Sometime, probably in the next two weeks, the U.S. Senate will vote on H.R. 5638, the estate tax reduction bill passed in the U.S. House of Representatives yesterday.
I hope that the bill doesn't get the 60 votes it needs to pass. Outright repeal won 57 votes, and this bill still gives away the farm.
Of course, nothing prevents Democrats, should they secured control again, if H.R. 5638 is passed, from restoring some of the estate tax cuts to raise revenue to help close the defict.
A better proposal is set forth below. I have put my recommendations (in addition to some subheadings) in bold, for those who like to save the analysis for later (if ever).
Towards A Reasonable Compromise
A compromise worth shooting for would be to freeze the estate tax at the levels set forth for 2009 under existing law, with some slight modications.
In 2009, the tax rate will be 45% and the exemption amount will be $3,500,000. Under current law, the rate jumps to 55% (with a 60% bubble rate) in 2011, with an exemption that falls to $1,000,000. The increase in the exemption from $1,000,000 to $3,500,000 isn't outrageously costly in terms of revenue collected and eliminate the need for large number of people to have to file estate tax returns or do tax planning. This increases revenue relative to compliance costs and reduces the political pressure to eliminate the tax. The rate drop is fairly modest.
One would want to make some minor changes at the same time:
Gift Taxes and Generation Skipping Transfer Taxes
* The gift tax exclusion, currently $1,000,000 and scheduled to remain there indefinitely should be harmonized with the $3,500,000 estate tax exclusion.
* Gift taxes should be calculated on a tax inclusive basis, just as income and estate taxes are now. Right now, while the gift tax rate in 2009 will be a nominal 45%, because of the "tax exclusive" way that it is calculated, this is equivalent to an estate tax rate of 31%. There is no principaled reason for gift and estate tax rates to be different.
* Likewise, the generation skipping transfer tax rate (which covers transfers made to grandchildren directly in an effort to avoid estate taxes in the children's estates), which is now identical to the gift tax rate, should also be made the same as the gift tax rate.
* The generation skipping transfer tax exemption, unlike the gift and estate tax exemption, does not need to be increased. While the gift and estate tax exemptions are integrated in a way that makes unifying them into a single exemption useful, the generation skipping transfer tax exemption is an entirely different beast which has no linkage to the other exemptions.
Current law creates a strong incentive, especially in large estates, to make large gifts during life, and to make large gifts to grandchildren, even when they don't really want to do either, in order to benefit from the favorable tax rates that flow from the way these taxes are calculated.
Incidentally, there are almost no direct revenue impacts to changing gift tax rules, many people choose to limit their lifetime gifts to an amount that won't cause them to pay actual tax during life.
Indexing Exemption Amounts
The unified exclusion should be indexed. Almost all other comparable amounts in the tax code, such as the personal exemption, tax brackets, standard deduction and gift tax annual exclusion are already indexed. Inflation shouldn't change effective tax rates.
The political drive to repeal the estate tax was largely a product of the fact that the original tax free amount, $600,000, established in 1976, didn't change for twenty-five years, many of which were marked by high inflation. By the time the $600,000 was finally increased to $1,000,000 in the Clinton Administration, this once tidy sum barely covered a medium sized single family house in California.
Inheritability of Exemptions
The ability of a surviving spouse to inherit a deceased spouse's unified credit should be implimented in some form. This proposal is part of H.R. 5638 and its purpose is to dramatically reduce compliance costs. H.R. 5638's right of a surviving spouse to inherit any unused exclusion amount of a decedent should be adopted.
Most married couples want to leave everything to a surviving spouse, but this is an idiotic thing to do if the couple has a combined net worth in excess of an individual's estate tax exclusion.
Why?
The estate tax basically applies to everyone you own at death that is not given to a spouse or a charity. The estate tax exclusion is use it or lose it, and is on a per person per lifetime basis.
For example, if a husband and wife each own $2,000,000, the husband leaves all to his wife at his death, and then wife dies, she has an estate of $4,000,000, and no estate taxes were due at the first death. But, if she dies in 2009, she has only $3,500,000 of exemption and pays a tax on the remaining $500,000.
In contrast, if husband had left his $2,000,000 to a trust for the benefit of his wife, his exemption would have made that trust funding tax free, and the wife has a taxable estate of only $2,000,000 at her death, so she would also pays no estate tax, producing a savings of about $225,000 under current law.
Setting up trusts to accomplish this objective cost about $2,500 (your mileage may vary). Just about everyone with a net worth over the exemption amount, or for that matter, even close, needs one. This means that about three million families need them, which means that an aggregate $7.5 billion of investment in legal paperwork to avoid estate taxes needs to be in place at any time to deal with the non-inheritability of the exclusion. Realistically, this means that people need to spent about $200 million a year or so, as newcomers to the wealth level for estate taxes are a concern replace those who have died or seen their wealth dissipate. This is a dead weight loss to the tax system.
The simplest way to eliminate the need for this kind of tax planning is the one found in H.R. 5638, in which a surviving spouse inherits all unused exemption of a decedent. But, this isn't the only available approach.
The main alternative would be to limit inheritance of an exclusion amount to the amount given to the surviving spouse by the decedent, rather than to the amount unused at the decedent's death. This would be administratively more complex, because it would make it necessary to assign a value to assets at the first spouse's death, even if everything was left to the surviving spouse. But, some people would prefer it because it encourages "estate equalization."
Under either H.R. 5638, or an inheritance of exemption system based on the amount received by the surviving spouse from the decedent, the decedent has to leave something to the surviving spouse to avoid wasting the surviving spouse's exemption at the second death, although this can be done in the form of a QTIP trust, which requires that all income be paid to the surviving spouse, but allows the decedent to control who receives the property at the surviving spouse's death.
But, the couple can benefit taxwise from H.R. 5638 if the poor spouse is the first to die, but, husband and wife must first equalize their estates to benefit if the poor spouse if first to die if inheritance of exemption is limited to the amount received by the surviving spouse.
Under current law, if one husband has lots of money in his name, and wife has little or none, or visa versa, there is a strong tax incentive to change this by equalizing their estates. The trust for the surviving spouse system only works if the decedent has assets to fund the trust with at death. Normally, this is accomplished by simply transferring property from the rich spouse to the poor spouse.
Estate equalization can also be accomplished with a trust known as an "inter vivos QTIP" which pays income annually to the beneficiary spouse, and is treated for estate tax purposes as belonging to the beneficiary spouse, but leaves the rich donor spouse in control of who gets the property at the beneficiary spouse's death. QTIP trusts are normally used in second marriages, to perserve assets for children from a first marriage, and an inter vivos QTIP costs another thousand or two dollars to set up.
If estate equalization is an important value, it makes sense to limit inheritance of the exclusion from a surviving spouse to the amount actually inherited. But, in the case where the beneficiary spouse is the first to die, the QTIP income is paid at a time when the beneficiary spouse probably already lives in the same household as the spouse and hence usually benefits from the spouse's wealth, regardless of how it is titled, so the benefit's to the poor spouse from this requirement are modest.
The other benefit of not requiring estate equalization is that it doesn't disadvantage couples who don't do it simply out of lack of familiarity with the specialized area of tax law pertaining to estate taxes, something that is particularly common among wealthly people who have not grown up in wealthy communities where these taxes are more widely known.
The estate tax shouldn't be simply a tax on those too ill informed to plan for it. The best taxes, indeed, have little unintended impact on economic behavior at all. Estate taxes are designed to encourage people to make large charitable gifts. The fact that they encourage elaborate trust and entity arrangements is merely an unintended side effect which is wasteful and serves no valid purpose.
Given the limited benefits involved in linking estate tax exemption to the amount received by the surviving spouse, the H.R. 4638 method of allowing a surviving spouse to inherit the unused exemption of a decedent is the better choice.
State Tax Credits
Ten percent of federal taxes should be designated as a state tax credit, to be allocated amongst states where the decedent was domiciled and states where there are assets with a strong connection to a particular state like real estate and closely held businesses located in that state, if it agrees to not impose an estate tax of its own. This would discourage states from adding to complexity by enacting their own estate taxes with a different structure, or increasing the total estate tax burden. It would also provide revenues cut from state budgets without consultation from Congress in the lastest round of estate tax reforms.
Closing Loopholes
There are a few other issues that drive an immense amount of costly estate planning, which drives up compliance costs while reducing estate tax revenues. Closing some of these loopholes would make the estate tax simpler, would make up for much of the revenue lost by increasing exemptions and lowering rates, and would make the system more fair. Loopholes related to closely held businesses, life insurance and "split interest trusts" are particular important.
Closely Held Businesses
Privately held businesses are hard to value. This is inherent in the nature of the beast. It is entirely legitimate to note that privately held businesses may be worth less than publicly held businesses because shares are more difficult to buy and sell, because the death of the company founder or CEO makes the business less valuable, or that earnings have been inflated by a CEO who took artificially low compensation because he or she knew that it would be reflected in higher share prices for him or herself and other family members.
But, one huge tax valuation discount found in the current law has nothing to do with actual value. It flows from the fact that there are no tax rules requiring valuations to be done on a consistent basis across multiple gifts, or across both gifts and estates. Each gift is valued in isolation, without regard to what either the donor or donee owns. For example, it is possible to obtain a discount for the reduced value of owning a minority interest in a company when one receives 1% of a company's shares, even if the shares are received by the controlling owner of the company. It is possible to give all of the shares of a company to heirs at a valuation that values those shares as if they were minority interests in the company (typically 35%-50% less than their pro rata share of the company's asset value), even if all the shares end up going from a father to a single daughter, for example. These discounts have even been obtained when there is little or no underlying business other than inventment assets in the business, and the plan has been developed in the shadow of asset owner's serious health problems which ultimately lead to that person's death not much later on.
This is nonsense, results in massive compliance costs, and is very costly in terms of tax revenues. There is nothing wrong with intentionally giving a tax break of some kind to closely held businesses. There is something wrong with making those tax breaks contingent on expensive disingeneous hypertechnical appraisals that ignore the reality on the ground and elaborate tax motivated transfers.
A simple rule, that reflects the fact that a majority of closely held businesses operate on a consensus basis in which voting rights are largely irrelevant, could solve this problem. This rule would require the value of interests in business entities to be calculated by first valuing the business as a whole, and then allocating that value consistently on all gift and estate tax returns involving the business among the owners on a pro-rata basis proportionate to their economic rights in the company. Thus, while lack of marketability discounts would be allowed, minority interest discounts and control premium analysis would be eliminated.
But, one of the reasons that these ridiculous tax breaks have been allowed by Congress to persist is a strong concern about the impact the estate tax has on family owned businesses.
The legitimate concern of closely held business and farm owners is that they don't want estate tax issues to disrupt business operations, and that unlikely a publicly held company, fair value to pay estate taxes cannot be obtained from the underlying illiquid assets simply by selling shares on the open market in the nine month time frame normally allowed for payment of estate taxes. Congress doesn't want to destroy business value by forcing fire sales.
Another concern is that the estate tax encourages farms to sell out to developers, because farming is often not the most valuable use of land in the short run, and requiring a farm to finance taxes based on development values is unfair.
It is also legitimate for closely held business and farm owners to complain that existing law protections for closely held businesses, such as special use valuation, the family owned business exclusion (currently a dead letter, but something that will again be relevant if current law remains in place in 2011), and special installment payment arrangements for closely held businesses are themselves complex and to some extent micromanage a business.
But, the desire of closely held business and farm owners to owe less tax even when they are just as wealthy as the owner of a portfolio of stocks and bonds is not legitimate.
There are better ways to solve the legitimate concerns of closely held businesses and farms.
One would be to eliminate almost all restrictions on special use valuation, which allows closely held businesses and farms to value property based on its value in a going concern, even if this is less than development value. This currently has a stingy dollar cap, elaborate requirements related to the importance of the business in the estate and which family members must be active in the business, and the number of years that the business must remain family owned.
Instead, special use valuations could be made available without restriction to any closely held business or farm, so long as the heirs agree, in a manner that binds them and any successor in interest by gift, to pay the estate tax rate, rather than the capital gains rate, on any gains in excess of the special use value when the property is ultimately sold or was no longer used as a closely held business or farm.
Thus, for example, if an estate with $90,000,000 of other liquid assets has a ranch worth $1,000,000 as a ranch, but $10,000,000 developed into condominiums, the ranch could be valued at $1,000,000 for estate tax purposes, so long as a 45% tax rate was paid on any gain in excess of $1,000,000. So, for example, if the ranch were sold two years later for $10,000,000 for development into condominiums, a tax of 45% on the $9,000,000 gain would be due, producing only a couple of years of tax deferral from what would have happened if no special use valuation was involved. But, if the property was held as a ranch until the heir's death, the excess development value never realized, would never be taxed.
Similarly, the favorable financing and installment arrangements now available only to estate with a large percentage of closely held business or farm assets, could be made available to any estate, to the extent that their estate tax liability comes from closely held business or farm assets, and would be secured by a lien on those assets, to prevent them from being sold with the deferred estate taxes unpaid.
Life Insurance
Under current law, life insurance is included in a decedent's estate, at death benefit value, if the decedent has any control over naming the insurance beneficiary or access to the policy's cash value. As a result, there is a strong incentive to spend money to create trusts that benefit the insured's family to own the insurance and keep it out of the decedent's estate for estate tax purposes. Frequently, life insurance proceeds are the primary factor causing an individual to have a potentially taxable estate. But, because the planning work around is relatively easy to accomplish, the rule including death benefits doesn't generate too much tax revenue.
Still, existing law does impose some limits, because premium payments from the insured or the insured's spouse are treated as gifts, either to a trust, or in a properly crafted "Crummey trust" to its beneficiaries. Simply excluding life insurance proceeds from taxable estates, which would seem the simple solution, is a problem, because a terminally ill person could, for example, buy a $100,000,000 life insurance policy for $98,000,000 and shield vast amounts of otherwise taxable assets from the estate tax. This already happens to some extent. A large majority of cash value life insurance is purchased by wealthy people aged 55 and up for tax planning purposes, even though they don't need the "insurance" protection against an unlikely event that can't be covered with existing assets for which families with dependent children buy life insurance.
