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Jon Huntsman's Tax Reform Proposals

The Republican Party seems to have a litmust test for 'good' Republican nominees for party office:

• first, tax cuts:  Republican candidates must have no plan to increase taxes, even if that means that the wealthy pay too little and the poor too much;
• second, deregulation.  Republican candidates must have no plan to have the government regulate the activities of the market (that will not regulate itself) in ways that favor the long-term wellbeing of ordinary Americans; and
• third, militarization:  Republican candidates must have no plan to reign in the exorbitant military/defense/homeland security spending that has been a large part of the reason for our buildup of significant deficits; and
• fourth, privatization:  Republican candidates must not resist privatization of every possible public asset and activity.

Readers will recognize the four-pronged stool of the Reagan administration and the right's agenda since--deregulation, militarization, privatization, and tax cuts.  We've been operating more or less under that agenda most of the time since 1980.  We have not created a sustainable economy that benefits everyone.  Instead, we have created a highly unequal society in which those at the top gain incredibly and those in the middle are squeezed down towards the bottom, while interminable wars get waged and environmental degradation continues at rapid pace.  Ordinary Americans lose out in this 'brute capitalism' endeavor which gives most of the rewards to those already holding most of the wealth and furthers a "corporatist" society in which everything caters to business while ordinary people's needs go unanswered.

Jon Huntsman's so-called "American Jobs Plan" fits the mold. 

On taxes, Huntsman wants to

1) eliminate deductions and lower rates to 8%/14% /23%. 

2)  Eliminate the AMT

3) Eliminate taxes on capital gains and dividends

4) Reduce the corporate tax rate to 25% from the statutory rate of 35%

5) shift from a worldwid system to a territorial one

6) enact a tax repatriation holiday

That scheme represents class warfare on the poor and middle class, for whom a tax bill of 8 or 14% of income, respectively, could be devastating.   You really can't simplify the tax code for the 70% of people who take the standard deduction except by removing provisions that may benefit them if they qualify (medical deductions, etc.).   Eliminating the AMT is extraordinarily costly, and doesn't "penalize ... small businesses" as the Huntsman plan argues.  Meanwhile, the wealthy--who own most of the financial assets (stocks and bonds) and get most of the capital gains and dividend income that Huntsman wants to make tax free, benefit extraordinarily.  Our tax code already favors investment income heavily--we should move in the opposite direction and tax investment income no differently from labor income.  Otherwise, we create an enormous privilege for those who already own capital and have investment income, while disadvantaging those who must earn a living from labor and now become the ones required to carry on their backs the entire federal government enterprise. 

 Huntsman's argument for zero taxation to capitalists' investment gains is on one hand the same old hat of "let's favor capital over labor" based on the failed market theories of the Chicago school that taxing capital gains deters investment.  But that's absurd on its face.  The wealthy who own most of the financial assets do not stop investing in those financial assets because of taxation--if so, they would switch from financial assets to operating assets and stimulate the economy.  Regretably, taxation doesn't have that much of an effect.  They continue right on investing in capital assets. 

Further, Huntsman makes a 'double tax' argument that shows how little he understands about the existing arguments about taxation of capital gains.  He says "[b]ecause dollars invested had to first be earned, they have already been subject to an income tax [and] taxing these same dollars again when capital gains are realized serves to deter productive and much needed investment in our economy." 

But it is not the "same dollars" that are taxed when capital GAINS are realized--tax basis protects the after-tax dollars invested and the amount taxed is the GAIN over that amount that has accrued to the investment.  The 'double taxation argument has a little more heft when made about dividends paid by corporations, but again much of that is based on the starting point.  Once we decide that corporations are persons that are taxpayers, then it is not proper to say that dividend taxation represents 'double' taxation.  Corporations are taxable entities and pay tax on their income.  They may then pay amounts out of that to shareholders who are also taxable entities and the shareholders will pay taxes as well (unless they are corporations, which generally get a 70-80 or 100% dividends received deduction).  But that is not really any different from the fact that I as a professor pay tax on my income and may pay amounts out of that to workers in my household who are also taxable entities and the workers will pay taxes as well.  The only reason it seems that the capital investment is different is because the Code has created a category of capital versus ordinary assets and distinguishes the rate on them.  And because one of the taxpayers in the corporate situation is an artificial entity--but one that we recognize as a 'person' under the Constitution entitled to even free speech rights. 

Furthermore, Investment gains and income earned through non-corporate entities of course have been subject to NO tax at all, since noncorporate entities are not subject to corporate taxation, and the gains beyond the after tax investment would be allowed to escape with zero taxation in Huntsman's scheme.

Huntsman's argument for reducing the corporate tax rate is equally nonfactual.  He states that "The United States cannot compete while burdened with the second-highest corporate tax rate in the developed world."  This is bunk--the statutory rate is not the actual rate paid by corporations.  Most corporations pay no tax, and those that do pay tax already pay a rate of 25% or lower.  So IFF it is really important to help US multinationals compete with other US multinationals and other country multinationals (which is itself a doubtful proposition) and IFF a 25% tax rate makes corporations competitive, the our corporations are already sitting pretty.  The US is in fact a tax haven for corporations, according to the OECD's analysis of developed countries  US corporations pay a very small share of taxes these days-the corporate tax take has shrunk from about 40% of GDP to less than 3%. 

The switch to a territorial system is another element that favors the corporatist agenda, as is the repatriation holiday.  See earlier postings.  Corporations have plenty of money that they can invest in the US right now; Repatriation isn't likely to increase investments but rather to amount to a windfall.  Repatriation didn't do anything to increase jobs in 2004 and it won't again.  Repatriation led the companies that repatriated profits in 2004 to keep even more profits outside the US (expecting a second 'one-time-only repatriation').  There is simply no good reason to do another repatriation tax holiday.

