Bald Cow Live July 15, 2011 Chicago

I am told we will be playing at 9:00 p.m. (going on first and early since we are old and our friends are also old) at Gallery Cabaret in Bucktown. I am troubled to see we are not shown on the calendar … . Details to follow as I get that clarified. (The drink specials that night are Jever Pilsener and Huber Bock, both $3 bottles. )

Four songs recorded in 1989 here. We will be dragging out these old warhorses, for sure. We will be adding one new cover to the set: Who Will Save Rock’N’Roll? I wish Handsome Dick Manitoba could be there with us, physically, not just in spirit.

Obama, Tax Policy, and Manufacturing

Fact #1: Obama has been giving many speeches about how much he values American manufacturing and also introducing various initiatives which he claims will be help manufacturing businesses

Face #2: In his recent budget proposal, Obama proposed the elimination of LIFO inventory accounting for tax purposes. This would generate additional business income tax revenues for the government of an estimated $72B by 2016.

In what universe do the above two things go together?

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New! – Your ChicagoBoyz helpful tip of the day.

If your neighbor who is moving away and owns a lot of cats offers you one of them because she can’t take them all to her new place, do not take her up on her offer.

UPDATE: Let me rephrase that. There may be a reason why your neighbor has decided to give up this particular cat.

You might call this a case of revealed purrferences.

Waking Up to the Behavioral Impact of Taxes

The current administration has continually protested the lower rates signed into law by the previous administration and initially acted as if there was no impact on behavior based on the act of raising tax rates.

However, the administration IS interested in getting re-elected. Thus some new “incentives” have been put into place to incent economic activity, such as a tax credit for capital expenditures that makes them completely deductible in the current year. Since large capital expenditures are usually deducted over many years, this is a significant one-time tax holiday that major companies will consider seriously while planning for uses of their free cash flows (or available financing).

This tax credit, however, is diametrically at odds with the administration getting re-elected, because it provides FURTHER encouragement for companies to replace people with automation. And as the jobless rate remains high, the government starts casting about for more solutions to a problem that they really care about, which is getting people back to work so they aren’t disaffected voters (never mind the deficit, the total economy, or other factors).

While the government tried to make labor a bit less un-favorable with a social security tax holiday, the 2% is on the employee side (yes, yes, I know that this factors into wages in the long run, but not in the short or medium term), this type of change isn’t going to make businesses hire more in the short term.

Thus now the government has decided to look at other incentives to try to get companies to hire people, such as a more extensive payroll tax holiday, as they discuss in this NY Times op ed piece.

The administration apparently doesn’t feel any uneasiness with the blatant contradictions in their policies; officially they say that raising taxes “on the rich” doesn’t incent behavior, but here they are starting to see that businesses DO respond to incentives, and that in order to try to get businesses to hire they might want to use tax policies to further this end.

In fact, our tax policies are a complete mess. Not only do businesses want a fair tax climate, they want a PREDICTABLE tax climate. Since businesses are (all) run by high net worth individuals, it also makes sense to have a predictable tax climate for businesses as well as individuals. No one would have foreseen that we would go an entire year without an estate policy; think of all the years of lawyers and various “shifting” transactions that could have been avoided. Likewise, this one time tax break for capital is something that businesses will have to consider for years to come; perhaps the best bet is just to wait to invest until a better tax deal comes along.

I would love to hear the administration explain why taxes DO incent behavior sometimes (like when the administration wants you to hire people) but DON’T incent behaviors at other times (like when they raise rates and expect you to work just as hard as you did before and keep investing and hustling for years to come, knowing that a large chunk of it is going to go to the government in taxes). That would be a good you tube for Goolsbee. (also hilarious that when you put in his name the auto-correct in my computer comes up Goebbels).

Cross posted at LITGM