One could limit so called "Crummey trusts," which are named after the fellow who won the court case which made them possible, by tailoring a law narrowly to the holding of the Court case that made the possible. Under current law, gifts to a trust can only escape gift taxation if they are under $12,000 per beneficiary, and the beneficary has a right to withdraw the funds for a reasoable period of time which then lapses and becomes a part of the trust. It would be a simple matter to provide that gift taxation is escaped by a Crummey trust only if the money is actually withdrawn, something that never happens in practice, and this is probably a reform worth encouraging.
But, eliminating Crummey trusts doesn't really solve the entire life insurance problem because this would only encourage wealth insured to give money outright to their children, while strongly encouraging them to buy insurance on their parents with the money, knowning that gifts might not continue otherwise, in the absence of a legally binding trust, and would encourage families with many children to either enter into complex life insurance policy co-ownership arrangements, or to purchase multiple policies on the same person for tax reasons.
The cleanest solution to the life insurance problem would probably be to require that any proceeds from insurance purchased with funds traceable to the insured (made after the effective date of the law, so as not to harm people who reasonably relied on prior law) be included in his or her estate for estate tax purposes. This theory was considered in a few court cases, but ultimately rejected based on the language of the estate tax statute. This would virtually eliminate the incentive to create life insurance trusts for the purposes of estate planning, would partially curtail a largely tax motivated cash value life insurance industry (although income tax benefits beyond the scope of estate tax reform would leave it alive and breathing), and would modestly increase estate tax revenues, which is appropriate if the theory of the estate tax is, as it should be, as a tax in lieu of an income tax on heirs, so that the focus is on what is received by non-charitable and non-spouse beneficiaries, rather than what is actually owned at death.
Split Interest Trusts
A third major strategy to reduce gift and estate taxation is the split interest trust. These trusts have one person who is an "income" beneficary, who receives a fixed dollar amount or fixed percent of trust assets each year, and another person who is a remainder beneficiary.
Under current law, the remainder beneficiary's gift is considered complete and taxed for gift tax purposes, when the trust is created. This is done using a formula based on prevailing interest rates and the current fair market value of the assets in the trust.
The purpose of a split interest trust in an estate planning context is to undervalue the interest of your heirs. For example, if the value of a remainder interest in the trust (usually after a term based on a fixed number of years or life expectency) using the IRS formula is $100,000, but you have good reason to believe that this particular asset will actually be worth far more than the formula predicts at that point, you can reduce the effective gift and estate tax rate on the gift.
This is basically like playing blackjack against a house dealer who has inflexible rules on how to play the game, when you are allowed to count cards to know what your odds of winning are in reality in each hand.
In addition, any appreciation in the asset during the term of the trust is shifted to the remainder interest owners, even though they don't actually have asset to the asset until the trust terminates. So they are treated for gift and estate tax purposes of owning something that the donor, through the terms of the trust, still controls.
Again, a very simple rule could eliminate the elaborate actuarial calculations, complex trusts and gamesmanship that goes into these arrangements, increasing estate tax collections to make up for rate reductions and exemption increases, and reducing the compliance costs associated with trying to jump into Congressionally created loopholes that encourage purely tax motivated behavior.
The solution would be to treat split interest trusts as incomplete gifts from the donor until their term expires. "Income" interest beneficiaries in split interest trusts would be deemed to have received gifts directly from the donor in each year when they get the money from the trust in an amount equal to the fair market value of what was actually received in that year. Remainder interest beneficiaries would be deemed to have received a gift from the donor who established the trust in the year the trust ends in an amount equal to the fair market value of the trust when it terminated. If a donor died prior to the end of the trust term, the trust's assets would be included in the donor's estate.
Conclusion
An estate tax based on proposed 2009 law, with a 45% tax rate and $3,500,000 per person exemption amount, indexed to inflation, with the tax modified to reduce the estate planning driven by quirks of the current law, some of which are true loopholes that reduce tax revenue, and others of which are mere pitfalls in the way the tax is structured, would be a good way to put the issue of the estate tax to bed.
It would:
* Remove a vast number of upper middle class people from the group who has to pay estate taxes or engage in estate planning compared to current law, and make the top marginal tax rate less ominous (45% instead of up to 60%) for those who do pay the tax.
* Continue to impose a tax in lieu of federal, state and local income taxes on unrealized capital gains of decedents, and on inheritances which look no different to heirs than lottery proceeds upon which they would ordinarily pay high ordinary income tax rates, with a minimum of complexity or administration costs. This would also discourage the creation of an American aristocracy and continue to encourage charitable giving of great wealth.
* Reduce revenues from current law by less than existing 2009 law, because it would also close loopholes. The 2009 law involves a cut of about 50% from currrent law, and the proposal above might net out at a cut of 25% or so from current law.
* Greatly reduce compliance costs for taxpayers by closing loopholes that are now the basis for most of the routine tax planning by almost all wealthy families. This also has the effect of reducing dead weight loss from the tax to irrational economic behavior and of increasing the fairness of the tax amongst those who pay it with different levels of sophistication, planning and asset mixes.
* Protect the legitimate interests of closely held business and farm owners, in a greatly simplified manner, without making major concessions on ultimate tax levels for these taxpayers based simply on the form in which they own their wealth.
23 June 2006
22 June 2006
American Wealth Concentration
The House voted to cut estate taxes by about two-thirds today (look at my Daily Kos diary in the sidebar if you want more details). It is worth remembering, now, just how concentrated wealth is in America (according to a Federal Reserve Board researcher) as this decision faces the Senate:
The family net worth cutoffs referenced above are:
99th percentile at $6,006,000
95th percentile at $1,393,000
90th percentile at $827,600
50th percentile at $92,900
Some other significant cutoffs are the 10th percentile ($200), the 25th percentile ($13,300) and the 75th percentile ($328,500). About 8% of Americans are millionaires.
Thus, a third of the nation's wealth is owned by those whose net worth is $6,006,000 or more, a third is owned by those whose net worth is $827,600 to $6,006,000, and a third is owned by those with a net worth of under $827,600 (the vast majority of which, in turn, is owned by people with a net worth of, at least, $92,900).
Both African-Americans and Hispanics are less affluent than the population at large. Among African-Americans the 10th percentile is -$1,400, the 25th percentile is $1,700, the median is $20,600, the 75th percentile is $97,000, and the 90th percentile is $248,000. Among Hispanics in the United States the 10th percentile is $0, the 25th percentile is $2,800, the median is $18,600, the 75th percentile is $103,200, and the 90th percentile is $304,100.
Income is distributed significantly more equitably than wealth.
Unrealized, and hence, untaxed, capital gains make up 31% of the wealth of the top 1% and come mostly in investment assets for these families. This trend is probably more extreme at extremely high net worths. In contrast, unrealized capital gains make up 11% of the wealth of the median family, which holds the gains mostly in a principal residence.
Another key policy area where wealth is a factor, in addition to familiar ones like campaign finance and taxation, is tort reform.
Often, tort reformers seek to cap non-economic damages in the $250,000-$500,000 range. This means a lot to someone in the top quarter of the wealth distribution. But, if you have a net worth of $328,500, a significant chunk of which is in exempt assets like a certain amount of home equity and retirement accounts, a $250,000 judgment and a $2,500,000 judgment look identical.
In the same vein, realistically, about 50% of the population is effectively judgment proof to a general non-domestic relations creditor, beyond any insurance coverage, after exemptions from creditors and bankruptcy laws are considered. People who earn below the median income (who make up roughly 80% of bankruptcy filings under Chapter 7 prior to the changes to the law that took effect in 2005) can end garnishments by filing a Chapter 7 bankruptcy, those who have higher incomes often cannot. They are also likely to hold a large part of their personal wealth in creditor exempt forms such as homestead protected real estate equity and retirement accounts. This is why mandatory automobile insurance laws are so central to the tort law system.
* The wealthiest 1 percent of Americans held 33.4 of the wealth in 2004.
* This was up from 30.1 percent in 1989.
* The top 5 percent collectively held 55.5 percent of the wealth in 2004.
* The poorest 50 percent of the American population collectively held 2.5 percent of the wealth, down from 3.0 percent in 1989.
* And the very wealthiest 1 percent of Americans own a bigger piece of the pie (33.4 percent) than the poorest 90 percent put together (30.4 percent).
For particular types of property, the inequality of holdings is even greater.
* The wealthiest 1 percent of Americans owned 62.3 percent of the business assets in 2004.
* The wealthiest 5 percent collectively owned 88.7 percent of business assets.
* The wealthiest 5 percent also owned 93.7 percent of the value of bonds, 71.7 percent of the nonresidential real estate, and 79.1 percent of the value of stock.
The family net worth cutoffs referenced above are:
99th percentile at $6,006,000
95th percentile at $1,393,000
90th percentile at $827,600
50th percentile at $92,900
Some other significant cutoffs are the 10th percentile ($200), the 25th percentile ($13,300) and the 75th percentile ($328,500). About 8% of Americans are millionaires.
Thus, a third of the nation's wealth is owned by those whose net worth is $6,006,000 or more, a third is owned by those whose net worth is $827,600 to $6,006,000, and a third is owned by those with a net worth of under $827,600 (the vast majority of which, in turn, is owned by people with a net worth of, at least, $92,900).
Both African-Americans and Hispanics are less affluent than the population at large. Among African-Americans the 10th percentile is -$1,400, the 25th percentile is $1,700, the median is $20,600, the 75th percentile is $97,000, and the 90th percentile is $248,000. Among Hispanics in the United States the 10th percentile is $0, the 25th percentile is $2,800, the median is $18,600, the 75th percentile is $103,200, and the 90th percentile is $304,100.
Income is distributed significantly more equitably than wealth.
Unrealized, and hence, untaxed, capital gains make up 31% of the wealth of the top 1% and come mostly in investment assets for these families. This trend is probably more extreme at extremely high net worths. In contrast, unrealized capital gains make up 11% of the wealth of the median family, which holds the gains mostly in a principal residence.
Another key policy area where wealth is a factor, in addition to familiar ones like campaign finance and taxation, is tort reform.
Often, tort reformers seek to cap non-economic damages in the $250,000-$500,000 range. This means a lot to someone in the top quarter of the wealth distribution. But, if you have a net worth of $328,500, a significant chunk of which is in exempt assets like a certain amount of home equity and retirement accounts, a $250,000 judgment and a $2,500,000 judgment look identical.
In the same vein, realistically, about 50% of the population is effectively judgment proof to a general non-domestic relations creditor, beyond any insurance coverage, after exemptions from creditors and bankruptcy laws are considered. People who earn below the median income (who make up roughly 80% of bankruptcy filings under Chapter 7 prior to the changes to the law that took effect in 2005) can end garnishments by filing a Chapter 7 bankruptcy, those who have higher incomes often cannot. They are also likely to hold a large part of their personal wealth in creditor exempt forms such as homestead protected real estate equity and retirement accounts. This is why mandatory automobile insurance laws are so central to the tort law system.
The Party Of Bad Ideas.
There is a political party with no ideas in the United States, and it isn’t the Democratic Party. Well, this isn’t entirely true. Of course they have ideas. But, they don’t make a lot of sense. What are the Republican ideas?
* Plan to end frivolous medical malpractice litigation: Reduce recoveries from doctors proven negligent in court.
* Plan for improving K-12 education: Cut education funding.
* Plan for improving higher education: Cut financial aid.
* Idea for making Medicare more efficient: Create world’s most complex prescription benefit.
* Idea for controlling Medicaid costs: Kick poor elderly legal immigrants out of nursing homes and require photo ID for newborn babies.
* Idea for controlling private health care costs: Encourage teen moms to leave home to get Medicaid benefits.
* Idea for expanding access to health care: End tax benefits for health insurance.
* Exit strategy from Iraq: Build permanent bases.
* Solution to global warming: What global warming? (6/22 edition).
* Plan for reducing unemployment: Record low wages.
* Plan for Social Security solvency: Cut benefits and invest in the stock market. Dow when Bush took office: 10,732; Dow on June 13, 2006: 10,764. Gain for past five and a half years: 0.1%.
* Plan for financing government: Cut taxes more than spending and let the kids pay for it.
* Plan for cutting record high foreclosures: End mortgage interest deduction and increase interest rates.
* Plan for encouraging traditional families: Make it harder to get married.
* Idea for government efficiency: More driver's license paperwork and longer lines.
* Idea for discouraging abortions: Make it hard to prevent unwanted pregnancies.
* Plan to end frivolous medical malpractice litigation: Reduce recoveries from doctors proven negligent in court.
* Plan for improving K-12 education: Cut education funding.
* Plan for improving higher education: Cut financial aid.
* Idea for making Medicare more efficient: Create world’s most complex prescription benefit.
* Idea for controlling Medicaid costs: Kick poor elderly legal immigrants out of nursing homes and require photo ID for newborn babies.
* Idea for controlling private health care costs: Encourage teen moms to leave home to get Medicaid benefits.
* Idea for expanding access to health care: End tax benefits for health insurance.
* Exit strategy from Iraq: Build permanent bases.
* Solution to global warming: What global warming? (6/22 edition).
* Plan for reducing unemployment: Record low wages.
* Plan for Social Security solvency: Cut benefits and invest in the stock market. Dow when Bush took office: 10,732; Dow on June 13, 2006: 10,764. Gain for past five and a half years: 0.1%.
* Plan for financing government: Cut taxes more than spending and let the kids pay for it.
* Plan for cutting record high foreclosures: End mortgage interest deduction and increase interest rates.
* Plan for encouraging traditional families: Make it harder to get married.
* Idea for government efficiency: More driver's license paperwork and longer lines.
* Idea for discouraging abortions: Make it hard to prevent unwanted pregnancies.
New Family Members
Summer is birthday season in my household. This year, fish were the gift of choice. So, welcome to the family Sparkle, Goldie and Cutie, the family goldfish.
21 June 2006
Estate Tax Proposal Possibly Close To Passing
House Ways and Means Committee Chair Bill Thomas (R-CA) has thrown his hat in the ring of estate tax reform proposals wiht H.R. 5638, the “Permanent Estate Tax Relief Act of 2006.” A floor vote in the House is expected as soon as June 22.