Huntsman then goes on to propose deregulation.  Note that he wants to

• eliminate Dodd-Frank.  We had a near Depression because we eliminated Glass-Steagal, and Huntsman wants to go back to the "banker take all the gains/society take all the losses" mindset of financial speculation that nonregulation of derivatives led us to. 
• undo the baby step towards health care reform.  Sure, we should have enacted Medicare for all, a single-payer system like every other advanced country in the world already has. But deregulating health care got us into the mess we are in--it certainly won't cure the mess.
• "dramatically reign in the EPA".  IN a country where corporate will has destroyed wetlands, denuded forests, and bulldozed mountaintops into creeks, Huntsman wants to let the corporate giants operate with no agency to protect the environment.  He particularly objects to protecting the ozone layer--that 'little' issue of whether we even exist as a planet that supports life or not...
• "curb" independent agencies like the NLRB.  Huntsman says the NLRB "destroys jobs"--in other words, we are supposed to be willing to have sweatshop conditions in order to have any jobs at all in the corporatist culture, rather than having jobs and protecting workers.
• "streamline the FDA". that favors Big Pharma and the investors, who want to be able to foist new drugs on patients without the painstaking clinical trials currently required

Huntsman thinks privatizing Fannie and Freddie will stabilize the housing market.  Allowing modification of mortgage loans in bankruptcy would go much further to doing that.   And "privatization" of Fannie and Freddie would have to be handled correctly to avoid a windfall from the existing public guarantee.  Better to simply wind them down and let them go out of business.  If anybody wants to run a Fannie equivalent, let them start it up themselves from scratch.

 

Joint Committee on Taxation Document Archives

The JCT has announced that  most of its old documents and reports, dating to the founding of the Committee in 1926, will now be available in a searchable database on its website.  This is significant for tax practitioners and tax academics, who will now have access to early JCT materials that may have been hard to find in print form, giving a better understanding of the development of the Internal Revenue Code and tax policy decisions.

The link for the website archive is http://www.jct.gov/publications.html?func=select&id=6.

Hurricane Irene Postpones Deadline for Offshore Tax Evaders to File Voluntary Disclosure

The IRS has delayed the end date for the voluntary disclosure program for offshore accounts.  Citing the potential interruptions caused (or likely to be caused) by Hurricane Irene as she trundles up the east coast, the IRS provided a reprieve for filing the required information or seeking a 90-day extension, from August 31 to September 9, for those making a 'good faith' effort to comply.  The updated voluntary disclosure initiative information is available on the IRS website, here.  The posting provides details about the program and the documents necessary to comply.

This second program requires participants to pay 25% of the highest amount in the account from 2003-2010, along with the back taxes, interest, and other penalties.  Without the voluntary disclosure program, the penalty can easily be more than is in the account.

Corporatist Think Tank Pushing Repatriation with biased study--definitely not a progressive solution.

A press release Thursday from the corporatist Washington "think" tank, NDN (New Democratic Network), announced a new study :  the study supports allowing huge multinational enterprises (MNEs) to repatriate their overseas earnings at almost zero tax. 

The study relies on some questionable assumptions and, I believe, comes to a wrong conclusion.  Even without repatriation, the combination of the foreign tax credit and US MNEs' ability to manipulate their income results in very low tax rates on repatriated income.  With repatriation, the tax rate may even be negative.  There are almost no benefits that accrue to the US from repatriation, while the benefits to MNEs are substantial.

The Joint Committee on Taxation has estimated that another rendition of the 2004 repatriation provision (part of the cornucopia of corporate tax benefits passed by the Bush Administration and responsible for lowering even further the tax-haven effective tax rates actually paid by US corporations) will cost about $80 billion over the ten years from 2011 to 2021.

Yet a corporate coalition--the alliance that has been pushing repatriation for months, on grounds of increasing 'competitiveness' and 'job creation'-- and their corporatist allies in Congress (especially on the right) are nonetheless pushing passage of a new "one-time" repatriation provision.  (The fact that the original repatriation provision was also a "one-time provision" and yet they are lobbying for a second iteration is something easily glided over in this age of reckless legislating.)  

This is all occurring at a time when the rightwing GOP in the House and Senate has pushed to reduce US spending for social justice programs like Medicare, Medicaid and Social Security on the claim that its highest priority is reducing the US deficit.  That right-wing fringe refuses tax increases--even to restore the series of huge Bush tax cuts that moved us from surplus to deficit--and it engaged in economic terrorism to walk to the cliff edge on default on the US debt in order to get the kind of spending cuts it wanted.

The repatriation study is by "economic consultants" Robert Shapiro &  Aparna Mathur (American Enterprise Institute), The Revenue Implications of Temporary Tax Relief for Repatriated Foreign Earnings: An Analysis of the Joint Tax Committee's Revenue Estimates, NDN (Aug. 25, 2011).

NDN styles itself as 'progressive' and in some senses it is--the organization appears to be interested in the concerns of ordinary Americans for jobs and income and decent health care  But on core issues, such as globalization, corporatism, and the relative priority of protecting social justice programs versus 'reforming' the corporate tax code, the organization ends up supporting a Clintonesque right-of-center position that is far short of progressive.  Shapiro, one of the co-authors, is on record as supporting the right-of-center, non-progressive Simpson-Bowles and Rivlin-Domenici approach to the U.S. fiscal problems--cut entitlements (probably significantly), cut defense (probably limited compared tot he entitlement cuts) and raise revenues (but not from corporations).  See Shapiro's blog postings for NDN, here.  His co-author is an American Enterprise Institute econometrician.  The study seems to reflect more the pro-corporatist agenda of that institute than anything progressives should stand for. 

Regrettably, the self-designated moniker of 'progressive think tank' may well mislead those interested in tax policy into thinking that progressives should support an additional repatriation holiday.  Nothing could be further from the truth. 

Just look at the way the Wall Street Journal glommed onto the 'study' as support for the tax cut for multinationals that it has been pushing since the last one in 2004.  McKinnon, Study Finds Benefits in Temporary Tax Break for Multinationals, Wall St. Journal (Aug. 24, 2011).  The Journal's description of the MNE coalition's effort for even further reduction in their already low, US-tax haven for MNE-rates is succinct and accurate (though no corporation pays the statutory 35% rate, and certainly not multinationals, who finangle their repatriation of foreign-taxed income to ensure the maximum foreign tax credit, thus reducing to a very low rate their tax rate on the overseas earnings (which are often really US earnings that are flushed overseas with transfer pricing gimmicks that the Congress should outlaw). 

"A coalition of U.S. multinationals including Cisco, Apple, Google, Microsoft and Pfizer has been pushing Congress to pass the temporary tax break, which would sharply lower U.S. tax rates on overseas income from as much as 35% now to as little as 5% or so. The companies argue such a move would induce companies to bring home hundreds of billions of dollars in profits that could be used for new investment and hiring as well as dividends, stock repurchases and debt reduction."

But evaluation of the arguments in the paper suggest it is not particularly persuasive.   I've written about this extensively here and elsewhere (see my SSRN article on democratic egalitarianism and corporate taxation, here).  There are deep flaws in the idea, and equally deep flaws in the Shapiro-Mathur study.  I'll outline  a few of them here.

