds of millions of Americans will make better decisions about how to use their money than a few hundred politicians in Washington.

The one major thing that both the House and Senate bills have in common is reducing the corporate tax rate from 35 percent to 20 percent. If that was all the Congress did, it would be a tremendous boon to the American economy. Right now, the U.S. has the fourth highest corporate income tax rate among 202 jurisdictions surveyed by the Tax Foundation in 2017. Only the UAE, Comoros, and Puerto Rico have higher rates.

But rates are misleading. The actual tax rates that U.S. corporations pay are much lower because they have armies of lawyers and accountants who know how to exploit all of those loopholes baked into the complicated code. Large multinational corporations also avoid America taxes by keeping all of the profits they can overseas outside the reach of the IRS.

By lowering the corporate tax rate and repealing many of the loopholes, American corporations find it more advantageous to bring their profits back to the U.S. and invest. Whether they spend their tax savings on dividendsto owners, employee compensation, capital investments, innovation, or all of the above, it is more money pumping into the American economy.

The rest of the two tax bills have less in common and will have to be reconciled. The self-imposed convoluted rules in the Senate forced some unnatural items into their bill. For example, the House bill sets a straight 25 percent tax rate for business profits that are passed through to individuals in LLCs, sole proprietorships, and other pass through business entities. The Senate tried to cut this tax, after Senator Johnson forced the issue, by slightly reducing the rate, but allowing the business owners to exempt the first 23 percent of business profits.

On individual taxes, the House bill reduces the current seven tax brackets to four and cuts the rates. The Senate bill reduces some individual tax rates, but keeps all seven brackets and the rates will return to their current levels in 2025. In exchange for reducing the rates, the House bill reduces the amount of mortgage interest that individuals can deduct while the Senate bill leaves this unchanged. Both the House and Senate bills increase the Child Tax Credit, but to different amounts.

On the death tax, the House bill repeals it. The Senate bill merely increases the threshold at which it is applied. I have never understood how it is good public policy or moral for the government to confiscate the lifetime earnings of Americans just because they had the temerity to die.

Perhaps the starkest difference between the two bills is that the Senate repealed Obamacare’s mandate that levies a tax penalty if Americans do not buy health insurance. The House bill does not address this at all. Many House Republicans will surely agree to revisit part of the Obamacare repeal debate.

Overall, the House bill does a better job of simplifying the tax code and reducing taxes than the Senate bill, but the Senate bill is tolerable as it is written. Neither bill is as clean and cohesive as it could have been. Such is the art of compromise. I hope the final compromise bill can be agreed upon and passed into law soon so that all Americans can benefit.

Racine Politicians Insert Useless, Unenforcable Mandate into Foxconn Deal

At least they can feel good about themselves, I guess.

Embedded in the development agreement is a Good Faith Hiring and Contracting Efforts clause, which states: “Developer agrees to exercise good faith in striving to hire, retain and contract, whenever reasonably possible, with qualified individuals and businesses residing and/or based in the County as well as veterans and minority-owned businesses.”

I went ahead and put in bold the ambiguous words and phrases that make this clause completely meaningless. Don’t get me wrong… I’m glad that it is unenforcable, but it’s fun to highlight the useless pandering of politicians.

CVS to Buy Aetna

What an interesting deal.

CVS is buying health insurance giant Aetna, the companies announced Sunday.

If approved, the $69 billion acquisition — $77 billion including debt — would drastically remap the health care industry. CVS Health (CVS)is a massive drugstore chain and prescription drug insurer, while Aetna (AET) is one of the nation’s largest health insurers.

It would also go down as the largest health insurance deal in history, far exceeding Express Scripts (ESRX)’ $29 billion acquisition of Medco in 2012, the last record-holder.

If the deal goes through, you would have a health insurer with direct access to thousands of store locations from which they could deliver routine services to control costs.