The proposal abandons estate tax repeal in favor of larger exemptions (currently $2 million and increasing to $3,500,000 in 2009), and lower rates (currently 46% and dropping to 45% in 2007), in order to head of a return to higher rates (55% plus a bubble rate) and lower exemption ($1,000,000) in 2011 and thereafter.
The proposal would impact decedent dying and transfer made starting in 2010, when under current law, the estate tax faces a one year repeal.
It would establish an exemption amount for gift and estate taxes (and also for the generation skipping transfer tax) of $5 million per person per lifetime, and surviving spouse could elect to use any unused exemption of a deceased spouse, something not possible under current law which is a basis for a great deal of estate planning activity.
The firsts $25 million would be taxed at the maximum capital gains tax rate(currently 15%, set to increase to 20% in 2011 unless extended) and the balance would be taxed at twice that rate (currently 30%, set to increase to 40% in 2011 unless extended).
Existing "step up in basis" rules, which eliminate capital gains taxes on gains accruing prior to a death, would remain in place. Currently law would switch to a "carry over basis" rule in 2010.
The deduction for state death taxes would be eliminated, presumably in an effort to discourage their imposition.
An unrelated provision would exclude 60% of certain capital gains on timber sales from taxation in 2006-2008. Can you say pork?
The proposal is better than some that have been proposed in Congress recently, some of which would simply reduce the estate tax rate to 15%. This proposal is particularly reasonable if current artifically low capital gains tax rates are not extended. But, is still exceedingly generous to decedents with estates under $25,000,000, in most cases simply imposing a tax in lieu of capital gains taxes that accrued during life and imposing no additional estate tax on the heirs at all.
This proposal might very well peel off the three Democratic Senators needed to overcome a Senate filibuster of estate tax repeal, if complete estate tax repeal were not part of the debate. Senator Frist has indicated that he wants to bring an estate tax bill to the floor of the Senate before the 4th of July, and if this is passed by the House of Representatives tomorrow (and it probably wouldn't make it to the floor if the votes weren't there), it would be an obvious candidate for a negotiated rule with an up or down vote without amendments in the Senate on this bill only in Frist's time frame.
The proposal abandons estate tax repeal in favor of larger exemptions (currently $2 million and increasing to $3,500,000 in 2009), and lower rates (currently 46% and dropping to 45% in 2007), in order to head of a return to higher rates (55% plus a bubble rate) and lower exemption ($1,000,000) in 2011 and thereafter.
The proposal would impact decedent dying and transfer made starting in 2010, when under current law, the estate tax faces a one year repeal.
It would establish an exemption amount for gift and estate taxes (and also for the generation skipping transfer tax) of $5 million per person per lifetime, and surviving spouse could elect to use any unused exemption of a deceased spouse, something not possible under current law which is a basis for a great deal of estate planning activity.
The firsts $25 million would be taxed at the maximum capital gains tax rate(currently 15%, set to increase to 20% in 2011 unless extended) and the balance would be taxed at twice that rate (currently 30%, set to increase to 40% in 2011 unless extended).
Existing "step up in basis" rules, which eliminate capital gains taxes on gains accruing prior to a death, would remain in place. Currently law would switch to a "carry over basis" rule in 2010.
The deduction for state death taxes would be eliminated, presumably in an effort to discourage their imposition.
An unrelated provision would exclude 60% of certain capital gains on timber sales from taxation in 2006-2008. Can you say pork?
The proposal is better than some that have been proposed in Congress recently, some of which would simply reduce the estate tax rate to 15%. This proposal is particularly reasonable if current artifically low capital gains tax rates are not extended. But, is still exceedingly generous to decedents with estates under $25,000,000, in most cases simply imposing a tax in lieu of capital gains taxes that accrued during life and imposing no additional estate tax on the heirs at all.
This proposal might very well peel off the three Democratic Senators needed to overcome a Senate filibuster of estate tax repeal, if complete estate tax repeal were not part of the debate. Senator Frist has indicated that he wants to bring an estate tax bill to the floor of the Senate before the 4th of July, and if this is passed by the House of Representatives tomorrow (and it probably wouldn't make it to the floor if the votes weren't there), it would be an obvious candidate for a negotiated rule with an up or down vote without amendments in the Senate on this bill only in Frist's time frame.
Detroit Still Hasn't Hit Bottom
Detroit was again one of the fastest shrinking cities in the United States in 2005. New York City lost several thousand more people than Detroit in 2005, but it is about nine times as large.
In 1950, Detroit had 1,849,568 people. By 1970, it has lost about 345,000 residents. Between 1970 and 1980 it lost another 311,000 residents. Between 1980 and 1990 it lost another 172,000 residents. Between 1990 and 2000 it lost about 67,000 residents, so that by 2000, it had just 951,270 people. By 2005, it had lost another 65,000 or so residents, bringing it to a population of roughly 885,000. It lost roughly 16,000 people from 2004 to 2005 alone. Detroit's population will probably have fallen to below 825,000 by the next census at this rate.
Detroit has experienced five decades of relentless decline. And, in the 2000s, the rate of decline, rather than leveling off, has actually accelerated from the more modest declines it experienced during the boom years of the 1990s. There is no end to this free fall in sight.
The laws of supply and demand that are supposed to attract people to places with declining housing prices and excess infrastructure already in place, like a phoenix, seem to take second fiddle to the economic impact of an equally relentlessly declining manufacturing sector. Comparative advantage apparently trumps economic equilibrium.
General Motors, the corporate patron of Motown, is teetering on the brink of bankruptcy, losing thousands of dollars for every car it makes, burdened by legacy costs associated with its own repeated rounds of layoffs, its bonds downgraded to junk status, and its balance sheet arguably in the red if you accounted properly for the debts it owes to its retirees. A betting man would have to assume that GM will lay off more people still before it hits bottom, and as goes GM and its captive suppliers, like recently spun off Delphi, whose fiscal health is almost as bad, so goes Detroit. Ford, another Motown mainstay, is doing better, but not much. Chrysler has already been bought out by German automobile company Daimler, taking some key executive posts with it. Michigan based pizza giants Dominos and Little Caesers seem poised to eclipse the automobile industry in Southeast Michigan at this rate.
This means continuing ugly cuts in city government and local school districts that will discourage new people from coming into the city. Yet, politics dictate that local government cutbacks will almost certainly come slower than that the decline in population, which means that the city's government will continue to bloat governments and local taxes will continue to rise as fewer people must support more government per capita. In growing places the reverse happens, as populations grow faster than government can keep up, creating different problems. This means property values in Detroit are likely to continue to fall, and that more homes will be simply abandoned to mortgage companies and tax collectors. This means a city already dominated by the poor, will likely get even poorer, as those who leave a declining city tend to be those with above average incomes, who can afford to do so.
Detroit is one of the hubs of the Arab-American community, a community composed to a signficiant extent of people who have fled depositic failed states in the Middle East for the promise of the American dream. It is ironic that many will have landed in a community more ridden with despair than almost any other in the United States.
The 4.5 million person Detroit metropolitan area isn't actualy declining in population. It actually grew 4.8% during the 1990s, although the metro area's growth, like that of most of its industrial cousins, St. Louis, Pittsburg, Cleveland, Providence, Milwaukee, Buffalo, and Rochester, for example, has been sluggish compared to national averages.
By comparison, the Denver metropolitan area's population grew 30.7% in the 1990s. Denver proper is at its all time peak population and has grown steadily since 1990 (18% in the 1990s), although it declined in population during the 1970s and 1980s.
Every Detroit mayoral candidate since the beginning of time, it seems, has been running on a campaign of ending decline and turning the city around after all these years. Detroit hasn't seen a mayor able to deliver on this promise yet. There are loft projects downtown, not far from the Wayne State University campus, one of the few parts of the local economy not has not up and left the city. But, they seem to have fizzled compared to similar projects elsewhere.
More than once, I've heard the heartfelt, if bittersweet, cries of Detroiters and former Detroit residents who love their troubled city, with its charming local landmark stores, its Motown and now hip hop music, its memories. It seems like a perfect place for new ideas in some ways.
Denver's LoDo didn't emerge out of its permier residential communities, it rose up out of skid row, where no one complained about people with radical new ideas for the area. The same can be said for the former railyards that are now Denver's South Platte neighborhood, the parking lot wasteland that is now becoming the Coors Field neighborhood in Denver, the dead malls that have become thriving Belcaro and Cinderalla City (the Southglen Mall in metropolitan Denver is planning on following suit), and the military bases that nobody wants that have spawned new neighborhoods in Lowry and Stapleton, and a new biomedical center at Fitzsimmons.
But, what distinguishes the host of projects that have turned some of Denver's wastelands into healthy neighborhoods and Detroit, which certainly has no shortage of urban wastelands, is jobs. Denver's infill projects can thrive, because there are lots of people who want to and need to live here because they work here, in a city with a healthy, diversified economy. The growth is inevitable in the short run. It is just a matter of whether it will happen in the city, or on the suburban frontier.
Detroit has no such luxury. Until it finds a new engine of economic growth to replace the automotive industry and related manufacturing sector activity, it is dead in the water. And, the prospects of replacing that manufacturing sector activity with new investment from outside the city seems bleak.
While the United States has lots millions of manufacturing jobs in the last half decade alone, there have been new factories, indeed new factories in the automotive industry, built in the United States. But, not in Detroit. While U.S. automakers have shipped jobs overseas, Toyota, Honda and other foreign car companies, foreseeing backlash against imported vehicles, have further muddied the waters buy building new automotive factors in the United States. But, for the most part, they have avoided traditional rust belt manufacturing centers in favor of rural Midwestern and Southern locations where unions are weak, wages are low, good jobs are scarce, and the greenfields the factories are built upon carry no environmental baggage. The have built new state of the art facilities, rather than trying, as many American firms have, to salvage as much as possible of existing outdated facilities. The newcomers have tried to avoid accumulating what they see as bad attitudes and bad corporate cultures in their manufacturing workforce by starting to a great extent from scratch, something impossible in a place like Detroit where many workers have already absord the ethics of America's declining manufacturing sector.
The numbers may show that union shops are more productive than non-union shops, but executrives in car companies building new plants don't believe it. Brownfield laws may try to mitigate the environmental baggage of building new factories in existing industrial areas that may already be contaminated, but until there is actually an economic downside to building a factory on virgin territory, no environmental cleanup risk will always have an edge over some environmental cleanup risk in the boardroom. I have no doubt that a new factory in Detroit would have thousands, if not tens of thousands of people ready to line up to apply for jobs, but in the eyes of corporate executives looking to hire thousand of new employees, the only partially true myth of a chaotic, violent, ill educated city has a hard time competing with also less than completely true myth of America's hard working, well behaved small towns.
The only way manufacturing will return to Detroit is for local entrapreneurs, who are already committed to the city, to draw on local expertise and start from garages and empty warehouses making products that compete, in price and quality, on the world market from day one. I don't know if this is possible, and given increased automation, even if it was, it wouldn't create as many jobs as the automobile industry did, even if the movement was so huge that its output rivalled the output of that immense industry. Barring an embargo or protectionist policies that end the flow of cheap foreign goods, or more likely, economic development abroad that makes foreign goods from places like China and Mexico no longer so cheap, it is hard to see a reinvigorated American manufacturing industry revitalizing Detroit.
Barring such a development, Detroit really has only two options. Find some new industry to which to hitch its star, and/or downsize itself on a permanent basis, not just to where it is now, but to where it expects to be in a a decade, which will have even fewer people. Perhaps, if Detroit can resign itself to more modest ambitions so that it can stop failing, it can finally turn the corner. Maybe I should run for Mayor of Detroit. Only, given the poor track record of those who have come along so far, I'm not sure I'd have any more success.
In 1950, Detroit had 1,849,568 people. By 1970, it has lost about 345,000 residents. Between 1970 and 1980 it lost another 311,000 residents. Between 1980 and 1990 it lost another 172,000 residents. Between 1990 and 2000 it lost about 67,000 residents, so that by 2000, it had just 951,270 people. By 2005, it had lost another 65,000 or so residents, bringing it to a population of roughly 885,000. It lost roughly 16,000 people from 2004 to 2005 alone. Detroit's population will probably have fallen to below 825,000 by the next census at this rate.
Detroit has experienced five decades of relentless decline. And, in the 2000s, the rate of decline, rather than leveling off, has actually accelerated from the more modest declines it experienced during the boom years of the 1990s. There is no end to this free fall in sight.
The laws of supply and demand that are supposed to attract people to places with declining housing prices and excess infrastructure already in place, like a phoenix, seem to take second fiddle to the economic impact of an equally relentlessly declining manufacturing sector. Comparative advantage apparently trumps economic equilibrium.
General Motors, the corporate patron of Motown, is teetering on the brink of bankruptcy, losing thousands of dollars for every car it makes, burdened by legacy costs associated with its own repeated rounds of layoffs, its bonds downgraded to junk status, and its balance sheet arguably in the red if you accounted properly for the debts it owes to its retirees. A betting man would have to assume that GM will lay off more people still before it hits bottom, and as goes GM and its captive suppliers, like recently spun off Delphi, whose fiscal health is almost as bad, so goes Detroit. Ford, another Motown mainstay, is doing better, but not much. Chrysler has already been bought out by German automobile company Daimler, taking some key executive posts with it. Michigan based pizza giants Dominos and Little Caesers seem poised to eclipse the automobile industry in Southeast Michigan at this rate.
This means continuing ugly cuts in city government and local school districts that will discourage new people from coming into the city. Yet, politics dictate that local government cutbacks will almost certainly come slower than that the decline in population, which means that the city's government will continue to bloat governments and local taxes will continue to rise as fewer people must support more government per capita. In growing places the reverse happens, as populations grow faster than government can keep up, creating different problems. This means property values in Detroit are likely to continue to fall, and that more homes will be simply abandoned to mortgage companies and tax collectors. This means a city already dominated by the poor, will likely get even poorer, as those who leave a declining city tend to be those with above average incomes, who can afford to do so.