For those needing a primer on the value of deferral in the US system for taxing MNEs' on their worldwide income, you may find the Dec. 2000 Treasury study entitled "The Deferral of Income Earned Through  U.S. Controlled Foreign Corporations: A Policy Study" on subpart F helpful.  It considered whether the US regime is anti-competitive and concluded that there was no evidence that it was.

[The study acknowledged that] promoting multinational competitiveness may conflict with the goal of promoting economic welfare. It then attempted to evaluate the effect of subpart F on competitiveness and concluded that the available data do not provide a reliable basis for evaluating whether subpart F has had a significant effect on multinational competitiveness. Although some have attempted to use statistics selectively in an attempt to show a decline in U.S. competitiveness, there is no convincing evidence of such a decline, nor is there convincing evidence regarding what impact, if any, subpart F may have had on these figures. Further, there are many other statistics that appear to show, generally, that the U.S. economy is highly competitive. Chapter 4 also noted that the U.S. tax regime imposes a lower overall tax burden than that imposed in many other OECD countries.

 And possibly the most useful study on the effects of the earlier 2004 repatriation holiday is Thomas Brennan, What Happens After a Holiday? The Long-Term Effects of the Repatriation Provision of the AJCA, 5 Nw. J.L. & Soc. Pol'y 1 (2010).

So what are the arguments that need to be made on the issue of repatriation?  A few ideas follow.

1. Much of the corporate earnings that are now 'retained' in controlled foreign corporation reinvestment are actually US earnings that have been moved overseas through transfer pricing gimmicks.  Instead of providing another undeserved and unneeded tax break to US MNEs who already enjoy tax haven taxation under the US corporate code, Congress should stiffen the transfer pricing rules, including refusing to recognize a transfer of an intangible intellectual property asset (eg., patents) that lies at the core of a company's business.  No company would sell its most essential  intellectual property rights to an unrelated third party.  The only rationale for the sale to a controlled foreign corporation is to avoid US taxation on the value of a patent that was developed in the US with US subsidies (R&D credits, public sponsorship of university  research that underlies the intellectual property, etc.).

2. Even 'retained' earnings aren't usually 'retained' overseas by investing in overseas operating assets--they are mostly invested in (US dollar-denominated) financial assets--in bank deposits, in securities, etc.   See, e.g., Bryant-Kutcher et al, Taxes and Financial Assets: Valuing Permanently Reinvested Foreign Earnings , National Tax Journal (arguing from a corporatist position that the US worldwide tax system 'forces' companies to reinvest in financial assets, which really isn't good for their businesses). 

In other words, if having corporate profits be brought back tax free and distributed to wealthy shareholders who don't need to spend them and instead invest them at least to some extent in US dollar-denominated financial assets like stocks, bonds, and derivatives is a positive for the US economy (an argument in the Shapiro-Mathur paper), then having controlled foreign corporations of US MNEs invest their 'retained' earnings in US financial assets is just as good.  The US economy gains very little, if anything, in new investments by having MNEs get a huge tax break on making more cash available to distribute to shareholders through dividends and buy backs (the major use of the repatriated earnings in the 2004 corporate tax break)--it just changes the owner of the investment from corporation to corporate shareholder.  (US shareholders may be even more likely to invest those surplus dollars in emerging markets, taking them out of the US economy...)

3. Since Congress gave in to the incessant MNE lobbying for the first repatriation holiday (which was supposed to be the 'only one' ever), MNEs and their funded lobbying and propaganda tank compadres have been pushing for another one.  Accordingly, while the MNEs profits have soared (so the dollar amount of repatriated earnings hasn't decreased by significant amounts), retained earnings abroad have  soared even more since the 2004 repatriation holiday.  See, e.g., Citizens for Tax Justice, Data on Top 20 Companies Using Repatriation Amnesty Calls Into Doubt Claims of New Democrat Network (August 26, 2011) (noting that the top 20 companies now have about triple the amount of profits held offshore than at the end of 2005); a PricewaterhouseCoopers description of accounting for deferred taxes on permanently reinvested earnings notes that a 2009 study of 300 MNEs showed a per-company mean of $3.74 billion, for a total at that time of $1.02 trillion.  Deferred Taxes on Foreign Earnings: A Roadmap (PwC, Dec. 2010); Brennan, op.cit (in a rigorous statistical analysis using publicly available data, finding that there has been an "increase in overseas investment" and that "findings are consistent with the hypothesis that the cash inflow to the United States of repatriated funds [from the 2004 repatriation provision] has already been substantially offset by the increased levels of foreign earnings being permanently reinvested overseas in the wake of the AJCA" and that there has been a "dramatic increase in the rate at which firms add to their stockpile of foreign earnings kept overseas") (emphasis added.  Today, that total amount is likely closer to $1.3-1.4 trillion.

In anticipation of winning the lobbying campaign, even those companies that had been good citizens prior to the first repatriation holiday have not regularly repatriated cash, and those that were already bad citizens have been even worse (and are leading the coalition to argue for yet another tax break). Cisco, Google, and those who can most easily manipulate where their earnings are located because their greatest value lies in their intangible assets are, not surprisingly, the culprits in this scenario. 

The lesson here--that unless Congress sticks with its 2004 conclusion that this had to be a one-time only tax break, it will have enacted the most foolish reform to the corporate and international taxation scheme imaginable, without even thinking it is doing so.  The repatriation holiday, if reenacted, will become an 'expected' part of the Code, just like the supposedly temporary AMT patches, the active financing exception for banks, the R&D credit, accelerated depreciation and on and on.  Because corporations will expect these tax breaks to be repeated they will behave accordingly.  Even greater percentages of income will be moved abroad under transfer pricing gimmicks and  whatever is brought home will come almost tax-free.  Corporate tax revenues will be much less than they should be without the foolish provision.  Ed Kleinbard, former chief of staff for the Joint Committee on Taxation, called the regular acquiescence in the MNE demand for a repatriation holiday "a cartoon version of a territorial system, without safeguards of any kind, and with the ability to shelter interest and royalty income from foreign subs with FTCs [foreign tax credits] (which no territorial system would allow)."  See Kleinbard's article on The Lessons of Stateless Income (2011).

4. The primary goal of repatriation is supposedly job creation with the 'new' influx of money to corporations.  But that simply didn't happen in 2004, as various studies show.  Many of the biggest repatriators, such as Hewlett Packard, actually cut tens of thousands of jobs at the same time.  The primary use of repatriated cash was to do stock buybacks or pay dividends.  IN other words, the money primarily went to shareholders, not new workers.

