Story Of Business: When Costs Compete With Passion

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    Nov 25, 2010 8:55 AM GMT
    It's stories like this for why economic issues generally trump social issues for me. Gay marriage or at least the legal equivalent will happen. It's a question of not if, but when - even Republican pundits see the writing on the wall given changing attitudes between generations. This holds almost equally true in developing countries where rights to minorities follow economic prosperity.

    Politicians insert ridiculous clauses because they are so out of touch with business (especially with this White House in the US) and seem to believe that regulations and associated reporting/compliance are cost free - when the biggest tax cut could be just massive simplification of the tax code for instance - cutting out the favors politicians supposedly give to some businesses or groups which result from lobbying.

    Anyway - one thing I think ideological liberals tend not to understand is how recent regulations have created a great deal of uncertainty which is one of the reasons businesses have been reluctant to spend or to invest but instead, horde cash:




    Incidentally, given I have a startup bias, I personally think one of the best conntributions anyone can make to the world is to build a successful business. All businesses solve problems to varying degrees and it's a sustainable way to make a difference (positive feedback loops):

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    Nov 25, 2010 3:42 PM GMT

    "All businesses solve problems to varying degrees and it's a sustainable way to make a difference (positive feedback loops):"

    Tobacco companies are businesses.

    .....and of course this gem of a business selling seal penis.



    http://www.alibaba.com/product-gs/286307154/fur_seal_penis.html


    -Doug

    Then there's this noble business.

    'Erin Brokovitch’s exhaustive investigation uncovered that Pacific Gas & Electric had been poisoning the small town of Hinkley’s Water for over 30 years. It was because of Erin’s unwavering tenacity that PG & E had been exposed for leaking toxic Chromium 6 into the ground water. This poison affected the health of the population of Hinkley. In 1996, as a result of the largest direct action lawsuit of its kind, spear-headed by Erin and Ed Masry, the utility giant was forced to pay out the largest toxic tort injury settlement in US history: $333 million in damages to more than 600 Hinkley residents.'



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    Nov 25, 2010 5:28 PM GMT
    PG&E couldn't have survived if at its core, it didn't perform something valuable. All businesses do at least meet a demand within society. I suppose it depends on where you stand on the issue of how much censorship/control society should place on what individuals want.

    For instance, I'm not a consumer of cigarettes, but I don't think that my personal preferences should dictate your needs or wants. Do you? (as for exotic, ahem, treatments, you are also familiar with the value of the placebo effect?)

    Further, I suppose you could take a legalistic/gotcha approach to picking and choosing what businesses you think have societal value but of the options you've chosen, they're a tiny fraction of the economy at large. The points raised in the first two videos for instance is how onerous reporting standards are about to be for the healthcare bill with the 1099 filing requirement for the total transactions with any individual/company above $600 over the course of a year - and for these individuals you have to ask them for their IRS numbers.

    Think about that - this means customers and vendors. You have to have a way to track this and report it easily. In a healthcare bill?

    @ jprichva - I would suggest that the issue of regulatory uncertainty is not the exclusive domain of Republicans, it is however the Democrats who tend to seek more regulation and reporting standards (all in the name of good causes I'm sure) and believe that success should bear more of a burden on the costs of society - and these things damage business certainty the most. As for the 1099 requirement - I'm curious how you feel about that because for businesses, it amounts to an additional tax despite the fact the government doesn't collect an additional dime from it (unless you believe that the costs on anyone who does business is worth less than the potential benefits of catching tax cheats - but on that front, perhaps a better alternative is to nominate more Democrats to be part of the Obama Administration?)
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    Nov 25, 2010 9:03 PM GMT
    We're a nation of small business...and tax cheats.