Detroit is one of the hubs of the Arab-American community, a community composed to a signficiant extent of people who have fled depositic failed states in the Middle East for the promise of the American dream. It is ironic that many will have landed in a community more ridden with despair than almost any other in the United States.
The 4.5 million person Detroit metropolitan area isn't actualy declining in population. It actually grew 4.8% during the 1990s, although the metro area's growth, like that of most of its industrial cousins, St. Louis, Pittsburg, Cleveland, Providence, Milwaukee, Buffalo, and Rochester, for example, has been sluggish compared to national averages.
By comparison, the Denver metropolitan area's population grew 30.7% in the 1990s. Denver proper is at its all time peak population and has grown steadily since 1990 (18% in the 1990s), although it declined in population during the 1970s and 1980s.
Every Detroit mayoral candidate since the beginning of time, it seems, has been running on a campaign of ending decline and turning the city around after all these years. Detroit hasn't seen a mayor able to deliver on this promise yet. There are loft projects downtown, not far from the Wayne State University campus, one of the few parts of the local economy not has not up and left the city. But, they seem to have fizzled compared to similar projects elsewhere.
More than once, I've heard the heartfelt, if bittersweet, cries of Detroiters and former Detroit residents who love their troubled city, with its charming local landmark stores, its Motown and now hip hop music, its memories. It seems like a perfect place for new ideas in some ways.
Denver's LoDo didn't emerge out of its permier residential communities, it rose up out of skid row, where no one complained about people with radical new ideas for the area. The same can be said for the former railyards that are now Denver's South Platte neighborhood, the parking lot wasteland that is now becoming the Coors Field neighborhood in Denver, the dead malls that have become thriving Belcaro and Cinderalla City (the Southglen Mall in metropolitan Denver is planning on following suit), and the military bases that nobody wants that have spawned new neighborhoods in Lowry and Stapleton, and a new biomedical center at Fitzsimmons.
But, what distinguishes the host of projects that have turned some of Denver's wastelands into healthy neighborhoods and Detroit, which certainly has no shortage of urban wastelands, is jobs. Denver's infill projects can thrive, because there are lots of people who want to and need to live here because they work here, in a city with a healthy, diversified economy. The growth is inevitable in the short run. It is just a matter of whether it will happen in the city, or on the suburban frontier.
Detroit has no such luxury. Until it finds a new engine of economic growth to replace the automotive industry and related manufacturing sector activity, it is dead in the water. And, the prospects of replacing that manufacturing sector activity with new investment from outside the city seems bleak.
While the United States has lots millions of manufacturing jobs in the last half decade alone, there have been new factories, indeed new factories in the automotive industry, built in the United States. But, not in Detroit. While U.S. automakers have shipped jobs overseas, Toyota, Honda and other foreign car companies, foreseeing backlash against imported vehicles, have further muddied the waters buy building new automotive factors in the United States. But, for the most part, they have avoided traditional rust belt manufacturing centers in favor of rural Midwestern and Southern locations where unions are weak, wages are low, good jobs are scarce, and the greenfields the factories are built upon carry no environmental baggage. The have built new state of the art facilities, rather than trying, as many American firms have, to salvage as much as possible of existing outdated facilities. The newcomers have tried to avoid accumulating what they see as bad attitudes and bad corporate cultures in their manufacturing workforce by starting to a great extent from scratch, something impossible in a place like Detroit where many workers have already absord the ethics of America's declining manufacturing sector.
The numbers may show that union shops are more productive than non-union shops, but executrives in car companies building new plants don't believe it. Brownfield laws may try to mitigate the environmental baggage of building new factories in existing industrial areas that may already be contaminated, but until there is actually an economic downside to building a factory on virgin territory, no environmental cleanup risk will always have an edge over some environmental cleanup risk in the boardroom. I have no doubt that a new factory in Detroit would have thousands, if not tens of thousands of people ready to line up to apply for jobs, but in the eyes of corporate executives looking to hire thousand of new employees, the only partially true myth of a chaotic, violent, ill educated city has a hard time competing with also less than completely true myth of America's hard working, well behaved small towns.
The only way manufacturing will return to Detroit is for local entrapreneurs, who are already committed to the city, to draw on local expertise and start from garages and empty warehouses making products that compete, in price and quality, on the world market from day one. I don't know if this is possible, and given increased automation, even if it was, it wouldn't create as many jobs as the automobile industry did, even if the movement was so huge that its output rivalled the output of that immense industry. Barring an embargo or protectionist policies that end the flow of cheap foreign goods, or more likely, economic development abroad that makes foreign goods from places like China and Mexico no longer so cheap, it is hard to see a reinvigorated American manufacturing industry revitalizing Detroit.
Barring such a development, Detroit really has only two options. Find some new industry to which to hitch its star, and/or downsize itself on a permanent basis, not just to where it is now, but to where it expects to be in a a decade, which will have even fewer people. Perhaps, if Detroit can resign itself to more modest ambitions so that it can stop failing, it can finally turn the corner. Maybe I should run for Mayor of Detroit. Only, given the poor track record of those who have come along so far, I'm not sure I'd have any more success.
20 June 2006
When Your Life Imitates Your Art.
Don't expect a judge to believe that you're an honest man when you've made a living publishing books and articles describing how to commit real estate fraud and then get caught doing so.
Rare 8th Amendment Defendant Win
A man sentenced to 26 years to life under California's three strikes law for taking the written part of the driver's license test for an illiterate cousin under the argument that a life sentence for the third of three "serious" felonies are disproportionate to the life sentence under the 8th Amendment, if the defendant was not personally engaged in violent activity during any of the offenses.
In this case the prior two strikes were a juvenile burglary and an armed robbery conviction as an adult six years after the juvenile offense and fourteen years prior to the most recent conviction. The driver's license offense would have been a misdemeanor itself, but for the prior conviction. The man argued on appeal that he was not personally armed or violent during the armed robbery and should be allowed to argue that this was the case in the sentencing hearing, and the 9th Circuit agreed, holding that if this was the case, that the 8th Amendment was violated. The U.S. Supreme Court declined to review the case.
Of course, the more fundamental problem is California's three strikes law itself, some of whose flaws are well illustrated in this case. First, it includes juvenile offenses. Second, there is no time range within which the strikes can be committed, once you have two strikes it doesn't matter if you stay clean for decades afterwards. Third, strikes don't have to be terribly serious felonies. And fourth, strikes can include offenses which would be a misdemeanor if committed by a first offender.
A juvenile burglary, misdemeanor forgery conviction and being a lesser participant in an armed robbery do not an unredeemable felon make, particularly when these offenses are widely spaced over twenty years. It is an injustice to the man convicted and all who rely upon him for support, and it is an injustice to the people of California who have to pay for it.
There is nothing fundamentally wrong for enhancing punishments for recidivist offenders. They pose a high risk off reoffending so keeping them in prison and off the streets for a longer period than a first offender makes sense. But, punishments also need to bear some relationship to the crime, even for recidivists.
Colorado Compared
Colorado, while not perfect, is far less draconian than California.
To qualify for life imprisonment on the basis of three strikes in Colorado, each of the felonies must be a class one felony, a class two felony, or a violent class three felony. Section 18-1.3-803(1), Colorado Revised Statutes. This means that strikes are limited to crimes like murder, aggravated assault, kidnapping, armed robbery, and aggravated rape. In practice, this results in no meaningful sentence enhancement for class one felonies, which already carry a life sentence, and rarely more than doubles a sentence for a class two felony or a class three violent felony, which already carries a sentence of up to twenty-four years and in some cases longer.
Alternately, one can face life imprisonment as a habitual criminal in Colorado by committing a felony crime of violence, when one had already committed four ordinary felonies tried on separate occassions and involving separate criminal episodes, and have already received one previous aggravated habitual criminal sentence. Section 18-1.3-803(2.5), Colorado Revised Statutes. This does not appear to include juvenile offenses. If the current offense was a class three felony or worse, this no more than doubles the sentence. If the current offense is a class four violent felony, this no more than triples the sentence in most cases. If the current offense is a class five or class six violent felony, this could increase the sentence sixfold or more.
Colorado has other habitual offender statutes, but they result merely in double (two serious burglaries within ten years), triple (three non-trivial felonies within ten years), or quadrupile (four felonies) the regular sentence for the crime most recently committed. Thus, the punishment bears some relationship to the crime, and in the case of a relatively minor most recent offense, is much shorter than a life sentence.
Thus, the only time you can receive more than four times the usual maximum sentence in Colorado, is if you a convicted of a violent class five or six felony (such as a a first or second degree assault causing serious bodily injury committed in the heat of passion) and have four prior felonies, which makes it a little hard to feel much sympathy for you, even if you are getting a relatively raw deal.
The defendant in the California case described above wouldn't even be considered a habitual offender in Colorado at all due to the juvenile case, the time elapsed between the cases and the fact that the third would be a misdemeanor, since only a handful of offenses go from misdemeanor to felony status based on previous convictions and even then only in very specialized situations.
In this case the prior two strikes were a juvenile burglary and an armed robbery conviction as an adult six years after the juvenile offense and fourteen years prior to the most recent conviction. The driver's license offense would have been a misdemeanor itself, but for the prior conviction. The man argued on appeal that he was not personally armed or violent during the armed robbery and should be allowed to argue that this was the case in the sentencing hearing, and the 9th Circuit agreed, holding that if this was the case, that the 8th Amendment was violated. The U.S. Supreme Court declined to review the case.
Of course, the more fundamental problem is California's three strikes law itself, some of whose flaws are well illustrated in this case. First, it includes juvenile offenses. Second, there is no time range within which the strikes can be committed, once you have two strikes it doesn't matter if you stay clean for decades afterwards. Third, strikes don't have to be terribly serious felonies. And fourth, strikes can include offenses which would be a misdemeanor if committed by a first offender.
A juvenile burglary, misdemeanor forgery conviction and being a lesser participant in an armed robbery do not an unredeemable felon make, particularly when these offenses are widely spaced over twenty years. It is an injustice to the man convicted and all who rely upon him for support, and it is an injustice to the people of California who have to pay for it.
There is nothing fundamentally wrong for enhancing punishments for recidivist offenders. They pose a high risk off reoffending so keeping them in prison and off the streets for a longer period than a first offender makes sense. But, punishments also need to bear some relationship to the crime, even for recidivists.
Colorado Compared
Colorado, while not perfect, is far less draconian than California.
To qualify for life imprisonment on the basis of three strikes in Colorado, each of the felonies must be a class one felony, a class two felony, or a violent class three felony. Section 18-1.3-803(1), Colorado Revised Statutes. This means that strikes are limited to crimes like murder, aggravated assault, kidnapping, armed robbery, and aggravated rape. In practice, this results in no meaningful sentence enhancement for class one felonies, which already carry a life sentence, and rarely more than doubles a sentence for a class two felony or a class three violent felony, which already carries a sentence of up to twenty-four years and in some cases longer.
Alternately, one can face life imprisonment as a habitual criminal in Colorado by committing a felony crime of violence, when one had already committed four ordinary felonies tried on separate occassions and involving separate criminal episodes, and have already received one previous aggravated habitual criminal sentence. Section 18-1.3-803(2.5), Colorado Revised Statutes. This does not appear to include juvenile offenses. If the current offense was a class three felony or worse, this no more than doubles the sentence. If the current offense is a class four violent felony, this no more than triples the sentence in most cases. If the current offense is a class five or class six violent felony, this could increase the sentence sixfold or more.
Colorado has other habitual offender statutes, but they result merely in double (two serious burglaries within ten years), triple (three non-trivial felonies within ten years), or quadrupile (four felonies) the regular sentence for the crime most recently committed. Thus, the punishment bears some relationship to the crime, and in the case of a relatively minor most recent offense, is much shorter than a life sentence.
Thus, the only time you can receive more than four times the usual maximum sentence in Colorado, is if you a convicted of a violent class five or six felony (such as a a first or second degree assault causing serious bodily injury committed in the heat of passion) and have four prior felonies, which makes it a little hard to feel much sympathy for you, even if you are getting a relatively raw deal.
The defendant in the California case described above wouldn't even be considered a habitual offender in Colorado at all due to the juvenile case, the time elapsed between the cases and the fact that the third would be a misdemeanor, since only a handful of offenses go from misdemeanor to felony status based on previous convictions and even then only in very specialized situations.
Construction Industry Tax Break
If your in the construction industry, you probably qualify for the insanely complicated Internal Revenue Code Section 199 deduction, a tax break designed initially to boost the manufacturing industry, for which final regulations have finally been issued.
To get the tax break you must:
(1) be engaged in the active conduct of a trade or business treated as a construction activity;
(2) perform a construction activity involving real property in the U.S.; and
(3) derive "domestic production gross receipts" from the construction activity.
Land sale income doesn't count, but a safe harbor makes it easy to allocate income between land sale income and construction income. While it is more elaborate than this, basically, the safe harbor assumes a 5% markup if the land is sold within five years and a larger amount if it is sold more than five years from purchase and less than sixteen years.
Construction activities include services such as grading, demolition, clearing, excavating, and any other activities that physically transform the land if this is part of a construction project. But, receipts for materials generally don't count.
You must be a construction company or in the construction business to qualify.
To get the tax break you must:
(1) be engaged in the active conduct of a trade or business treated as a construction activity;
(2) perform a construction activity involving real property in the U.S.; and
(3) derive "domestic production gross receipts" from the construction activity.
Land sale income doesn't count, but a safe harbor makes it easy to allocate income between land sale income and construction income. While it is more elaborate than this, basically, the safe harbor assumes a 5% markup if the land is sold within five years and a larger amount if it is sold more than five years from purchase and less than sixteen years.
Construction activities include services such as grading, demolition, clearing, excavating, and any other activities that physically transform the land if this is part of a construction project. But, receipts for materials generally don't count.
You must be a construction company or in the construction business to qualify.
Colorado's 2006 Ballot Issues
Colorado has a full ballot this year. I'd explain the ballot issues on it for you, but Dan already has a webpage that explains them all and gives his opinion on each of them. Dan is a smart guy. I agree with him on every single one of them.