5. The study claims that the 2004 repatriation provision "should" ultimately generate more tax revenues than it lost and therefore supports the enactment of a similar repatriation scheme.  The nature of that claim has to be questioned--is the data inadequate to support it?  have key aspects of the analysis been carried out in a way that biases the outcome?  The answer here has to be yes to both of these questions, suggesting that the study is more in line with the propaganda pieces typically produced by the American Enterprise Institute and similar organizations than some 'nonpartisan' piece that merits attention.

The study claims the JCT analysis of huge tax losses from repatriation provisions is flawed because it assumed  that the prospect of future additional repatriations would lead more MNEs to i) retain more earnings abroad and ii) offshore even more of their earnings to foreign CFCs.  The study claims these assumptions are flawed because i) the amount repatriated didn't go down as steeply as one might have expected and ii) there is 'no evidence" that foreign direct investment accelerated as a result of the 2004 act.

What's wrong with these points?  A lot.  While the amount of repatriated earnings may have stayed fairly high after the 2004 repatriation provision, the amount of unrepatriated earnings has about doubled just since the 2004 act.  The study is comparing dollar amounts rather than rates of repatriation of earnings, and thus obscuring the fact that the impact of the repatriation provision was to encourage companies to retain more foreign earnings as permanent reinvestments.  If earnings increase offshore (which may in part reflect even better use of the transfer pricing gimmick) then companies can retain ever larger amounts offshore while still repatriating about the dollar amount they were prior to the 2004 act.  The important statistic is the rate of earnings retention abroad, not the dollar amount of earnings  repatriated.  And various studies have shown that companies are retaining more abroad (see above).

Further, the study's estimates the tax revenues from amounts that are repatriatedare questionable.  See the discussion of the assumptions made in estimating the tax revenues from repatration at page 12 et seq.  The treatment of the foreign tax credit seems particularly so.  The report acknowledges that the foreign tax credit can reduce repatriated income tax to less than zero, noting that a Treasury study by Grubert shows that the majority of U.S. MNEs face negative effective tax rates on repatriated dividend income even without the special repatriation provision.  The report nonetheless claims this aggregate data doesn't give a good enough picture, since some firms may not be able to use the technique of repatriating dividends only from high-tax jurisdictions to maximize use of foreign tax credits.  Accordingly, the report uses other studies of the foreign tax credit to substantially reduce the impact of the foreign tax credit on the tax revenues from repatriation and conclude that repatriated dividends are ordinarily taxed at a rate of around 10% even after the foreign tax credit. That is, two studies suggested an effective tax rate after foreign tax credits of 3.3%.  Another "broader" study suggested an effective tax rate after foreign tax credits of 10.26%.  Even while acknowledging the study showing that the majority of companies have a negative effective tax rate after taking the foreign tax credit into account and two other studies showing at most a rate of 3.3%, given the ability of most companies to avoid taxation through repatriation of high taxed income and application of foreign tax credits, the report nonetheless used that latter figure of a 10.26% effective tax rate on repatriated income as the 'normal' effective tax rate for repatriated income when there is no special repatriation provision!   See pp. 13-15 discussing foreign tax credits.  Accordingly, the report's assumptions about the impact of the low repatriation tax provision are skewed by its assumptions about the tax rate on repatriations without the provision.

Here's a sentence  from page 2 of the report (comments following):

To minimize the lock-out effect that discourages U.S. multinationals from deploying these earnings in the United States and to provide those. corporations with low-cost resources to expand their domestic workforces and investment, the legislation would offer U.S.-based multinationals a one-time deduction of up to 85 percent for "extraordinary dividends" paid by controlled foreign corporations (CFCs) to their U.S. parent companies, subject to certain limitations.

Note the inconsistencies here.  First, this statement assumes that the already low tax on foreign earnings, when the foreign tax credit is taken into account, has a 'lock-out effect' --an assumption that is assisted by the report's unreasonable reliance on a 10.26% effective tax rate after foreign tax credits for normally repatriated dividend income.  Yet that assumption seems inconsistent with the claim that repatriation has not decreased after the 2004 repatriation provision--i.e., a claim that there really hasn't been a lock-out effect.  Second, note the assumption that the "low-cost resources" yielded by close to tax-free repatriation will be used to "expand [MNEs'] domestic workforces and investment".  In fact, neither of these occurred when companies repatriated under the special repatriation provision in 2004:  they generally used the money for dividends and stock buybacks and at the same time often conducted huge layoffs of workers.  There are substantial studies to this effect, but the report merely terms the repatriation provision's effectiveness in generating new jobs a "matter of debate" among economists and relies on the repatriating companies' CFOs (who needless to say have a stake in having it thought that repatriation will create jobs) for 'evidence' that repatriation creates jobs.

Lloyd Doggett, the Democrat from Texas who been more determined than anyone to go after the corporatist provisions of the Code that permit big corporations to reduce what is on paper a statutory rate of 35% to very very low tax-haven rates of taxation, isn't buying the NDN's study. 

“In fact, the JCT cost estimate of nearly $80 billion is likely too conservative and does not even address the full impact of a repeat of the 2004 corporate bonanza in lost jobs for hardworking Americans and windfalls for wealthy corporations and shareholders,” he said in a news release issued to The Hill.

“It is outrageous that large multinationals continue to push for their massive tax break that past experience demonstrates will not create jobs or help our economic recovery,” Doggett added. Becker, Texas Democrat Fires Back at Repatriation Study, The Hill (Aug. 25, 2011).

UBS client loses: information required to be kept on foreign bank accounts can be subpoenaed

The UBS saga continues.  The Ninth Circuit found a Catch-22 for secret account holders in a case,  In re Grand Jury Investigation M.H. v. United States,  No. 11-55712 (9th Cir. Aug. 19, 2011), against a former client of UBS who moved his accounts in June 2010 to another Swiss bank.  The prosecutor, seeking a grand jury indictment, subpoenaed the taxpayer's foreign account records, and the taxpayer claimed Fifth Amendment privilege from revealing information about his foreign accounts.  The three-judge panel nipped that privilege claim in the bud.  There's a law requiring taxpayers to keep records of their foreign accounts--name of bank, number of account, amount in the acount--available for inspection.  Bank Secrecy Act of 1970 (BSA), 31 U.S.C. § 5311.  And that information is required to be reported to the IRS on Form TD F 90-22.1, fondly known as a "FBAR" by tax practitioners advising clients about their offshore reporting obligations.