AT&T CEO Promises Investment if Tax Reform Passes

This is one company. There are billions of dollars of pent up projects that businesses would do if they had more capital.

If tax reform passes, AT&T (T) CEO Randall Stephenson said the company will spend “at least” $1 billion in capital expenditure and be able to create an estimated 7,000 jobs.

“From my standpoint, the driver of this is the business tax reform… if we get investment going, we get productivity going, we get wage gain going, we invest another billion dollars. Every billion dollars AT&T invests is 7,000 hard hat jobs. These are not entry-level jobs. These are 7,000 jobs of people putting fiber in ground, hard hat jobs that make $70,000 to $80,000 per year,” Stephenson said at an event hosted by The Economic Club of New York on Wednesday.

He described passing tax reform as a “major” and “significant” item for the U.S. economy.

“I cannot overstate how important I think a tax bill that makes the US corporate taxes a competitive regime around the world — that’s big. That’s significant,” he said.

He explained that it would be a “capital-freeing” event for corporate America.

“You are freed up to invest more capital. We have so many initiatives and projects that we would like to invest more in.”

Economy Growth Accellerating

Great!

  • Gross domestic product grew at a 3.3% annualized rate (est. 3.2%), revised from 3%; fastest since 3Q 2014
  • Consumer spending, biggest part of the economy, grew 2.3% (est. 2.5%); revised from 2.4%; down from 3.3% in 2Q
  • Business-equipment spending rose at a 10.4% pace, a three-year high, revised from 8.6%; reflects transportation gear
  • Corporate pretax earnings rose 5.4% y/y, following a 6.3% y/y advance

FCC gets it right on net neutrality

My column for the Washington County Daily News is online. Here you go:

The U.S. Federal Communications Commission has decided to move forward with reversing Obama-era regulations of the interned dubbed “net neutrality.” In doing so, President Donald Trump’s FCC is upholding a bedrock conservative principle of free market capitalism.

The internet has been atwitter for years over the issue of net neutrality. One side of the debate argues that the government should ensure that everyone has equal access to the internet. The other side argues that the people and companies who own their piece of the internet should be able to do with it what they please. While there are certainly philosophical or theoretical skirmish lines in this debate, the real war is being fought by giants of American business. As is always the case, one only needs to follow the money to see why.

First, let us remember that the internet is simply a vast array of millions of computers that are interconnected by millions of networks. All of those computers and networks are owned by separate people and companies who voluntarily connect them to each other for their own purposes.

On the “equal access” side of the debate are the giant media and entertainment companies who produce the movies, news sites, games, pornography, commercial marketplaces and other content that people consume through the internet. They argue that whatever they produce should be equally available to anyone at any time by any means.

On the “free market” side of the debate are the giant telecommunications companies who own the massive networks that connect all of the computers to each other and to the consumers who access the internet. They argue that since these networks are their property, they should be able to manage it and charge people to access their network as they please.

The media companies are worried that if the government does not force net neutrality, then the telecommunications companies will be in a position of market power to force the media companies to pay for access to consumers. The telecommunications companies want to do just that in order to monetize their network.

This debate is not about the internet consumer and whether or not he or she will be able to access cat pictures on Instagram at 100 megabits per second. This debate is about whether or not the government should regulate people and their businesses on how they manage and monetize their private property. Specifically, it is about whether or not the government should force telecommunications companies to give everyone the same access on their networks. Interestingly, nobody is talking about the government forcing media companies to give everyone equal access to the content they produce.

One of the principles that has helped drive the American economy for centuries is that the government should regulate less — not more. Laissez-faire economics are fundamental to free market capitalism. And while some may fear the consequences of less regulation, the invisible hand of the free market has proven for centuries to be the best regulator of prices, market access, allocating scarce resources and consumer demand.