19 June 2006
Minnesota Sentencing Policies
Minnesota manages to put far fewer people in prison than Colorado, about 8,613 in mid-2004 in Minnesota (2004 population 5.1 million) v. 19,756 at the same time in Colorado (2004 population 4.6 million). Minnesota keeps prison populations low by being selective about who really needs to be in prison to protect the public, and who can be dealt with in the community. "Minnesota has 135,000 under supervision in the community, and Colorado has 50,000."
Minnesota now, is imprisoning people at a rate similar to that of Colorado in 1992. The growth in Colorado's prison population has largely been a function of new sentencing laws.
Who is in prison in Minnesota and Colorado?
What does the makeup of Minnesota's prison population look like? According to the Department of Corrections in Minnesota:
Violent Crimes Other Than Rape 31%
Criminal Sexual Conduct 17%
Weapons 4%
Drugs 24%
Property Crimes 13%
Driving While Intoxicated 5%
Other 5%
Minnesota has 438 people serving life sentences, including 31 with a possibility of parole.
In Colorado the breakdown is:
Violent Crimes Other Than Rape 30%
Sex Offenses 11%
Weapons 4% (includes menancing)
Drugs 22% (includes share of habitual non-violent felon)
Property Crimes 23% (includes share of habitual non-violent felon)
Traffic 1%
Other 10%
Colorado has 1,687 people serving life sentences (1,313 with a possibility of parole), and 2 people on death row.
Surprisingly, the proportion of people in each state in prison for violent crimes, weapons and drugs isn't all that different, proportionately, which suggests that for those crimes, Minnesota is proportionately more inclined to use community corrections, for example, with earlier parole dates, than Colorado.
Minnesota is far less likely imprison people for property crimes like theft, burglary, vandalism and fraud, than Colorado. Minnesota has just 1,152 people in prison for property crimes. Colorado has about 4,544. Thus, Minnesota has about 75% fewer people in prison for property crimes than Colorado (in raw numbers), despite having only 12% fewer property crimes (in raw numbers, and thus considering both differing crime rates and differing populations). Minnesota is also much less likely than Colorado to impose long sentences for escape and contraband, which makes up two-thirds of the "other" category in Colorado.
Minnesota is more than twice as likely to imprison people for drunk driving. And, Minnesota takes sex offenses more seriously relative to other crimes, although absolute sentences of incarceration are probably still shorter in Minnesota for these crimes than in Colorado.
The number of life without possiblity of parole sentences in each state, normally reserved in each case for capital murder, is comparable with Minnesota's slightly larger number likely reflecting its larger population. So incarceration rates of aggravated murder are nearly identifical.
But, Colorado has far more people serving life sentences with possibility of parole, two-thirds of whom, in Colorado, are sex offenders, and 9% of whom, in Colorado, are habitual non-violent offenders. Kidnapping cases and older murder sentences make up most of the balance of the life sentences with possibility of parole in Colorado. Most of the life sentences with possibility of parole in Minnesota are probably older murder cases.
Fewer People In Prison, Yet Less Crime
Minnesota also has a considerably lower violent crime rate than Colorado (262.6 per 100,000 in Minnesota v. 345.1 per 100,000 in Colorado), and also has less property crime (3116.8 per 100,000 in Minnesota v. 3940.9 per 100,000 in Colorado). Why?
What isn't reducing crime rates in Minnesota?
Contary to those who claim low crimes rates are largely a function of high imprisonment rates, the state with fewer people in prison, Minnesota, has less crime. Studies have shown that dramatically higher imprisonment rates have had only a minor effect on crime rates, producing, perhaps 25% of the reduction in crime that we have experienced. Alternately, Minnesota has lower crime rates because it has more people under correctional supervision than Colorado, and parole and probation are far more effective than they are usually given credit for being by policy makers. The downside of having the 11,000 less serious felony offenders on parole instead of prison, may be made up for by the upside of having about 78,000 more convicted felons under at least some kind of community supervision.
Immigration can't explain the difference. In Colorado, foreign born persons are about a third less likely to be in prison than native born persons, on a per capita basis.
Race baiting also doesn't explain the difference. Colorado population is 4.2% black, while Minnesota's population is 3.3% black, a difference that can't imaginably be behind such a huge difference in prison populations.
The Rocky notes that one pop economist sees increased numbers of abortions as a factor in crime rates.
The states' per capita personal incomes are similar: In Colorado it is $36,063, while in Minnesota it is $35,861. Their unemployment rates aren't identical, 5.5% in 2004 in Colorado v. 4.7% in Minnesota in 2004, but neither are they incredibily different.
What is behind lower crime rates in Minnesota?
One clue to what Minnesota is doing but Colorado is now, is how the respective states treat the poor. The poverty rate in 2003-2004 in Colorado was 9.9%, while in Minnesota it was 7.2%, yet there are far more people on welfare (TANF) in Minnesota (27,310) than in Colorado (9,593). Colorado likewise has 17% of the population without health insurance, while Minnesota has 8.9% who lack health insurance.
Also, Minnesota has a significantly higher high school graduation rate (82.3%) than Colorado (69.6%). Why does this matter? "77 percent of inmates in the state and federal prisons across the nation do not have a high school diploma, according to a 2003 report by the U.S. Department of Justice."
Low imprisonment rates save Minnesota large sums of money. By spending more money on social services and less on prisons, Minnesota has produced a lower crime rate, and avoided creating a costly prison complex which has to a great extent, if not completely, paid for those social services.
(All statistics not found in linked materials are from the World Almanac and Book of Facts 2006.)
Minnesota now, is imprisoning people at a rate similar to that of Colorado in 1992. The growth in Colorado's prison population has largely been a function of new sentencing laws.
Who is in prison in Minnesota and Colorado?
What does the makeup of Minnesota's prison population look like? According to the Department of Corrections in Minnesota:
Violent Crimes Other Than Rape 31%
Criminal Sexual Conduct 17%
Weapons 4%
Drugs 24%
Property Crimes 13%
Driving While Intoxicated 5%
Other 5%
Minnesota has 438 people serving life sentences, including 31 with a possibility of parole.
In Colorado the breakdown is:
Violent Crimes Other Than Rape 30%
Sex Offenses 11%
Weapons 4% (includes menancing)
Drugs 22% (includes share of habitual non-violent felon)
Property Crimes 23% (includes share of habitual non-violent felon)
Traffic 1%
Other 10%
Colorado has 1,687 people serving life sentences (1,313 with a possibility of parole), and 2 people on death row.
Surprisingly, the proportion of people in each state in prison for violent crimes, weapons and drugs isn't all that different, proportionately, which suggests that for those crimes, Minnesota is proportionately more inclined to use community corrections, for example, with earlier parole dates, than Colorado.
Minnesota is far less likely imprison people for property crimes like theft, burglary, vandalism and fraud, than Colorado. Minnesota has just 1,152 people in prison for property crimes. Colorado has about 4,544. Thus, Minnesota has about 75% fewer people in prison for property crimes than Colorado (in raw numbers), despite having only 12% fewer property crimes (in raw numbers, and thus considering both differing crime rates and differing populations). Minnesota is also much less likely than Colorado to impose long sentences for escape and contraband, which makes up two-thirds of the "other" category in Colorado.
Minnesota is more than twice as likely to imprison people for drunk driving. And, Minnesota takes sex offenses more seriously relative to other crimes, although absolute sentences of incarceration are probably still shorter in Minnesota for these crimes than in Colorado.
The number of life without possiblity of parole sentences in each state, normally reserved in each case for capital murder, is comparable with Minnesota's slightly larger number likely reflecting its larger population. So incarceration rates of aggravated murder are nearly identifical.
But, Colorado has far more people serving life sentences with possibility of parole, two-thirds of whom, in Colorado, are sex offenders, and 9% of whom, in Colorado, are habitual non-violent offenders. Kidnapping cases and older murder sentences make up most of the balance of the life sentences with possibility of parole in Colorado. Most of the life sentences with possibility of parole in Minnesota are probably older murder cases.
Fewer People In Prison, Yet Less Crime
Minnesota also has a considerably lower violent crime rate than Colorado (262.6 per 100,000 in Minnesota v. 345.1 per 100,000 in Colorado), and also has less property crime (3116.8 per 100,000 in Minnesota v. 3940.9 per 100,000 in Colorado). Why?
What isn't reducing crime rates in Minnesota?
Contary to those who claim low crimes rates are largely a function of high imprisonment rates, the state with fewer people in prison, Minnesota, has less crime. Studies have shown that dramatically higher imprisonment rates have had only a minor effect on crime rates, producing, perhaps 25% of the reduction in crime that we have experienced. Alternately, Minnesota has lower crime rates because it has more people under correctional supervision than Colorado, and parole and probation are far more effective than they are usually given credit for being by policy makers. The downside of having the 11,000 less serious felony offenders on parole instead of prison, may be made up for by the upside of having about 78,000 more convicted felons under at least some kind of community supervision.
Immigration can't explain the difference. In Colorado, foreign born persons are about a third less likely to be in prison than native born persons, on a per capita basis.
Race baiting also doesn't explain the difference. Colorado population is 4.2% black, while Minnesota's population is 3.3% black, a difference that can't imaginably be behind such a huge difference in prison populations.
The Rocky notes that one pop economist sees increased numbers of abortions as a factor in crime rates.
He found the four strongest factors in cutting crime were . . . legalized abortion and the resulting decline in unwanted babies. Studies have shown unwanted children are more likely to become criminals.This doesn't work either. Abortion in legal in both Colorado and Minnesota. But, in 2000, the abortion rate per 1,000 women aged 15-44 years old in Colorado was 15.9 and it was 13.5 in Minnesota. This trend is long standing and goes back at least as far as 1992, with Minnesota consistently having lower abortion rates. Indeed, the gap between Colorado and Minnesota in abortion rates was much larger in 1992 than it is now.
The states' per capita personal incomes are similar: In Colorado it is $36,063, while in Minnesota it is $35,861. Their unemployment rates aren't identical, 5.5% in 2004 in Colorado v. 4.7% in Minnesota in 2004, but neither are they incredibily different.
What is behind lower crime rates in Minnesota?
One clue to what Minnesota is doing but Colorado is now, is how the respective states treat the poor. The poverty rate in 2003-2004 in Colorado was 9.9%, while in Minnesota it was 7.2%, yet there are far more people on welfare (TANF) in Minnesota (27,310) than in Colorado (9,593). Colorado likewise has 17% of the population without health insurance, while Minnesota has 8.9% who lack health insurance.
Also, Minnesota has a significantly higher high school graduation rate (82.3%) than Colorado (69.6%). Why does this matter? "77 percent of inmates in the state and federal prisons across the nation do not have a high school diploma, according to a 2003 report by the U.S. Department of Justice."
Low imprisonment rates save Minnesota large sums of money. By spending more money on social services and less on prisons, Minnesota has produced a lower crime rate, and avoided creating a costly prison complex which has to a great extent, if not completely, paid for those social services.
(All statistics not found in linked materials are from the World Almanac and Book of Facts 2006.)
Affordable Housing As A Wedge Issue
A wedge issue is one which divides on political party's coalition, while leaving another's unified. Affordable housing wedges Democrats, and is an issue where, as a result, Democrats should tread lightly.
While there are lots of ways to achieve affordable housing, the Republican solution is to encourage sprawl, substantially curtail zoning and building regulation, oppose impact fees, oppose habitability requirements for rental housing, fight environmenal species protections in new developments, and permit predatory lending practices that allow marginally eligible people to qualify for loans. New, low end subdivisions in Adams County and all points North have essentially followed this recipe.
This approach, of course, has multiple downsides and imposes significant externalities on the public. Leaving urban school real estate empty, while using tax dollars from old residents to build new schools is wasteful. Sprawl drives new government expenditures for road and highway construction, increasing vehicle miles traveled adding to gasoline consumption (and in turn to pollution) and to congestion on roads, and eliminates habitats, air purification from plants, and flood buffers from the environment. Crappy houses are vulnerable in disasters and can harm residents. Marginal lending practices lead to foreclosures and predictable personal financial tragedies.
On the other hand, pure opposition to growth that the economy is driving has its own problems. Portland, Oregon, with its urban growth boundary may be compact, remarkably undependent upon automobiles, and in many other ways desirable, but the limits on growth have also produced a dramatic rise in housing prices which has hurt the poor and working class residents of the area of the most.
There are solutions. For example, while zoning codes have their place, removing the provisions that serve as the greatest barriers to infill development can prevent regulatory burdens from forcing developers interested in infill development, a lynch pin of Denver's approach for some time, from being forced elsewhere. Likewise, building code provisions that require upgrades to current codes when old buildings are renovated which are so daunting that renovations don't happen at all, may prevent at least modest gains from being achieved. If the choice is between upgrading a non-ADA accessable building to add fire sprinklers, but not elevators, and doing nothing, allowing an upgrade may make sense Aesthetic considerations in building codes, like brick fascade requirements, can also be a barrier to affordable housing. Impact fees, like one stretched out over ten years being considered by Aurora, can level the playing field, particularly in exurban areas where infrastructure must be created from scratch from whole cloth.
One also has to look at secondary incentives. Why isn't much land zoned for multi-family housing, which permits higher population densities and less sprawl in an often affordable fashion? One reason is NIMBY politics, but equally powerful is the financial incentives placed on existing municipal governments by the Gallagher Amendment and heavy use of sales taxes to finance municipal government. Apartment buildings and condominiums generate no sales taxes and produce property taxes far below the actual cost of providing services to residents because residential property is deliberately undervalued, while commercial property is deliberately overvalued. A mall generates a great deal of tax revenue compared to service costs, and so is something almost every municipality tries to encourage, to the point of being counterproductive. Apartment buildings generate little tax revenue, so they are discouraged outside unincorporated territory (where even a credible threat to form a developer controlled municipality can secure county compliance with zoning objectives of property owners).
And, one also has to look at the ultimate objective. No one really wants "cheap housing", they want "affordable housing" which can be secured by increasing ability to pay, as well as by building inexpensive housing stock. For example, most ski resorts have a shortage of housing that workers can afford. But, increasing pay for ski resort workers can solve the affordable housing problem there just as well, indeed better, than building cheap housing far from the resorts.