Information isn't privileged when it is required to be maintained with the purpose of being inspected, said the judges, invoking the 'required records doctrine' originating in a 1948 Supreme Court case, Shapiro v. United States, 335 U.S. 1, 17 (1948) (holding that "the privilege does not extend to records required to be kept as a result of an individual's voluntary participation in a regulated activity").

So the taxpayer is in a pickle.  If he kept the account information as required by law, he must reveal it to the government and it may show that he didn't report as required to the IRS or that he reported falsely.  If he didn't keep the information as required by law, he will have committed a felony in violation of the records law.

One more example of why taxpayers with accounts sequestered in foreign banks had better come forward sooner rather than later.  The UBS deferred prosecution case appears to have been successful in breaking the dam.  The taxpayer in this case (referred to solely as M.H.) turned up in the disclosed information after the IRS agreed to defer prosecution--M.H. had held assets in UBS and then switched them to another Swiss bank account back in 2002. 

The IRS net is spreading--with bankers/advisers as well as US taxpayers who are/were foreign bank customers subject to criminal charges.  See David Voreaos, Ex-UBS Client Must Give Tax Records To Grand Jury, Court Holds, Bloomberg.com (Aug. 23, 2011).

 

Jobs as the Measure of Economic Success, and Rick Perry's Texas

We have had a warped sense of how to measure economic success in this country at least since George W. Bush started talking about the "ownership" society.  Of course, we should have guessed that moniker was problematic from the start, since it was 'invented' by a guy who bragged about representing the 'have-mores' while the economy was rapidly becoming a bi-polar, class-based society of have-mores and have-nots.

Most of the media looks at the gyrations of the Dow Jones Industrial, the S&P 500 and similar indexes of stock pricess and then says our economy is good (if they're up) or bad (if they're down).

Folks, that's only true for those who own most of the financial assets--the rich folks at the top of the scale.  It's not true for the companies. As Ali Velshi noted in the Daily Show clip on the earlier blog post, companies intrinsic values don't change by dropping 5% overnight, gaining 3% overnight and then dropping 4% overnight.  The companies are still plodding along doing what they're doing.  What changes is the attitudes of those secondary investors--more and more of them just quick traders out to arbitrage a temporary price difference who don't give a damn about the company's fundamentals.

Now, if you happen to own a few shares of a company that tanks, you clearly care about that stock price plunge.  And if your retirement account is large and heavily invested in stocks, then you care as well.  But fact is, the way we really should measure the economy is by how much and what kind of work it offers to ordinary Americans.  What's the jobs count?  And what do those jobs pay?

And those numbers are important only relative to other numbers.  You don't know whether you have a mice or an elephant in terms of job creation unless you know how much your population has grown alongside the growth of those jobs.  This is why the same record on job creation can be made to look good to the naive hearer  ("more than 5 million jobs in 8 years") or terrible ("only 3 jobs per 1000 new citizens in 8 years"), depending on whether the hearer gets information on the number of new job seekers as well as the number of new jobs available for those seekers.

So Rick Perry brags about his Texas record.  I've already posted on the many problems in Texas, some of which Perry is responsible for and most of which he is responsible for not addressing.

What about jobs?  Yes, there is still an oil and gas 'one-note' economy that creates directly and indirectly new jobs as the oil and gas industry grows (for now).  Many of those jobs are minimum wage and lots of them are not very secure.   But our question is what about the new jobs to new job seekers ratio--are jobs growing, so that unemployment is going down?  or are jobs growing but not at the same rate that the population is growing?    The fact that the unemployment rate has increased to just below the national average at 8.2% suggests that jobs aren't growing as fast as the population and maybe that jobs are even shrinking.

Here's someone else's take on this question.  The staff at ThinkProgress and the Center for American Progress Action Fund produced a report that delved a little deeper into the Texas jobs numbers and concluded: Texas Ranks Dead Last in Total Job Creation, [when] Accounting for Labor Force Growth, Aug. 17, 2011.

Here are a few facts from the report:

1) Between 2008 and 2010, jobs actually grew at a faster pace in Massachusetts than in Texas.

2) “Texas has done worse than the rest of the country since the peak of national unemployment in October 2009.”

3) The unemployment rate in Texas has been steadily increasing throughout the recession.

4) While over 126,000 net jobs were created in Texas over the last two and a half years, the labor force expanded by over 437,000, meaning that overall Texas has added unemployed workers at a rate much faster than it has created jobs.

5) if there is a real “miracle” here, it is North Dakota, which has seen over 27,000 new jobs and a labor force expansion of only 3,700, resulting in about 24,000 new jobs for workers who previously had none.

The resulting picture comparing Texas to other states in terms of job creation considering labor force increase or decline is the following (note that Michigan's 'top' rating is due to some job creation but primarily to loss of labor force as people without jobs leave the state;  neither Michigan nor Texas has the 'right stuff')

 

Credit Rating Agencies--God's Truth or Hocus-Pocus

The credit rating agencies would have you think that they are about God's work on earth--just doing their job to see that people have the "God's Truth" information they need to determine where to invest, whether they are rating corporate debt, equities, or sovereign debt.

Me?  I think there's a lot of hocus pocus going on.

When I worked at Cleary Gottlieb in New York, I didn't deal directly with credit rating agencies.  But any debt deal we were working on would be rated, and that rating was treated as "God's Truth" as a primary factor in doing the tax analysis (is it debt or equity?).  In my first year, most of the stuff I was doing was capital market dislosures.  So I'd read the draft of the offering document and any other deal documents, and then put together a tax dislosure statement.  I remember asking a more senior associate at the time how one could feel confident one had acquainted oneself well enough with the company information to think about the myriad factors that go into a "debt or equity" analysis.  After all, in most corporate tax classes a prof will spend class or so on the 'capital structure' topic, noting that the more subordinate the debt is, the less collateralized, the higher interest it pays, the more it starts to look like equity rather than debt.  If you add in thin capitalization, low cash flows, inability to borrow from other markets, technical defaults or late payments on other debt, a close correspondence of shareholder and debtholder ownership and similar factors, you are likely to conclude that it isn't debt at all but just being labeled that way to get the tax deduction for interest paid.  In publicly traded companies, the main thing you have is the financial statements.  I used to look at them really closely, trying to assess the financial state of the company.  But my colleague laughed my worries off. 