Let us walk through the worst case that the net neutrality adherents envision. In a world without the federal government regulating net neutrality, the telecommunications companies may manipulate the speed and access to certain internet content based on whether or not the content providers pay them. But remember that there is already competition — often very robust in urban areas — between internet service providers. If consumers are demanding access to certain internet content, they will speak with their consumer choices and the internet service providers will be forced to accommodate. Woe to the internet service provider, for example, who cannot deliver Netflix or Hulu without choppy buffering.

Until President Barack Obama came along and thrust net neutrality regulations on the nation, the internet was thriving with both internet service providers and media companies tripping over themselves trying to meet the demands of internet consumers. The Trump Administration’s FCC is on the right track in reversing Obama’s antifree market internet regulations. It is just such deregulation that will continue to allow the internet to be the transformational economic and societal engine that it is.

Graduate Students Fret Over Real World Taxation

Heh.

Talk among graduate students at the University of Wisconsin-Madison has been buzzing with speculation about a proposed federal tax bill that could hike their income taxes so high some wonder whether they could complete their degrees.

“A lot of folks are debating whether they would be able to stay in school,” said Adria Brooks, co-present of the Teaching Assistants Association, a labor union representing graduate student workers at UW-Madison. “People are panicked, they’re unsure of what to do,” Brooks said.

The U.S. House approved a tax reform bill Nov. 16 that would eliminate a section of the IRS code that exempts tuition remission for graduate students from taxes, making it taxable income.

Graduate students at public universities who work as teaching or research assistants often receive tuition reductions in addition to stipends for their work.

Well, it IS income, isn’t it? If a private employer gives an employee tuition assistance, it counts as income if it’s over a certain amount. Why wouldn’t the same apply if the employer is the university?

Study: Ethanol Policies Drove Massive Release of Carbon

It’s almost as if the ethanol policies weren’t about the environment and were more about driving money into the pockets of special interests. Hmmmm…..

Federal ethanol subsidies aimed at slowing climate change have triggered the release to the atmosphere of about 30 million tons of carbon a year as farmers have cleared land to plant more crops for production of the renewable fuel, UW-Madison researchers said Wednesday.

The first comprehensive measurement of climate damage associated with ethanol was being presented at a conference in Texas by its lead author, graduate student Tyler Lark, and graduate research assistant Shawn Seth. The study will be submitted to a journal for peer review within weeks, said geography professor Holly Gibbs, who is also an author.

The researchers spent years examining satellite imagery and high-resolution maps showing the vegetation and soil types on land before it was cleared for new crop acreage.

[…]

The researchers determined the amounts of grasslands, prairie, wetlands and wooded parcels that were gobbled up from 2008 to 2012 during a period of high crop prices after federal policies began pushing ethanol as an environmentally-friendly fuel that could constrain burning of fossil fuels in cars.

A portion of the carbon was released when grasslands were burned, but plowing up soil exposed organic matter and began the process of decomposition began the slower release of about 75 percent of the carbon, Gibbs said. Most of that carbon would be released from soil over a period of decades, but some could take a century or more, she said.

Engineering Wisconsin’s Roads for Autonomous Vehicles

Foxconn is pushing Wisconsin to the forefront of technology and innovation.

Spurred by Foxconn Technology Group and its plans for a mega-factory in Racine County, state highway planners are studying the possibility of including special lanes for driverless vehicles on I-94.

Should that come to pass — and at this point it is only something being contemplated — it would put Wisconsin in the vanguard of what many believe will be a key part of transportation in the future.

Driverless cars have been developed and are being tested, but there are no highway lanes dedicated to so-called autonomous vehicles, a spokesman with the U.S. Department of Transportation said.

[…]

One possibility, Sheehy said, would be driverless lanes between the Foxconn plant and Milwaukee’s Mitchell International Airport as a way to move supplies and products to and from the factory.

He said the fact that Foxconn executives brought up the use of autonomous vehicles indicated the vision the company is bringing to the project.

“We’re thinking about two years down the road; they’re thinking 20 years down the road,” Sheehy said.