The bottom line, however, is that it is a complex issue, and that crude solutions, like Initiative 76 (currently on the Colorado Supreme Court docket), the affordable housing and growth limitation initative, are poor solutions that have the potential to divide Democrats, instead of bringing them together to solve a complex problem with widespread input that takes into account all affected interests.
While there are lots of ways to achieve affordable housing, the Republican solution is to encourage sprawl, substantially curtail zoning and building regulation, oppose impact fees, oppose habitability requirements for rental housing, fight environmenal species protections in new developments, and permit predatory lending practices that allow marginally eligible people to qualify for loans. New, low end subdivisions in Adams County and all points North have essentially followed this recipe.
This approach, of course, has multiple downsides and imposes significant externalities on the public. Leaving urban school real estate empty, while using tax dollars from old residents to build new schools is wasteful. Sprawl drives new government expenditures for road and highway construction, increasing vehicle miles traveled adding to gasoline consumption (and in turn to pollution) and to congestion on roads, and eliminates habitats, air purification from plants, and flood buffers from the environment. Crappy houses are vulnerable in disasters and can harm residents. Marginal lending practices lead to foreclosures and predictable personal financial tragedies.
On the other hand, pure opposition to growth that the economy is driving has its own problems. Portland, Oregon, with its urban growth boundary may be compact, remarkably undependent upon automobiles, and in many other ways desirable, but the limits on growth have also produced a dramatic rise in housing prices which has hurt the poor and working class residents of the area of the most.
There are solutions. For example, while zoning codes have their place, removing the provisions that serve as the greatest barriers to infill development can prevent regulatory burdens from forcing developers interested in infill development, a lynch pin of Denver's approach for some time, from being forced elsewhere. Likewise, building code provisions that require upgrades to current codes when old buildings are renovated which are so daunting that renovations don't happen at all, may prevent at least modest gains from being achieved. If the choice is between upgrading a non-ADA accessable building to add fire sprinklers, but not elevators, and doing nothing, allowing an upgrade may make sense Aesthetic considerations in building codes, like brick fascade requirements, can also be a barrier to affordable housing. Impact fees, like one stretched out over ten years being considered by Aurora, can level the playing field, particularly in exurban areas where infrastructure must be created from scratch from whole cloth.
One also has to look at secondary incentives. Why isn't much land zoned for multi-family housing, which permits higher population densities and less sprawl in an often affordable fashion? One reason is NIMBY politics, but equally powerful is the financial incentives placed on existing municipal governments by the Gallagher Amendment and heavy use of sales taxes to finance municipal government. Apartment buildings and condominiums generate no sales taxes and produce property taxes far below the actual cost of providing services to residents because residential property is deliberately undervalued, while commercial property is deliberately overvalued. A mall generates a great deal of tax revenue compared to service costs, and so is something almost every municipality tries to encourage, to the point of being counterproductive. Apartment buildings generate little tax revenue, so they are discouraged outside unincorporated territory (where even a credible threat to form a developer controlled municipality can secure county compliance with zoning objectives of property owners).
And, one also has to look at the ultimate objective. No one really wants "cheap housing", they want "affordable housing" which can be secured by increasing ability to pay, as well as by building inexpensive housing stock. For example, most ski resorts have a shortage of housing that workers can afford. But, increasing pay for ski resort workers can solve the affordable housing problem there just as well, indeed better, than building cheap housing far from the resorts.
The bottom line, however, is that it is a complex issue, and that crude solutions, like Initiative 76 (currently on the Colorado Supreme Court docket), the affordable housing and growth limitation initative, are poor solutions that have the potential to divide Democrats, instead of bringing them together to solve a complex problem with widespread input that takes into account all affected interests.
Australia Limits Asset Protection
The U.S. Bankruptcy Code was recently amended and one of the many changes involve limit the benefit of what are called "fraudulent transfers" (i.e. asset transfers designed to avoid creditors).
Australia's new bankruptcy code amendments have taken similar measures which are in many respects more direct, cutting through the Gordian knot of legal doctrine behind many such methods, in what could be a model for American lawmakers:
Some of biggest impacts are predicted to be on business debts from businesses with no limited liability protection, and in creating an incentive to share business income with a spouse so that both will have contributed financially to household expenses, so a house is not fully attributed to an earner spouse.
Australia's new bankruptcy code amendments have taken similar measures which are in many respects more direct, cutting through the Gordian knot of legal doctrine behind many such methods, in what could be a model for American lawmakers:
[T]he new laws allow a trustee in bankruptcy to sell the family home on behalf of creditors even if only one spouse declares bankruptcy and regardless of whose name is on the title to the property. Moreover, the amendments double the time period in which a bankruptcy trustee may access the bankruptcy assets from 2 years before the filing of bankruptcy to 4 years for “under market” transactions, which are generally assets that are transferred to relatives, including a spouse, through a gift or a sale for less than market value.The law also allows a court to look through the title of property to consider who contributed financially to its purchase and maintenance.
Some of biggest impacts are predicted to be on business debts from businesses with no limited liability protection, and in creating an incentive to share business income with a spouse so that both will have contributed financially to household expenses, so a house is not fully attributed to an earner spouse.
Earliest Birds Aquatic
Some of the earliest birds were aquatic (like ducks). This suggests that rather than developing wings to glide, like sugar gliders, they may have developed them to swim and latter adapted to the air.
Progress In Fighting Leukemia
The husband of a cousin of mine has been diagnosed with leukemia (crudely speaking, blood cancer). Not long ago that would have been a death sentence. But, prospects for treating it are much improved from just a few years ago.
I recently attended a business meeting with a woman in full remission from the disease. Science News suggests why this might be possible:
I recently attended a business meeting with a woman in full remission from the disease. Science News suggests why this might be possible:
In the past few years, the breakthrough drug imatinib has changed chronic myeloid leukemia from a death sentence to a treatable disease. But 17 percent of patients taking the drug, also called Gleevec, become resistant to its protective effects over 5 years, and their cancer recurs.Here's to hope through science.
Now, two experimental drugs pick up where imatinib leaves off. In many patients with chronic myeloid leukemia (CML) that's impervious to imatinib, the new compounds suppress the malignancy, two studies show.
"In the 1990s, when we saw a patient with CML, we gave them the bad news that they were going to live 3 to 5 years," says hematologist-oncologist Hagop Kantarjian of the M.D. Anderson Cancer Center in Houston, who coauthored both studies. With imatinib and the new drugs, most CML patients may live a normal life. "And with some refinements, these drugs might cure most patients," Kantarjian adds.
The new drugs, called dasatinib and nilotinib, target the same protein that imatinib does. . . .
Patients with the less aggressive phase of the cancer showed the best results. Of 40 such patients given dasatinib, 37 had their disease go into remission, as indicated by their normal blood cell counts. So did 11 of 12 such patients who received nilotinib, the researchers report in the June 15 New England Journal of Medicine.
Patients benefited less if their imatinib-resistant CML had already turned aggressive. Fewer than half of such patients went into remission during treatment with either drug. Some patients with highly aggressive leukemia died during the study.
In the United States, more than 90 percent of CML cases are diagnosed in the least aggressive phase.
A Fool For A Client?
The rub goes that a man acts as his own lawyer has a fool for a client. (The best attribution I could find was to a man by the name of Hunt, with no first name and no date or source.) This is widely believed by judges and lawyers alike. In a number of high profile cases this has seemed abundantly clear. But, when you move from anecdote to an empirical study, the waters muddy.
Perhaps conventional wisdom hasn't spent enough time listening to Douglas Adams who reminds us that:
[T]he evidence establishes that pro se felony defendants in state court do just as well as represented felony defendants, and the vast majority of pro se felony defendants - nearly 80% - displayed no signs of mental illness.Another recent study is somewhat less positive but recognizes self-representation as a good option for some defendants who have done so.
Perhaps conventional wisdom hasn't spent enough time listening to Douglas Adams who reminds us that:
The problem with designing something completely foolproof is to underestimate the ingenuity of a complete fool.
Frist Seeks To Bribe Dems To Repeal Estate Tax
The rich really want to estate tax to go away, so Senate Majority leader Frist will seek to bring up an estate tax deal again before the 4th of July. Why bother when he just came up three votes short on June 9?
This time, something short of full repeal may be on the table.
Frist, a Tennessee Republican, said Republicans would add inducements to the measure to attract votes from Senate Democrats who opposed repeal on June 8, when a procedural measure that would have led to a vote on full fell three votes short.Inducements aren't clarified, but I suspect that they smell like pork.
This time, something short of full repeal may be on the table.
18 June 2006
Common Cause Suffering Memory Failure
Common Cause is currently backing a proposal to replace an appointed clerk and recorder, and a non-partisan election commission with an partisan elected clerk and recorder to run elections. I'll offer just a couple of words regarding why it is a bad idea to have a partisan elected official run elections: Katherine Harris.
Colorado's recent experience with partisan elected officials running elections and the ministerial duties of the parallel office of Secretary of State is equally dismal.
Sometimes the problem isn't the system, sometimes it is simply officials who aren't up to the task. Common cause would be better served by recruiting good candidates to the current commission.
Colorado's recent experience with partisan elected officials running elections and the ministerial duties of the parallel office of Secretary of State is equally dismal.
Sometimes the problem isn't the system, sometimes it is simply officials who aren't up to the task. Common cause would be better served by recruiting good candidates to the current commission.
16 June 2006
Regulation We Can Do Without.
At least the United States, unlike Denmark and much of the rest of Northern and Western Europe, you are not required to get governmental approval for names for your kids. My own children have names, a hypenated surname and Korean middle names, that almost certainly wouldn't have passed muster without elaborate efforts under Danish style laws. Government can go too far, and we manage just fine without limiting ourself to elaborate name regulations.
For what it is worth, this isn't an exclusively European problem. Korean regulation of names and regulation on marriage based not on bloodties, but on having similar names, is outrageous, and both the Koreans and Chinese generally have way too few surnames in common use.
For what it is worth, this isn't an exclusively European problem. Korean regulation of names and regulation on marriage based not on bloodties, but on having similar names, is outrageous, and both the Koreans and Chinese generally have way too few surnames in common use.
Why Don't Car Makers Make A Commuter Car?
While I have a one car family, most families do not. Most families have, at least, two vehicles, and many have three or more.
It make a certain amount of sense to buy one of those vehicles to meet the family's peak vehicle needs -- perhaps mom, dad, the kids, and a couple of friends, their bicycles, and their luggage on a rugged dirt path to some vacation cottage during summer vacation or Christmas Break.
But, a huge share of all of the trips made by most families are single passenger trips to and from work, single passenger day trips to business meetings and single passenger overnight business trips. On trips like these, you bring nothing but a briefcase, a lunch box and maybe an overnight bag. At peak use, you might drive your spouse to dinner, or a colleague from the office to lunch. In short, all many families need in a second vehicle is the passenger and luggage capacity of a Mazda Miata and nothing more. But, the vast majority of these trips will be made in urban traffic where a powerful engine does nothing, and people don't need their commuter car to have leather seats. An ability to park in a tight spot is more useful. The point is to keep second car costs down, not to pay the Mazda Miata price of about $26,700 MSRP.
True, there are lots of vehicles on the market which are fairly inexpensive and small, mostly targetted at single young people straight out of high school or college who needs a car, which will meet all of their needs, to drive with their friends to a party or the beach, cart all their worldly goods from apartment to apartment. The Honda Fit is the latest example of the genre and the pictures on the company webpage linked show the target audience. Another similar vehicle is the Toyota Yaris ($10,000-$13,000 MSRP, 34 mpg city, 40 mpg highway).
But, people in their thirties, forties and fifties commuting to work are a little vain. They don't want to convey the image that they are college kids, would enjoy some distinctive styling, and don't need the back seat and the gobs of potential cargo space found in most of these vehicles. They need two seats and a little bitty trunk, preferrably opaque so that no one will be tempted by the valuables you have in there.
A couple of German car companies have come close. The new VW Beetle (MSRP starting at $17,180 and up to 37 mpg city and 44 mpg highway in the diesel version), and the new Mini Cooper with BMW engineering, starting at $16,950 MSRP (27 mpg city, 35 mpg highway), are both nicely styled small vehicles, primarily designed for two passengers, although both have back seats,with only modest cargo space and decent mileage. No American and Japanese manufacturer, however, has a car in the U.S. market that is a good fit for the second commuter car role. Even the Beetle and the Mini aren't optimal, as they devote weight (which impacts fuel economy) and length (which impacts parking usefulness) to a back seat that can actually hold a couple of adults, which also contributes a little to the price of the vehicle, both in terms of materials cost and necessary engine size.
Why can't they make a two seater commuter car, with a small trunk, which is pretty inexpensive (I'm thinking under $14,000), gets good mileage (is 40 mpg city and 50 mpg highway too much to ask?), easy to park, and looks decent? It doesn't have to have a powerful engine. It doesn't have to have sports car styling. But, it does have to be something respectable.
It make a certain amount of sense to buy one of those vehicles to meet the family's peak vehicle needs -- perhaps mom, dad, the kids, and a couple of friends, their bicycles, and their luggage on a rugged dirt path to some vacation cottage during summer vacation or Christmas Break.
But, a huge share of all of the trips made by most families are single passenger trips to and from work, single passenger day trips to business meetings and single passenger overnight business trips. On trips like these, you bring nothing but a briefcase, a lunch box and maybe an overnight bag. At peak use, you might drive your spouse to dinner, or a colleague from the office to lunch. In short, all many families need in a second vehicle is the passenger and luggage capacity of a Mazda Miata and nothing more. But, the vast majority of these trips will be made in urban traffic where a powerful engine does nothing, and people don't need their commuter car to have leather seats. An ability to park in a tight spot is more useful. The point is to keep second car costs down, not to pay the Mazda Miata price of about $26,700 MSRP.
True, there are lots of vehicles on the market which are fairly inexpensive and small, mostly targetted at single young people straight out of high school or college who needs a car, which will meet all of their needs, to drive with their friends to a party or the beach, cart all their worldly goods from apartment to apartment. The Honda Fit is the latest example of the genre and the pictures on the company webpage linked show the target audience. Another similar vehicle is the Toyota Yaris ($10,000-$13,000 MSRP, 34 mpg city, 40 mpg highway).