"We tax lawyers don't need to do that kind of due dilligence," he said, "that'd be a waste of your and my time.  The credit rating agencies are supposed to be looking in detail at all that financial information, and they can review the debt, look at the loans, see the history.  They've got good quantitative models for assessing that stuff.  So we just take the credit rating agencies' evaluations into account, and otherwise look primarily at the interest rate (is it so high that it looks like a yield from equity) and maybe the amount of real equity capital in the corporation."  (paraphrasing, of course, from a conversation some years ago) 

That attitude continued even as financial innovation took off and left credit rating agencies, regulators and in some cases even the bankster themselves behind in terms of fully understanding the products being rated and sold.   Even if the ratings 'opinions' weren't hocus pocus before, they surely were when they failed to understand the products, didn't review the loans adequately, and scrambled to provide the desired ratings to their banker masters so that they would continue to get the business. So we ended up in a financial crisis, with too big to fail institutions locked in intangling webs of counterparty transactions that sometimes weren't even recorded on paper except as to expected result. 

With the Dodd-Frank mini-reform, a few changes were made, but the credit rating agencies generally have gotten off, so far, without even a slap on the wrist, for the devastation wrought on ordinary Americans who have lost their jobs and their homes at least in part due to the hocus pocus paucity of real assessment behind their bought "opinions"  that had so much influence on who bought what and how it was treated for tax purposes.

So now comes the European debt crises and the US debt ceiling fiasco (and US downgrade by S&P).  What to make of it?  Michael Hudson's guest post on Naked Capitalism, The case against the credit ratings agencies,  Aug. 19, 2011, is worth reading. 

The takeaway point:  credit ratings agencies serve as 'gatekeepers' to credit by acting as "guard-dogs ... to the world's bankers", putting pressure on countries to pursue creditor-friendly policies--including privatization of their most important public assets-- no matter the impact on their citizens and with considerable attention to the credit rating agencies' own bottom lines.

Localities are pressured when their rising debt levels lead to a financial stringency. Banks pull back their credit lines, and urge cities and states to pay down their debts by selling off their most viable public enterprises. Offering opinions on this practice has become a big business for the ratings agencies. So it is understandable why their business model opposes policies – and political candidates – that support the idea of basing public financing on taxation rather than by borrowing. This self-interest colors their “opinions.”

Hudson realizes this sounds somewhat polemical, but he offers the example of Dennis Kucinich's fight to save Cleveland's public utility from the privatization dreams of its bankers and their credit rating agency enforcers.

The banks and ratings agencies told Mayor Kucinich that they would back his political career and even hinted financing a run for the governorship if he played ball with them and agreed to sell the electric utility. When he balked, the banks said that they could not renew credit lines to a city that was so reluctant to balance its books by privatizing its most profitable enterprises. This threat was like a credit-card company suddenly demanding payment of the full balance from a customer, saying that if it were not paid, the sheriff would come in and seize property to sell off (usually on credit extended to customers of the bankers).

The ratings agencies chimed in and threatened to downgrade Cleveland’s credit rating if the city did not privatize its utility. The financial tactic was to offer the carrot of corrupting the mayor politically, while using the threat of forcing the city into financial crisis and raising its interest rates. If the economy did not pay higher utility charges as a result of privatization, it would have to pay higher interest.

***

[I]n saving Muni Light [Kucinich] had saved voters hundreds of millions of dollars that the privatizers would have built into their electric rates to cover higher interest charges and financial fees, dividends to stockholders, and exorbitant salaries and stock options. In due course voters came to recognize Mr. Kucinich’s achievement [and] have sent him to Congress since 1997. As for Mini Light’s privately owned rival, the Cleveland Electric Illuminating Company, it achieved notoriety for being primarily responsible for the northeastern United States' power blackout in 2003 that left 50 million people without electricity.

 Looking at the way credit agencies have destroyed states' ability to rein in mortgage fraud (the Georgia statute discussed in Morgenstern's book, Reckless Endangerment) and the way that push for privatization and support for financial innovation no matter the cost to the public is now operating at the national level to push the federal government towards the same destructive policies, Hudson suggests the country is foolish to create such a platform for greedy for-profit companies to dictate public policy. 

The basic conundrum is that anything that interferes with the arbitrary creditor power to make money by trickery, exploitation and outright fraud threatens the collectability of claims. The banks and ratings agencies have wielded this power with such intransigence that they have corrupted the financial system into junk mortgage lending, junk bonds to finance corporate raiders, and computerized gambles in “casino capitalism.”

Even if they are doing their job without paying too much attention to their own self-interest, credit rating agencies don't have the right priorities in mind for making policy decisions and should be dethroned from their 'god of the marketplace' pedestals.  They don't like anything that means debt might not be paid back, and that includes things like consumer protection, anti-trust legislation, tort penalties, and anti-fraud legislation.  That doesn't mean we should go along with that attitude.  Citizens, after all, don't like being ripped off:  we do want consumer protection and anti-fraud legislation.

Ali Velshi (on Daily Show)

A sort-ofFriday Animation feature--a day late, and not exactly an animation.....

But if you don't ordinarily watch the Daily Show, you might enjoy Jon Stewart's Aug. 15 interview with CNN's money man, Ali Velshi.  It's available here: Daily Show with Ali Velsai (after 5 seconds of ads...)

There's a key point worth reiterating.  The media, Congress and most of us seem to be treating the Stock Market level as "the" measure of the economy.  But folks, most of those assets are owned by a small minority of Americans.  Velshi notes that the status of investments generally and of houses in particular, matters to those who own them, so the fate of the stock market and the news about housing foreclosures or home sales is relevant.  But there are many in the economy without one or the other or both.  What almost everyone needs --except those 'investors' at the very top of the pyramid who own scads of financial assets and don't work for a living--is a job.  So if you were to look to one thing as the main 'thermometer of the economy', one that could tell you something about most of the people in the country and how the country was doing generally, it would be the employment rate.  (I'd add, also, the wages paid for that employment.) 

This of course makes the focus on the artificial debt ceiling even stupider.  The debt ceiling 'crisis' was completely manufacturered as something to focus on--with the GOP at best pretending that their 'concern' about the level of US debt was a reflection of their concern about US jobs.  But of course limiting US debt doesn't create jobs--it likely diminishes employment prospects but cutting federal (and state) spending.  And causing or threatening to cause a US default doesn't create jobs--it merely creates anxiety in the markets and anxiety among employers and business owners who have to think about whether to hire anyone or wait.  And cutting US expenditures--especially the kinds of expenditures that the GOP right wants to cut, Medicare and Medicaid and Social Security and other things on which ordinary people depend for their very lives--won't create jobs and will decrease jobs while leaving most Americans even more vulnerable.  In other words, the radical right is doing all the wrong things.