    http://swampland.blogs.time.com/2010/09/15/the-1099-fracas-and-income-tax-evasion-101/The most effective tool in the government's quiver to do the latter is not an IRS agent – it's information dissemination. Creating paper trails and telling people and businesses that the government has a copy of those paper trails is amazingly effective in curbing cheating. Sen. Max Baucus, chairman of the Senate Finance Committee, which has jurisdiction over tax policy, said in a floor speech on Tuesday, “research demonstrates that voluntary compliance doubles when information reporting is in place. The rate rises from 46 percent compliance to 95 percent compliance.”
    ...
    But there's nothing in the 1099 rule that would affect small businesses specifically. In addition, even before the Affordable Care Act, Democrats and Republicans – including George W. Bush – were looking for ways to help close the tax gap with the use of 1099s. Under the Bush Administration, a rule existed requiring businesses to file 1099s for cumulative annual purchases over $600, but the rule only applied to services – not goods – and excluded purchases from corporate entities. All the Affordable Care Act did was eliminate these two exceptions.

    ...
    Amid the backlash of the ACA's tighter 1099 rules, two senators introduced related amendments this week. One from Republican Sen. Mike Johanns would have repealed the provision altogether; another introduced by Democratic Sen. Bill Nelson would have exempted businesses with 25 or fewer workers and raised the reporting threshold from $600 to $5,000. Both amendments were defeated. According to Politico, a third 1099 amendment has already been filed by Democrat Sen. Mark Begich that would repeal the new rule.

    The 1099 fracas is interesting for two reasons. First, it represents a glimmer of bipartisanship in an age when such a thing is elusive at best. Senators from both sides of the aisle agree the new 1099 rule puts a burden on small businesses. Second, the new rule seems destined to be at least scaled back. Baucus, who voted in favor of the Nelson amendment, said yesterday, “We do need to address this requirement…The bottom line is this: We have heard the concerns of small businesses. And we intend to work diligently to address and mitigate those concerns..” The White House has also said it supports scaling back the rule.

    This amounts to conceding that, despite an annual tax gap equal to half of the Pentagon's entire budget, closing it completely is just too hard and will never happen. In other words, we will remain a nation of tax cheats unless the tax code itself becomes simpler, cleaner and easier to comply with.


    Sounds awfully like the new body scans in the airport: penalizing the many to catch the few (?).

    And the paper trail is more of a figure of speech: the IRS encourages e-filing of 1099's and is mandatory for payers who file >250 of them.

    I'm all for simplifying the tax code...and eliminating those loopholes which will close the tax gap much more efficiently than the 1099 clause in the ACA. I wonder who wants those loopholes though...
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    Nov 25, 2010 9:59 PM GMT
    Reading the link you provided, q1w2e3 - the government hopes to recover $17 billion from these new 1099 provisions.

    Then there are stories like this:
    http://www.washingtonpost.com/wp-dyn/content/article/2010/11/17/AR2010111706323.html

    The federal government's improper payments totaled about $125 billion in fiscal 2010 as unemployment insurance and Medicaid payments increased, officials said Tuesday. But agencies also recovered about $687 million mistakenly paid to delinquent government contractors and beneficiaries.

    The government's total improper payment amount climbed $15 billion from the previous year, according to statistics from the Office of Management and Budget. The payments included about 89,000 checks for $250 each sent to dead or incarcerated people as part of the economic stimulus program. [...]

    President Obama wants agencies to recoup at least $2 billion in improper payments by the end of fiscal 2012. In order to do so, he ordered the establishment of a government-wide "do not pay" database to stop payments made to dead or incarcerated people and debarred or suspended contracting firms. He also signed a law in July that penalizes agencies for failing to do so.


    So of the 125 billion dollars they hope to recover a total of $2 billion. There just seem to be far lower hanging fruit out there.
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    Nov 25, 2010 10:35 PM GMT
    Sometimes "low-hanging fruit" needs harvesting shears.

    http://healthpolicyandreform.nejm.org/?p=3671

    And there are other low-hanging fruit even more tempting:

    http://www.guardian.co.uk/world/2009/may/04/barack-obama-tim-geithner-corporate-taxWhite House aides said the US government could raise $103.1bn by repealing tax advantages that encourage American companies to invest overseas rather than create jobs and infrastructure in the US. Currently, companies are permitted to deduct from their taxes investment dollars spent on overseas operations while deferring paying taxes on the profits those operations create. Obama would make permanent a tax credit on research and development done within the US.