But, people in their thirties, forties and fifties commuting to work are a little vain. They don't want to convey the image that they are college kids, would enjoy some distinctive styling, and don't need the back seat and the gobs of potential cargo space found in most of these vehicles. They need two seats and a little bitty trunk, preferrably opaque so that no one will be tempted by the valuables you have in there.
A couple of German car companies have come close. The new VW Beetle (MSRP starting at $17,180 and up to 37 mpg city and 44 mpg highway in the diesel version), and the new Mini Cooper with BMW engineering, starting at $16,950 MSRP (27 mpg city, 35 mpg highway), are both nicely styled small vehicles, primarily designed for two passengers, although both have back seats,with only modest cargo space and decent mileage. No American and Japanese manufacturer, however, has a car in the U.S. market that is a good fit for the second commuter car role. Even the Beetle and the Mini aren't optimal, as they devote weight (which impacts fuel economy) and length (which impacts parking usefulness) to a back seat that can actually hold a couple of adults, which also contributes a little to the price of the vehicle, both in terms of materials cost and necessary engine size.
Why can't they make a two seater commuter car, with a small trunk, which is pretty inexpensive (I'm thinking under $14,000), gets good mileage (is 40 mpg city and 50 mpg highway too much to ask?), easy to park, and looks decent? It doesn't have to have a powerful engine. It doesn't have to have sports car styling. But, it does have to be something respectable.
Mortgage History
The history of the American mortgage is found here in a way that sums up some points I made in a recent post on Latin American economics.
Immigration Paperwork Screw Things Up.
Ten thousand marriages have been delayed because the Department of Homeland Security has failed to come up with a new visa form.
And, millions of poor and disabled Americans will have trouble getting medical care starting July 1, 2006, due to new Medicaid proof of citizenship requirements.
Elsewhere, citizenship requirements have removed large numbers of married women from state voter rolls, because identification requirements like birth certificates weren't matched to the married names and marriage licenses weren't promptly available.
And, millions of poor and disabled Americans will have trouble getting medical care starting July 1, 2006, due to new Medicaid proof of citizenship requirements.
Elsewhere, citizenship requirements have removed large numbers of married women from state voter rolls, because identification requirements like birth certificates weren't matched to the married names and marriage licenses weren't promptly available.
Polygamy in Morocco
Morroco had 841 polygamous marriages in 2005. This was a modest drop from a previous year due to a law requiring a first spouse to consent to new marriages of the husband.
Save Common Law Marriage
A freak common law marriage case from the Colorado Court of Appeals will almost certainly result in legislative action is the Colorado Supreme Court can't manage to correct it first. One temptation in that debate will be to abolish common law marriage all together. This would be a mistake.
Twelve Year Old Girls Married Without Parental Consent?
The case of In re Marriage of JMH and Rouse decided yesterday stunned Colorado. In it, the unanimous three judge panel held that common law marriages in Colorado are not subject to the age restrictions applicable to marriage license marriages in Colorado, only to the limitations of common law. It applied this conclusion to hold that a marriage between a fifteen year old girl and an older man was valid, even though it would have required a judge's permission, in addition to parental permission from both parents, for them to get a valid marriage license. It held that the age of consent for a common law marriage was fourteen for a boy and twelve for a girl.
It would be possible to read the statute this way as the judicial consent provision is worded to specificaly refer to the issuance of marriage licenses (in an effort to preserve the validity of a valid out of state common law marriage). But, this is still a bad decision.
There are lots of ways that the court court have reached a better result.
For example, it would have held that the legislature intended the age limitations for marriage licenses in Colorado to govern common law marriages as well. If they did not, they would be an absurdity, because if a man and woman can have a common law marriage without judicial or parental approval, why would anyone ever seek it? An interpretation that would render a statutory law an absurdity is disfavored.
Alternatively, common law is made by judges and need not slavishly follow the common law of England from centuries ago. It can recognize evolving realities.
When the English common law evolved, there were no marriage licenses, now, there is no state in the United States where a person may obtain a marriage license under the age of eighteen without parental consent, and that evolving reality could inform the standard that judges should set as a judge made common law standard in Colorado.
Colorado's statutory rape laws could also impact the decision. Section 18-3-409, Colorado Revised Statutes, provides that licensed, common law, or "putative" marriage is a defense to a rape offense only as stated in a specific offense.
Marriage is a defense to statutory rape, which in Colorado comes in two types. Felony statutory rape is committed when someone knowingly has sex with someone not their spouse who is fourteen or younger (if they are more than four years apart in age). Section 18-3-402, Colorado Revised Statutes and Section 18-3-405, Colorado Revised Statutes. Misdemeanor statutory rape is committed when one knowingly has sex with someone not their spouse who is sixteen years of age of younger (if they are more than ten years apart in age). Section 18-3-402, Colorado Revised Statutes. Marriage is also a defense to sexual assault by a person in position of trust. Section 18-3-405.3, Colorado Revised Statutes.
If sex with someone under fifteen is highly regulated, and sex with someone under seventeen is often a crime, and judicial consent is normally required for marriage under the age of sixteen, and parental consent is normally required for marriage under the age of eighteen, it is fair to infer that the social norms that established twelve as the age of consent for girls seeking to marry no longer apply.
Odd Facts Make Bad Law?
The facts of the JMH case are certainly freakish. Who are these people?
It was also not particularly well argued at trial or on appeal, in all probability, because the husband did not have an attorney and was incarcerated at the time.
By the time the case went to trial, the wife was over the age of eighteen and appears to have ratified her marriage. But, the Depatment of Social Services claims that the matter is not moot because a dependency and neglect proceeding is still pending. This conclusion is dubious, and largely unexamined in the decision, as well. If a marriage exists now, and the girl, now eighteen years old, is emancipated now, what purpose does a dependency and neglect proceeding, whose main purpose of the terminate parental rights, matter now? A finding that the case was moot would be a reasonable one which would void this precedent.
Also, in this odd case, the Adams County Clerk actually issued a marriage license to the couple in the case, with the mother's signed and notarized approval, despite the fact that the wife disclosed that she was fifteen years old at the time and did not present evidence of judicial approval.
The marriage license alone, even if invalidly issued, would establish a "putative marriage" under Colorado law (i.e. a relationship in which at least one party as a reasonable bona fide belief that he or she is married, even if he is not), which would appear to be a defense to any criminal prosecution for statutory rape in any parallel case, given the way the statute is worded, because the criminal statute simply uses the word "spouse", which could be more clear, but the language of the marriage defense statute specifically mentions marriages by license, common law or putative spouse.
Thus, it isn't at all clear that the validity of the marriage at age fifteen matters, since the couple is married now and the girl is an adult.
Common Law Marriage is Generally Good
It would be an easy enough matter, if the Colorado Supreme Court does not take up the case, to resolve the problem legislatively. For example, the legislature could simply enact a statute which states:
"No common law marriage may be entered into in this state, after the effective date of this act, if one of the parties is less than eighteen years of age old. In all other respects, the law of common law marriage in Colorado shall remain unchanged."
Thus, minors would need a marriage license to wed in Colorado, protecting the parental consent and judicial consent provisions there, and the full faith and credit requirement that marriages valid where entered into outside the state be honored, would remain in place.
But, the temptation to end common law marriage all together should be resisted. The usual common law marriage involves people who live together has husband and wife, often for an extended period, often have children, and live in all respects as married people, without any element of child abuse towards a young wife, and without any difference from any other marriage but a piece of paperwork.
To end common law marriage in Colorado would have a huge impact upon divorce. Homemaker common law wives who are divorcing would bear the brunt of the punishment, by being denied an equitable division of property held in the husband's name and being denied alimony. It would also cost these couples health insurance benefits, tax benefits, and inheritance rights (more often than not, these couples won't have a will either, they just aren't good at paperwork). Making such important substative right turn on the bureaucratic aptitute of a couple in their late teens or twenties is bad public policy. Common law marriage, as applied, produces just and equitable results.
But, there is no reason that common law marriage should be used to shield child abusers from criminal liability, at least, outside the remarkably odd case where a county clerk misleads an individual by issuing a marriage license where that was improper.
Twelve Year Old Girls Married Without Parental Consent?
The case of In re Marriage of JMH and Rouse decided yesterday stunned Colorado. In it, the unanimous three judge panel held that common law marriages in Colorado are not subject to the age restrictions applicable to marriage license marriages in Colorado, only to the limitations of common law. It applied this conclusion to hold that a marriage between a fifteen year old girl and an older man was valid, even though it would have required a judge's permission, in addition to parental permission from both parents, for them to get a valid marriage license. It held that the age of consent for a common law marriage was fourteen for a boy and twelve for a girl.
It would be possible to read the statute this way as the judicial consent provision is worded to specificaly refer to the issuance of marriage licenses (in an effort to preserve the validity of a valid out of state common law marriage). But, this is still a bad decision.
There are lots of ways that the court court have reached a better result.
For example, it would have held that the legislature intended the age limitations for marriage licenses in Colorado to govern common law marriages as well. If they did not, they would be an absurdity, because if a man and woman can have a common law marriage without judicial or parental approval, why would anyone ever seek it? An interpretation that would render a statutory law an absurdity is disfavored.
Alternatively, common law is made by judges and need not slavishly follow the common law of England from centuries ago. It can recognize evolving realities.
When the English common law evolved, there were no marriage licenses, now, there is no state in the United States where a person may obtain a marriage license under the age of eighteen without parental consent, and that evolving reality could inform the standard that judges should set as a judge made common law standard in Colorado.
Colorado's statutory rape laws could also impact the decision. Section 18-3-409, Colorado Revised Statutes, provides that licensed, common law, or "putative" marriage is a defense to a rape offense only as stated in a specific offense.
Marriage is a defense to statutory rape, which in Colorado comes in two types. Felony statutory rape is committed when someone knowingly has sex with someone not their spouse who is fourteen or younger (if they are more than four years apart in age). Section 18-3-402, Colorado Revised Statutes and Section 18-3-405, Colorado Revised Statutes. Misdemeanor statutory rape is committed when one knowingly has sex with someone not their spouse who is sixteen years of age of younger (if they are more than ten years apart in age). Section 18-3-402, Colorado Revised Statutes. Marriage is also a defense to sexual assault by a person in position of trust. Section 18-3-405.3, Colorado Revised Statutes.
If sex with someone under fifteen is highly regulated, and sex with someone under seventeen is often a crime, and judicial consent is normally required for marriage under the age of sixteen, and parental consent is normally required for marriage under the age of eighteen, it is fair to infer that the social norms that established twelve as the age of consent for girls seeking to marry no longer apply.
Odd Facts Make Bad Law?
The facts of the JMH case are certainly freakish. Who are these people?
Thursday's decision involves a girl known in legal documents as J.M.H., who started living with Willis Lee Rouse in April 2002 when she was 14 and Rouse was 34.This isn't a statutory rape case. It isn't even a dependency and neglect or juvenile delinquency case, although a parallel dependency and neglect case is pending. It is an annulment case, which is being brought despite the fact that both parties to the marriage are over the age of eighteen, are not described in the facts as being mentally incompetent, and neither party to the marriage seeks to end the marriage.
Rouse is now a 38-year-old inmate at the Fremont Correctional Facility, serving four years for stalking and escape. J.M.H. recently turned 18. . . .
Rouse is in prison in connection with a December 2002 arrest for sexual assault on a child. Westminster police arrested him for allegedly having sex with a girl who was living with him at the time, a police report said.
The girl became pregnant, but told investigators she did not have sex with Rouse and that the father of the child was someone else. Police removed her from Rouse's home and returned her to her mother, and the case was reported to Adams County Social Services, the report said.
According to court records, Rouse pleaded guilty to a stalking charge in the case, and all sexual assault charges were dropped. He was sentenced to four years.
It was also not particularly well argued at trial or on appeal, in all probability, because the husband did not have an attorney and was incarcerated at the time.
By the time the case went to trial, the wife was over the age of eighteen and appears to have ratified her marriage. But, the Depatment of Social Services claims that the matter is not moot because a dependency and neglect proceeding is still pending. This conclusion is dubious, and largely unexamined in the decision, as well. If a marriage exists now, and the girl, now eighteen years old, is emancipated now, what purpose does a dependency and neglect proceeding, whose main purpose of the terminate parental rights, matter now? A finding that the case was moot would be a reasonable one which would void this precedent.
Also, in this odd case, the Adams County Clerk actually issued a marriage license to the couple in the case, with the mother's signed and notarized approval, despite the fact that the wife disclosed that she was fifteen years old at the time and did not present evidence of judicial approval.
The marriage license alone, even if invalidly issued, would establish a "putative marriage" under Colorado law (i.e. a relationship in which at least one party as a reasonable bona fide belief that he or she is married, even if he is not), which would appear to be a defense to any criminal prosecution for statutory rape in any parallel case, given the way the statute is worded, because the criminal statute simply uses the word "spouse", which could be more clear, but the language of the marriage defense statute specifically mentions marriages by license, common law or putative spouse.
Thus, it isn't at all clear that the validity of the marriage at age fifteen matters, since the couple is married now and the girl is an adult.
Common Law Marriage is Generally Good
It would be an easy enough matter, if the Colorado Supreme Court does not take up the case, to resolve the problem legislatively. For example, the legislature could simply enact a statute which states:
"No common law marriage may be entered into in this state, after the effective date of this act, if one of the parties is less than eighteen years of age old. In all other respects, the law of common law marriage in Colorado shall remain unchanged."
Thus, minors would need a marriage license to wed in Colorado, protecting the parental consent and judicial consent provisions there, and the full faith and credit requirement that marriages valid where entered into outside the state be honored, would remain in place.
But, the temptation to end common law marriage all together should be resisted. The usual common law marriage involves people who live together has husband and wife, often for an extended period, often have children, and live in all respects as married people, without any element of child abuse towards a young wife, and without any difference from any other marriage but a piece of paperwork.