So Stewart asked what might be done to create jobs?  Velshi's answer--if we could only get Congress to focus on the real issue of job creation the way they focused on the bogus issue of the debt ceiling, we might get somewhere.  Lots of ideas could be considered, debated, tried and kept or tried and discarded.  Two he mentions:  easing payroll taxes (gives the poorer workers amongst us more cash in hand for necessities, and that spending helps the economy; gives employers more reason to hire, since they also get to keep the cash from their share of the payroll tax); providing a government guarantee for necessary retraining--for a long enough period to matter-- to retool workers for today's economy  (private enterprise could do this too, but won't; government could do it without worrying much about long-term costs, since even a reasonable success rate would essentially put a person who is on the dole pay on the payroll and result in more taxes and more spending and more growth in the economy).

These ideas aren't anything new.  We've long known that cutting taxes is not a way to economic growth unless we are talking about the taxes of little people.l  And we have long known that getting more spending into the economy creates jobs.  Congress just needs to quit mouthing its interest in creating jobs and start intervening in the economy in ways that create jobs.  Right now, it's intervening in the economy to kill jobs with austerity cuts that make no sense and the refusal to tax the rich in order to fund programs that will ultimately benefit all of us.

Stewart asks what keeps Congress from this kind of priority-centered focus and Velshi answers what we all are beginning to know.  Decades of preaching that 'the government is the problem'.  As I've noted here often, most of what is wrong today can be traced to Ronald Reagan and his naive views about government and the 'free market' policies favoring big business and the rich that he pushed--deregulation, militarization, privatization, and tax cuts.  These policies have justified a miserly attitude that is determined to cut government at whatever cost while protecting the lifestyles of the few ultra-rich at the top of the pyramid.  In some areas of the country, people elected ideologues determined to impose this view on everybody--determined to play hard-line politics to satisfy their constituents, even at the cost of the good of the country.  So an era of radical right economic terrorism is now underway.

About a week ago, I watched the PBS News Hour interview with the Norwegian Foreign Minister discussing the disaster they had just experienced, where scores of their brightest children were gunned down by a hate-filled terrorist.  It was so refreshing to hear candid answers to questions, a willingness to say what might not be popular in some quarters--"we are a more diverse nation"--all with a calmness and frankness that convinced you that you could have a reasonable conversation about controversial policy issues even if you disagreed with the man on most of them.  How rare that seems now, in this country, is telling of the level of insanity to which our political debate has fallen.

 

Business Method Patents and the CyberSource Patent on Appeal: ineligible subject matter

 

The world of patent lawyers (and tax lawyers concerned about tax strategy patents) had been eagerly awaiting the Federal Circuit's CyberSource decision handed down August 16. CyberSource Corporation vs. Retail Systems, Inc. (in a suit for patent infringement, whether a patent for a method of detecting online credit card fraud was valid).  The case provides a first glimpse of how the Supreme Court's Bilski decision on eligible subject matter for patents might affect future patentability of legal and software processes tied to machines one way or another.

 The case was tried in the Northern District of California in early 2009.  For a discussion of the case, see Brian Fletcher, Bilski Test for Patentable Subject Matter Applied in District Court, Patentability (March 26, 2009).  Judge Patel found, as the Federal Circuit background notes, that "tossing in references to [I]nternet commerce" did not render unpatentable mental process claims patentable.

The claims at stake are claims 2 and 3, as follows:

2. A computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:

a) obtaining credit card information relating to the transactions from the consumer; and

b) verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent,

wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,

wherein execution of the program instructions by one or more processors of a computer system causes that one or more processors to carry out the further steps of;

[a] obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;

[b] constructing a map of credit card numbers based upon the other transactions; and

[c] utilizing the map of credit card numbers to determine if the credit card transaction is valid.

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:

a) obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;

b) constructing a map of credit card numbers based upon the other transactions and;

c) utilizing the map of credit card numbers to determine if the credit card transaction is valid

Writing for the three-judge panel (Dyk, Bryson, and Prost), Judge Dyk commenced with an analysis of claim 3 under the ‘machine or transformation’ test that the Bilski Court had accepted as useful but rejected as an exclusive test for patentability.  Claim 3 fails the test, since it is merely the "collection and organization of data" that does not even require machine intervention.  It probably didn't help that CyberSource's CEO admitted that 'we could see just by looking that more than half our orders were fraudulent'.  Id. at 14. (emphasis added). Taking the Supreme Court's admonition that the machine or transformation test, while useful, is not the exclusive test for process patentability, the Federal Circuit found that the claim came within the 'abstract idea' exception, since it was merely a mental process that could be performed by a human with pen or pencil.  "Computational methods that can be performed entirely in the human mind are the kinds of methods that embody the 'basic tools of scientific and technological work'."  Id.  It relied on (among other authorities) the Supreme Court's decision in Benson, a case finding subject matter ineligibility for a general computer algorithm converting binary to decimal numbers.

The more interesting analysis, of course, is the consideration of the Beauregard claim 2, based on In re Beauregard, 53 F.3d 1583 (1995).  A Beauregard claim "is a claim to a computer readable medium . . . containing programming instructions for a computer to perform a particular process."  Id. 

 The court states that the method in claim 2 is the same method found unpatentable in claim 3.  CyberSource argued that claim 2 was nonetheless patentable, because it was a "manufacture" claim rather than a process claim, to which the abstract idea exception cannot apply.  

This is important for those of us who object to the idea of patenting tax strategies, since the patent bar generally claims that any tax strategy patent can be rewritten as a machine-based claim (a method carried out by means of a computer) and thus avoid whatever process hurdles may be thrown its way.  

Dyk argued that this kind of drafting leger-de-main can't work.  "Regardless of what statutory category ... a claim's language is crafted to literally invoke, we look to the underlying invention for patent eligibility purposes."  In both claim 2 and claim 3, Dyk states, what is at issue is a particular method for detecting fraud and not a manufacture.  Relying on In re Abele, 684 F.2d 902 (1982), in which an apparatus claim (claim 7) was treated as a method claim for the section 101 analysis, Dyk invokes Abele's form over substance language regarding claims that are "really to the method" rather than to the apparatus: in other words,  Dyk argues that unless there is a specific machine necessarily involved, the claim reduces to the underlying method. Id. at 17.  Dyk has more trouble distinguishing (or limiting) the Federal Circuit's holding in In re Alappat, 33 F.3d 1526 (1994), where software was treated as converting a general purpose computer into a specific computer and thus patentable, as CyberSource argued its patent should be, as the creation of a new machine.  Dyk's effort here seems to fall short--unable to reject all software patents, he attempts to draw a distintion that rejects claims where the result is merely "reciting the use of a computer to execute an algorithm that can be performed entirely in the human mind."  Id. at 18.  Thus, claim 2 is also analyzed as a process claim and consequently predictably also fails the machine or transformation test.  The use of a machine doesn't save it, since it is merely incidental.  "Purely mental processes can be unpatentable, even when performed by a computer."

