Booze, women, and movies!

How large an estate could a working person build by investing rather than spending “every darn penny they have” on “booze or women or movies”? Jon Muller ran some numbers. -promoted by desmoinesdem

Senator Chuck Grassley commented on what he sees as the motivation behind opposition to eliminating the estate tax, as reported by the Des Moines Register.

“I think not having the estate tax recognizes the people that are investing, as opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies…”

As someone who resembles his remarks, I decided to run some numbers. Consider the following assumptions:

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Go green for less green: A guide to consumer renewable energy credits

Jon Muller crunched the numbers on a way for homeowners to claim they are using renewable energy without installing wind turbines or solar panels. -promoted by desmoinesdem

This post is for those who want to encourage renewable energy, and are willing to put their money where their mouth is. This isn’t for people who are merely willing to reduce consumption, which has the side benefit of actually saving money. We’re talking about people willing to pay more for their electricity if they think it’s renewable.

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We can fix the Affordable Care Act for $30 each

Jon Muller offers a short-term solution for a problem facing tens of thousands of Iowans. -promoted by desmoinesdem

I just read that Blue Cross and Blue Shield of Kansas City is pulling out of the Affordable Care Act Exchange Market. This is on the heels of an earlier announcement by Wellmark Blue Cross and Blue Shield in Iowa, which last month announced it too was retreating from the individual insurance market. Aetna and Medica have also said they will not sell individual policies to Iowans in 2018.

Keep in mind, these developments come at a time when enrollments started to fall after the Trump administration announced it would not enforce the penalties put in place by the last administration for the current year, penalties that were just beginning to get to the point of altering behavior. Indeed, Wellmark BCBS of Iowa stated that as one of the reasons for its departure from the market. The insurance companies were also afraid (with good reason) that their loss subsidies would not be extended into 2018. Neither Congress nor the President would offer up any such assurance.

It’s important first to understand what this means.

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Expect more downward revisions in Iowa revenue estimates

Jon Muller examines factors contributing to Iowa’s budget crunch. What do you want first: the bad news or the “quite disturbing” news? -promoted by desmoinesdem

The Iowa Revenue Estimating Conference (REC) reduced its FY 2017 estimate for General Fund Revenues by $106 million. That’s on top of the $96 million downward revision in December 2016. Since the original estimate used for FY 2017 appropriations (December 2015), cumulative downward revisions total $243 million on a $7.3 billion budget.

This has led to all the gnashing of teeth that comes every time revenues begin to slow. The REC has never been particularly prescient when it comes to predicting the turn in receipts, either on the way down or the way up. I have some insight into this phenomenon because I used to be a revenue estimator for the Iowa General Assembly, and wasn’t any better than they are now. Indeed, economic models in general are not very good at predicting turns in the business cycle until after they happen. They are very good at generating consensus forecasts that tend to magically predict the next year will look a lot like the current year, at least during stable periods.

What’s new this time around is, according to policy makers expressing concern about the downgrade, is the reduction in revenues during what is considered a reasonably healthy economy. In my view, the stress on the General Fund is actually due to two primary factors. The economy is perhaps not quite as robust as consensus opinion suggests. Secondly, it appears the cost of House File 2433 passed during the 2016 legislative session, a bill providing a sales tax exemption for items consumed in manufacturing processes, was dramatically understated.

I suspect those looking to blame the sluggishness on a downturn in the farm sector will be disappointed as farm income growth begins to turn positive. Those who believed hundreds of millions of dollars of tax cuts and credits would spur state revenue growth should be equally disappointed. It’s just not happening.

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The Jury Is In: Impact of Iowa Business Property Tax Cuts

Thanks to Jon Muller for a close look at the effects of a law that is a major reason Iowa lacked the revenue to fund K-12 schools and higher education adequately this year. -promoted by desmoinesdem

Senate File 295, the keystone tax bill passed into Iowa law in 2013, is now in full swing. It left a big hole in the State’s General Fund. It delivered handsomely on its promise to cut taxes for commercial property owners, at least in the short run. It provided modest help to the working poor. For its $500 million (plus) price tag, it has accomplished little else.

One positive aspect from the bill, at least from the perspective of most readers on this blog, was an increase in the Earned Income Tax Credit, which returns approximately $30 million to low-income working Iowans. Whether that benefit was worth the hundreds of millions given away to Iowa commercial property owners is a question left to the political analysts.

The remainder of this piece will focus on the property tax components of the bill. For reasons economic, these provisions are not likely to fulfill their stated purpose of spurring development or reducing rents for small businesses and renters. Those issues will be the subject of a different blog post. This post addresses a variety of tax burden shifts, some intended, some not. Virtually all of the benefit has gone directly to improve the wealth of commercial property owners, and shifted the property tax burden to homeowners in the short-medium run. In a strange twist, for those who desired that impact, even that may possibly fail the test of time.

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Clinton Might Be a Better Bet than Sanders

Fascinating look at how investors view the electability question. One 2003 study found that the Iowa Electronic Markets were “both closer to eventual election outcomes and more stable than polls over the course of election campaigns.” According to Muller, last night’s primary results dropped Clinton slightly to 87.1 cents, while Sanders rose to 12 cents. -promoted by desmoinesdem

Supporters of both Senator Bernie Sanders and Secretary Hillary Clinton are busy on social media making their respective cases for why one or the other has a better chance of beating Donald Trump in the General Election. Insofar as you’re reading this, you have no doubt heard the arguments on both sides. Sanders is a socialist, and more than half of the American electorate will never vote for a socialist. Clinton has too much baggage, and is owned by Wall Street. On the one hand, there are national polls showing Sanders may have the edge over Trump, relative to Clinton. On the other hand, all of Clinton’s baggage is already common knowledge (real or imagined), and no one has really started attacking Sanders yet.

This is all an exercise in conjecture. Even sophistry. While I generally come down on the Clinton side of this debate, it’s been little more than a general feeling. Perhaps there are actual data that might give us a reason to prefer one candidate over another, provided “Democrat Winning the White House” is an important issue for a voter. The Iowa Electronic Markets (IEM) provide the data required to address the issue with a little more statistical rigor.

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