To end common law marriage in Colorado would have a huge impact upon divorce. Homemaker common law wives who are divorcing would bear the brunt of the punishment, by being denied an equitable division of property held in the husband's name and being denied alimony. It would also cost these couples health insurance benefits, tax benefits, and inheritance rights (more often than not, these couples won't have a will either, they just aren't good at paperwork). Making such important substative right turn on the bureaucratic aptitute of a couple in their late teens or twenties is bad public policy. Common law marriage, as applied, produces just and equitable results.
But, there is no reason that common law marriage should be used to shield child abusers from criminal liability, at least, outside the remarkably odd case where a county clerk misleads an individual by issuing a marriage license where that was improper.
15 June 2006
Colorado Attorney Joins Hall of Shame
How bad does your appellate brief have to be before you are personally sanctioned for doing a completely shitty job with an attorneys' fee award by the Colorado Court of Appeals? Ask Richard K. Blundell (attorney registration number #10358) of Greeley, Colorado who just received this punishment for his brief in a published opinion of the Colorado Court of Appeals today.
It doesn't help that the only authority he cited in the worker's compensation case was the appellate court rule on publication of opinions (be careful what you wish for, the opinion showing him make an utter fool of himself was published), Plessy v. Ferguson and Dred Scott.
We hope that he simply used bad judgment in agreeing to sign a brief actually prepapred by a delusional client. If not, he has reached a point at which he needs to hang up his license to practice law.
It doesn't help that the only authority he cited in the worker's compensation case was the appellate court rule on publication of opinions (be careful what you wish for, the opinion showing him make an utter fool of himself was published), Plessy v. Ferguson and Dred Scott.
We hope that he simply used bad judgment in agreeing to sign a brief actually prepapred by a delusional client. If not, he has reached a point at which he needs to hang up his license to practice law.
Denver Not In A Bubble; Grand Junction A Concern
Grand Junction, Colorado's real estate market may be on thin ice, but Denver's real estate market is not heading for a correction. This is the bottom line from a report estimating the degree to which various real estate markets are overvalued or undervalued as of the first quarter of 2006, prepared by mortgage servicing company National City, and consultancy Global Insight.
Most of the metropolitan areas studied in Colorado are only slightly inflated, which means that the likelihood of a downward correct in real estate prices here is very low. The Pueblo, Colorado market is 3.0% overvalued. Denver's market is 5.9% overvalued. The Colorado Springs, Colorado market is 6.4% overvalued. The Boulder, Colorado real estate market is 15.6% overvalued. The Greeley, Colorado market is 20.8% overvalued. And, the Grand Junction, Colorado market is 27.89% overvalued. By comparison, the most overvalued real estate market in the country, Naples, Florida, is 102.5% overvalued, and much of California's real estate market is grossly overvalued.
Grand Junction's growing house prices are likely a result of another oil industry boom.
The exuberance in the Greeley market is likely a product of its development into a bedroom community, not only for people in nearby Fort Collins, for also for people who work as far away as Boulder and Denver, as the drive until you can afford it trend continues.
Denver is showing the aftereffects of a sustained period of sluggish housing price growth after trends towards inflated prices a few years ago, and the impact of an exceptionally high rate of foreclosure that has been experienced in Denver on its real estate market, which has a remarkably high number of properties for sale at the moment.
The only sustained correction of real estate values in Colorado in the last twenty years took place in Denver from the first quarter of 1985 to the first quarter of 1989, during which real estate prices dropped 12%. Immediately prior to that correction, the Denver real estate market was overvalued by 18% according to the report's methodology. No market not at least 14% overvalued has experiences a sustained (two year or more) correction of at least 10% of value in the past two decades anywhere in the nation, and a majority of corrections in the past two decades have been preceeded by an overvaluation of, at least, 30%.
This is good news for the Denver economy. An overvalued real estate market tends to be a leading indicator of economic trouble on the horizon. Foreclosures tend to be a lagging indicator that flow from economic hard times already in place for some time. Thus, the real estate market is unlikely to slump out of control, and this stability may provide a foundation for an economic recovery in the Denver metropolitan area.
Grand Junction, in contrast, is in a very fragile condition. If the oil boom motivated by currently sky high oil prices falls apart, if for example, tensions ease in the Middle East, it could see another smaller verions of Black Monday: "May 2, 1982. The day Exxon shut down its $5 billion Colony Oil Shale project.", which devistated Grand Junction's economy and took a couple of decades for it to really recover from economically. Oil shale is back now.
"Shell thinks the whole thing is economic at a crude price of $30.", so with oil prices North of $70 a barrel right now, the boom will continue, but the entire project hangs in the balance on that commodity price. A drop in oil prices could cancel the project again, and while Grand Junction would be quite as devistated now as it was then, because it is diversified its economy in the meantime, it would certainly take a heavy hit if that happened.
Hat Tip to Daily Kos diarist bonddad.
Most of the metropolitan areas studied in Colorado are only slightly inflated, which means that the likelihood of a downward correct in real estate prices here is very low. The Pueblo, Colorado market is 3.0% overvalued. Denver's market is 5.9% overvalued. The Colorado Springs, Colorado market is 6.4% overvalued. The Boulder, Colorado real estate market is 15.6% overvalued. The Greeley, Colorado market is 20.8% overvalued. And, the Grand Junction, Colorado market is 27.89% overvalued. By comparison, the most overvalued real estate market in the country, Naples, Florida, is 102.5% overvalued, and much of California's real estate market is grossly overvalued.
Grand Junction's growing house prices are likely a result of another oil industry boom.
The exuberance in the Greeley market is likely a product of its development into a bedroom community, not only for people in nearby Fort Collins, for also for people who work as far away as Boulder and Denver, as the drive until you can afford it trend continues.
Denver is showing the aftereffects of a sustained period of sluggish housing price growth after trends towards inflated prices a few years ago, and the impact of an exceptionally high rate of foreclosure that has been experienced in Denver on its real estate market, which has a remarkably high number of properties for sale at the moment.
The only sustained correction of real estate values in Colorado in the last twenty years took place in Denver from the first quarter of 1985 to the first quarter of 1989, during which real estate prices dropped 12%. Immediately prior to that correction, the Denver real estate market was overvalued by 18% according to the report's methodology. No market not at least 14% overvalued has experiences a sustained (two year or more) correction of at least 10% of value in the past two decades anywhere in the nation, and a majority of corrections in the past two decades have been preceeded by an overvaluation of, at least, 30%.
This is good news for the Denver economy. An overvalued real estate market tends to be a leading indicator of economic trouble on the horizon. Foreclosures tend to be a lagging indicator that flow from economic hard times already in place for some time. Thus, the real estate market is unlikely to slump out of control, and this stability may provide a foundation for an economic recovery in the Denver metropolitan area.
Grand Junction, in contrast, is in a very fragile condition. If the oil boom motivated by currently sky high oil prices falls apart, if for example, tensions ease in the Middle East, it could see another smaller verions of Black Monday: "May 2, 1982. The day Exxon shut down its $5 billion Colony Oil Shale project.", which devistated Grand Junction's economy and took a couple of decades for it to really recover from economically. Oil shale is back now.
"Shell thinks the whole thing is economic at a crude price of $30.", so with oil prices North of $70 a barrel right now, the boom will continue, but the entire project hangs in the balance on that commodity price. A drop in oil prices could cancel the project again, and while Grand Junction would be quite as devistated now as it was then, because it is diversified its economy in the meantime, it would certainly take a heavy hit if that happened.
Hat Tip to Daily Kos diarist bonddad.
National Monument A Good Call
Despite trying hard not to, occasionally the Bush Administration does the right thing. It did so today when it elevated the Northwestern Hawaiian Island Coral Reef Ecosystem Reserve to National Monument status, supervised by National Oceanic and Atmospheric Administration in the Commerce Department.
What is it?
As a national monument, the designated area will receive stronger environmental protections.
The decision implements one of the growing consensus concepts in endangered species protection: Endangered species tend to be found clustered in key habitats, and providing strong protections for these key habitats through ecosystem management is the key to preventing these species from going extinct, because individual species function within an entire ecosystem. Usually, a species within an ecosystem isn't singled out for trouble, while the other specicies in the ecosystem are thriving. There is a web of life in any given habitat, and all species unique to a habitat rise and fall together to a great extent.
As Brian Nowicki, conservation biologist at the Center for Biological Diversity, put it:
The Politics and History
This action, under the Antiquities Act of 1906 allows for a more flexible conversion to higher protections than national park status and does not require Congressional approval. The area in Hawaii was first designated for protection in 1913 by Theodore Roosevelt, with protections expanded by President Clinton in a 2000 executive order. President Clinton used the power to create similar protections in Colorado in the Canyon of the Ancients National Monument in 2000, after having a few months earlier upgraded the Black Canyon of the Gunnison National Monument to National Park status. One wonders if the departure of Coloradan Gail Norton from her post as Secretary of Interior in the Bush Administration, where she had been a firm opponent of expanding habitat protections during her tenure, was a factor in the timing of this decision, and in the decision to give NOAA, rather than the Fish and Wildlife Service of the Interior Department, jurisdiction over the monument.
Let's hope that we see more habitat decisions along these lines in the future.
What is it?
As a national monument, the designated area will receive stronger environmental protections.
The area comprises 140,000 square miles of ocean dotted with dozens of coral reefs and tiny islands; it is a 1,400-mile-long, 100-mile-wide swath of pristine marine habitat larger than all U.S. national parks combined.Another key element of the area is its role as a breeding ground for sharks. This is particularly important in light of an emerging and counterintuitive discovery among ecologists that predator populations may be even more important to an ecosystem that the health of species at the bottom of the food pyramid in an ecosystem. Predators are not merely parasites on an ecosystem who serve as canaries in the mine to indicate its impending troubles. They actually drive ecosystem health.
The area is considered an ecological jewel. It is a nesting and breeding site to more than 14 million seabirds and home to 7,000 marine and terrestrial species, more than a quarter of which are found nowhere else in the world.
It is an important nesting area for the threatened Hawaiian green sea turtle and home to the endangered Hawaiian monk seal, of which only 1,300 remain. The coral reefs of the region provide vital breeding and nursery habitat for numerous fish and other marine species.
The decision implements one of the growing consensus concepts in endangered species protection: Endangered species tend to be found clustered in key habitats, and providing strong protections for these key habitats through ecosystem management is the key to preventing these species from going extinct, because individual species function within an entire ecosystem. Usually, a species within an ecosystem isn't singled out for trouble, while the other specicies in the ecosystem are thriving. There is a web of life in any given habitat, and all species unique to a habitat rise and fall together to a great extent.
As Brian Nowicki, conservation biologist at the Center for Biological Diversity, put it:
Habitat loss and destruction is the No. 1 reason why species are imperiled. Clearly, if a species is close to extinction, it's occupying a habitat far smaller than it was when it was healthy. How can we expect a species to rebound if we don't give it expanded habitat to do so?As set forth in another study, a habitat orientation allows us be proactive and prevent species from being endangered in the first place:
Ecosystem-level protection has a potential to avoid some species conservation problems in the future. . . . . A shift in focus to habitat protection and recovery planning is likely to make the species conservation goal of the ESA [Endangered Species Act] more attainable while reducing uncertainty. . . . Rather than waiting for the number of members of a species to get low enough to worry about extinction, a more effective strategy would be to identify potential problems and mitigate them before it becomes necessary to invoke the ESA. If that cannot be done through cooperation, then the ESA with its protection and recovery mandates becomes necessary. . . . The solution in most cases is providing adequate habitat.This approach is a departure from a previous approach that looked at one species at a time in isolation, has focused on threats specific to that species, and has focused on imposing restrictions on piecemeal parcels of land held by private landowners. This has often proven difficult to enforce and has generated controversy, without prioritizing critical habitats over areas of relatively marginal importance.
The Politics and History
This action, under the Antiquities Act of 1906 allows for a more flexible conversion to higher protections than national park status and does not require Congressional approval. The area in Hawaii was first designated for protection in 1913 by Theodore Roosevelt, with protections expanded by President Clinton in a 2000 executive order. President Clinton used the power to create similar protections in Colorado in the Canyon of the Ancients National Monument in 2000, after having a few months earlier upgraded the Black Canyon of the Gunnison National Monument to National Park status. One wonders if the departure of Coloradan Gail Norton from her post as Secretary of Interior in the Bush Administration, where she had been a firm opponent of expanding habitat protections during her tenure, was a factor in the timing of this decision, and in the decision to give NOAA, rather than the Fish and Wildlife Service of the Interior Department, jurisdiction over the monument.
Let's hope that we see more habitat decisions along these lines in the future.
14 June 2006
Cape Jasmine Treats Diabetes Type II
Most herbs, when facing scientific tests of their efficacy don't work. Cape jasmine (Gardenia jasminoides) fruits, in contrast, does appear to work to treat type 2 diabetes, just as claimed by Chinese herbalists. The herb is currently in animal testing.
It wouldn't be the first time. Aspirin had similar origins.
It wouldn't be the first time. Aspirin had similar origins.
Bush Administration Forum Shopping
Continuing a Bush Administration trend of moving detainees to obtain a favorable venue, the 10th Circuit has held that the Department of Homeland Security policy of moving illegal immigrant detainees from Wyoming and Montana where they are initially detained, in the 9th Circuit Court of Appeals, to Colorado, in the 10th Circuit Court of Appeals, for the purpose of benefitting from a more favorable precedent in the 10th Circuit works.
Estate Tax Repeal Losers
Everyone knows that the federal treasury loses significant funds if the federal estate tax is repealed. Few people know, however, that there are more taxpayers who pay more taxes after repeal, than there are taxpayers who receive a tax cut from estate tax repeal.
According to a study by Congress's nonpartisan Joint Committee on Taxation, 7,500 estates would be better off under full repeal in 2010 than under the 2009 rules -- but more than 60,000 would be worse off.At fault is the conversion from a stepped up basis for capital gains tax purposes at death to a carryover basis rule after repeal. For anyone with $1.3 million to $3.5 million in wealth and substantial appreciation in capital assets that has not been taxed, and some people a little over the $3.5 million level, estate tax repeal is a tax increase.
Subscribe to:
Posts (Atom)