These last few paragraphs, where Dyk struggles to distinguish among software cases, are troubling. 

For those who think any innovative idea should be patentable--whether a tax strategy or computer software--this will be unconvincing.  With innovation as the key word, patent lawyers will argue that software and other intangibles should be just as patentable as 'iron age' manufacturing technology and that Dyk hasn't adequately distinguished one from the other. See, e.g., comments on the Patently-O blog post noting the CyberSource decision, suggesting that we've gone from "Bizarre Bilski to Crazy CyberSource".  If the software method is not patentable, then neither is the computer readable medium, Patently-O, Aug. 16, 2011.

 For those (like myself) who think that  tax strategy patents and similar methods based on law or logic shouldn't be patentable, it would appear that software generally should not be patentable under the same logic that applies to tax strategies.  It's not clear that Dyk has found a workable divide between patentable and non-patentable.  It seems to rest entirely on the  difference between the kind of calulations that humans can do (though computers do them better and faster) versus the kind of complex calculations that generally represent too large a data storage and processing time for humans to undertake but are easily doable by computer. 

Will the Supreme Court likely take cert in CyberSource (assuming that a petition for certiorari is filed)?   I'd speculate that it would not.  If it were to do so, would it likely add more fuzziness, as it did by refusing to draw a clear line in Bilski?   I tend to think that a likely result.  While it would be refreshing to have the Court acknowledge the problem of allowing patents on  nature (genes!) and legal processes (tax strategy patents!) and logical processes (software), the IT industry pressure and the status quo ante pressure of existing patents will cast a heavy weight on the Court. 

Taxes, religion, and the State-- Rick Perry supports using tax money to teach creationism

Everyone knows now that another Texan wants to occupy the White House and is busy spouting radical right-wing soundbites in his attempt to get there.  He claims he can create jobs with the same policies he's applied in Texas but guess what folks, not unless he can magically wave a wand.  Texas has weathered the recession because Texas has (for now) oil and gas.  And Texas has created a lot of low-wage jobs to go with those Big Oil men of wealth--waitresses and clerks and nurse's aides, all making minimum wage or thereabouts while the oilmen rake it in and live high on the hog.  That's not a formula that could be repeated on the national level (unless Perry comes up with that magical, oil-conjuring wand) and not a formula that anyone should want to be repeated on the national level.

Worse still, the same governor that thought it might make sense for Texas to secede from the Union (which sounds rather treasonous to me) thinks that the Federal Reserve doing what the Federal Reserve does -- managing monetary policy, including printing money--is traitorous/treasonous.  Now why would he say something like that?  Possibly because he knows that if we were to combine new economic stimulus (real, job-creating stimulus focussed exclusively on public infrastructure projects and human capital issues) with quantitative easing we could likely solve this Great Recession and start creating jobs.  Radical rightwingers don't want that--they hope to use people's ignorance about the economy to get in power, and then continue to reshape the government to their backwards agenda--mixing religion with politics, including using tax money to fund religious organizations; favoring their "have-more" class, no matter what the cost to the have-less group, including through preferential (or zero) tax rates on investment gains, zero corporate taxes, and zero estate taxxes; and continuing to dumbdown the educational enterprise, through a combination of privatization (including especially religious schools), defunding of public schools, and centralized control of the curriculum to favor religious views.

If you have any doubts about the latter topic--the relation of taxes, education and religion in Texas--you should start studying the way private church schools were used to limit the impact of desegregation while furthering the indoctrination of Texas children into a right-wing view on church-state interaction and the corporatist ('low taxes favors business'/'the state better stay out of my business') mentality. 

Or listen to Rick Perry when he supports teaching creationism in science classes.  The Washington Post ran a story today about Rick Perry Charms His Way Through New Hampshire.  Here's an excerpt that reveals how far right Perry really is.

[A] young boy, prompted by his mother, asked Perry whether he believes in evolution.

“It’s a theory that’s out there,” Perry told the child. “It’s got some gaps in it. . . . In Texas, we teach both creationism and evolution in our public schools because I figure you’re smart enough to figure out which one is right.”

So Perry apparently thinks it appropriate for schools to teach both real science (evolution) and fake science (creationism) and then leave it to the young kids to figure it out.  That's not, of course, what schools should be doing--they need to help kids learn what scientific discovery is, how it is conducted, what a theory is, and how objective facts can be evaluated to further or disprove a theory.  Rick Perry seems to be willing literally to take us backwards in time to a world where only a select few had any comprehension of real science and to see the gap between Americans' science and math abilities compared to other developed countries' grow even larger.   The difference between 'gaps' in the scientific theory of evolution and the 'junk science' of the religious doctrine of creationism cannot be bridged with a Fox News 'fair and balanced' approach that treats facts and fiction as on equal footing.

I don't like the world that Rick Perry would work to create on the national level.  I want my neighbors to be able to live a healthy and sustainable life.  I want all of us to have clean air, clean water, and land that is not contaminated.  I want to protect the few pieces of unspoiled nature that are left in our country (and on this planet) so that my grandchildren and greatgrandchildren and those that come after them will have a chance to breathe in the bitingly crisp coolness of air off a glacier, to see a fawn frolicking in a green meadow, to hear and see the rush of clear water in a mountain stream.  I'd much rather live in a community where most of us have about the same income and wealth and even those with wealth are not so much wealthier than the poorest amongst us that it is impossible for most to comprehend their status.  I want a community where children learn how to think, not how to repeat dogma.  I want a community where same-sex couples and opposite-sex  and black-white couples can marry, have children, and have a say in each other's lives that's recognized legally (whether or not some particular church agrees with their views).  I want a community where tax monies are used to support the public good, not funneled to private businesses or used to support somebody else's religious preference. I want a community where people's needs and wishes are the primary consideration behind what government does, rather than one in which an elite group of businessmen and wealthy families determines the agenda.  I want regulations that make life better for all of us, not deregulation that lets business do what it wants and forces ordinary folks to simply go along to get along.

I suspect that's what a majority in this country want.  Not Rick Perry's return to the wild west where the rashest gunslinger and the most brutal capitalist can grab a fortune and leave everybody quivering in their boots.