    Other proposals include increasing the amount of foreign income subject to US tax law, and requiring companies to treat some foreign subsidiaries as corporations for US tax purposes.

    Obama also proposed a set of disclosure rules that the White House said would discourage wealthy individuals and companies from hiding wealth in off-shore tax havens such as the Cayman Islands. He proposed hiring an additional 800 new International Revenue Service inspectors to bolster international enforcement.
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    Nov 25, 2010 10:46 PM GMT
    The budget puzzle estimates that cutting tax loopholes would generate $75-136 billion dollars by 2015 (depending on whether tax rates are changed).
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    Nov 26, 2010 2:39 AM GMT

    "PG&E couldn't have survived if at its core, it didn't perform something valuable. All businesses do at least meet a demand within society. I suppose it depends on where you stand on the issue of how much censorship/control society should place on what individuals want.

    For instance, I'm not a consumer of cigarettes, but I don't think that my personal preferences should dictate your needs or wants. Do you? (as for exotic, ahem, treatments, you are also familiar with the value of the placebo effect?)"

    ...no one is mentioning censorship ( telling assumption), but rather the statement that ALL businesses solve problems to varying degrees and it's a sustainable way to make a difference.

    Pacific gas made a difference all right, and another company (of which there are many) would not have poisoned so many knowingly. icon_rolleyes.gif

    The tobacco companies made a difference too.
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    Nov 26, 2010 3:09 AM GMT
    Ever watch someone's pet die slowly and horribly from renal failure?

    http://en.wikipedia.org/wiki/2007_pet_food_recalls


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    Nov 26, 2010 3:41 AM GMT
    meninlove said Ever watch someone's pet die slowly and horribly from renal failure?

    http://en.wikipedia.org/wiki/2007_pet_food_recalls




    It's difficult to understand the examples you provide unless you are arguing that this is a systemic issue to all business. I've already provided for the reality that there may be a few bad players but they are only a fraction of the market. For which you would punish the vast majority of companies? I don't really understand your line of reasoning here if there is one.
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    Nov 26, 2010 3:55 AM GMT
    It only takes a few to spoil it for the rest. Regulation is actually a good thing for business.

    Anyway, resume riddler. I wanted to clarify that ALL should have been SOME.

    -Doug

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    Nov 26, 2010 5:37 AM GMT
    meninlove said It only takes a few to spoil it for the rest. Regulation is actually a good thing for business.

    Anyway, resume riddler. I wanted to clarify that ALL should have been SOME.

    -Doug



    On that note, I'd venture to say that it's practically all - not even some, or substantially all but I would concede that it's not "all".

    Regulation is a necessary condition for business - but good regulation should be transparent, predictable and simple (the Healthcare Reform Bill meets none of these parameters). It's a bit of a strawman that opponents think that libertarians would argue that no regulation is the logical condition. Property rights and rule of law are a necessary prerequisite to healthy competitive markets.
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    Nov 26, 2010 9:50 AM GMT
    riddler78 said
    Regulation is a necessary condition for business - but good regulation should be transparent, predictable and simple (the Healthcare Reform Bill meets none of these parameters).


    Why do you think there are so many tax loopholes in the first place?
    It would have been easy if the world were a simple place. Specifically, the health care "market" has mushroomed into the monster that it is now, and insurance companies have not made it any simpler in their various rules and regulations designed for profit.
    Medicine itself is not simple--to expect anything less is impractical.
    There are simply too many interests and scenarios at play.
    Please point to one area in the US where regulation has been "transparent, predictable and simple." Or anywhere in the developed world.
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    Nov 26, 2010 9:56 AM GMT
    meninlove said It only takes a few to spoil it for the rest. Regulation is actually a good thing for business.


    There used to be patent medicines that were completely baseless in their claims and dangerous which was the rule rather than the exception before the FDA was created in 1906. Some businesses need to be regulated out of existence. Tobacco is one of them. Tax loopholes (and the business they generate for tax lawyers) are another. Then the world will be much simpler.

    http://en.wikipedia.org/wiki/Patent_medicine
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    Nov 26, 2010 10:35 AM GMT
    The real world of regulation (at least what we've figured out so far about mitosis)...people who put up complex charts as if they are the exception should be reminded of what goes on everyday without them knowing about it.
    http://www.genego.com/maps/706_map.png
    706_map.png
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    Nov 27, 2010 8:09 PM GMT
    q1w2e3 said
    riddler78 said
    Regulation is a necessary condition for business - but good regulation should be transparent, predictable and simple (the Healthcare Reform Bill meets none of these parameters).


    Why do you think there are so many tax loopholes in the first place?
    It would have been easy if the world were a simple place. Specifically, the health care "market" has mushroomed into the monster that it is now, and insurance companies have not made it any simpler in their various rules and regulations designed for profit.
    Medicine itself is not simple--to expect anything less is impractical.
    There are simply too many interests and scenarios at play.
    Please point to one area in the US where regulation has been "transparent, predictable and simple." Or anywhere in the developed world.


    I agree with you on almost all these points. Tax loopholes are often created by incumbent businesses through lobbying or by politicians trying to coerce businesses or special interests. I should point out though that most insurers structure their paperwork and processing around standards set by Medicare. I don't expect medicine to be simple but as you point out, it seems absurd that so many other riders have been tacked on (1099 being only one of them - but probably the most costly to business) that have nothing to do with healthcare itself. Further, given the overpayments of Medicare/Medicaid, shouldn't government have worked at fixing that before changing the rules for everyone?

    (and as for simple - most criminal law is clear cut; a lot of property law is readable and understandable - which I should not have described as the same as "simple").
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    Nov 28, 2010 12:50 AM GMT
    Riders seem to have been tacked along because of a simple rule by fiscally responsible people: the law was designed to be fiscally neutral at least. The goal was to expand coverage; the means included having more people buy into the market as well and sundry items like tax on tanning booths. (I'm surprised they didn't tack on another tax for cigarettes).
    And, as the article I quote above pointed out, it's very likely that expanded 1099 reporting will be repealed for small businesses at least.

    The overpayments of Medicare and Medicaid have a lot more to do with criminals than with most people in the health care sector. They take advantage of the "prompt pay" rules to get the money first and then disappear. (As opposed to the delaying tactics of the insurance companies for paying claims)
    Patients' data (both alive and deceased) are sometimes sold for phantom billing. Sometimes the "patients" are in it on the scam.
    Organized crime is involved more and more also.
    Then there are cases like Columbia/HCA which were done under the aegis of one Rick Scott, governor-elect of Florida:
    http://en.wikipedia.org/wiki/Medicare_fraudAmong the crimes uncovered were doctors being offered financial incentives to bring in patients, falsifying diagnostic codes to increase reimbursements from Medicare and other government programs, and billing the government for unnecessary lab tests,[5] though Scott personally was never charged with any wrongdoing. HCA wound up pleading guilty to more than a dozen criminal and civil charges and paying fines totaling $1.7 billion.


    The tightening of the law is long due in the ACA. Criminals are smart too, you know.
    http://www.hhs.gov/asl/testify/2010/06/t20100615c.html

    riddler78(and as for simple - most criminal law is clear cut; a lot of property law is readable and understandable - which I should not have described as the same as "simple").

    How about finance law dealing with the complexity of financial instruments? Is most of that readable and understandable?