The Market Ticker
Commentary on The Capital Markets- Category [States]

Is it time?

It’s difficult to say what’s more striking about President Obama’s Affirmatively Furthering Fair Housing (AFFH) regulation: its breathtaking radicalism, the refusal of the press to cover it, or its potential political ramifications. The danger AFFH poses to Democrats explains why the press barely mentions it. This lack of curiosity, in turn, explains why the revolutionary nature of the rule has not been properly understood. Ultimately, the regulation amounts to back-door annexation, a way of turning America’s suburbs into tributaries of nearby cities.

Tributaries?

Look folks, if even half of what's written in that article is true -- forcing demographic and taxation on suburban districts so it can "flow back" to cities then you folks who live in a suburban area are in for a hell of a shock.

Don't think for a second that most suburban dwellers actually pay lower taxes.  Not on real estate anyway, in many cases.  No way.  But this will make it inestimably worse, because one of the issues related to so-called "demographic differences" is that those suburban tax profiles are utterly impossible for someone of lower economic means to afford.

So how do you think they'll deal with that?  I'll tell you how they won't deal with it -- in any way you're going to like.

Forcing low-income housing quotas into the suburbs will radically raise property taxes for everyone else, since the services required will go up and the revenue per-person will go down.  Everyone not on those low-income housing tiers will get monkey-hammered.  The other part of it is outright forcible transfers of tax revenues into the cities themselves, which will simply compound the issue.

We're supposed to be a nation of 50 state political laboratories; you move to one you like, and if it changes to something you don't like, move again.  What the federal government is attempting here is to completely flatten the field when it comes to city and local political decision-making and the tax base and spending that comes from it.

At some point the people of this nation either have to decide that we're going to be what the founders intended, 50 state political laboratories, or we're going to be one centrally-controlled, politburo-style monstrosity.

The only remaining question is whether those of you who live in such areas will make that decision before or after everything you have is confiscated.

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2015-07-24 06:00 by Karl Denninger
in States , 130 references
 

You knew the feds would not give up to those "uppity" states that legalized pot so easily, right?

But earlier this month we learned that there very well may be something more powerful than the marijuana movement that could halt its growth: the Federal courts.

On July 9, 2015, in the case of Olive v. Commissioner, San Francisco's Ninth Circuit Court of Appeals upheld U.S. tax code section 280E which states that expenditures in connection with the illegal sale of drugs don't qualify for any deductions or credits.  What this means is that marijuana-based businesses aren't able to deduct ordinary and necessary business expenses, and are thus being taxed on 100% of their gross profit as opposed to net profit.

Got it?

You have to pay taxes on the gross.

This means that if the cost of doing business is more than the inverse of the tax rate you're done as you can't pay the taxes.

Isn't that special?

Of course the real impact of this is to increase prices; if you cannot deduct operating expenses then you price is going to be higher.  That in turn means that for state governments (that typically apply a sales tax) they make more too.

Isn't that special.....

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Hahaha....

Netflix service in Chicago is about to get notably more expensive. On the hunt for new revenue, Chicago's Department of Finance is applying two new rules that would impact companies like Netflix and Spotify. One covers "electronically delivered amusements" and another covers "nonpossessory computer leases"; together they form a unique and troubling new attempt by cities to tax any city resident that interacts with "the cloud. According to the Chicago Tribune, streaming service providers need to start collecting the tax starting September 1.

Between the two it would total about 9% on gross sales.

"Amusement taxes" are nothing new; if you go into a bowling alley or similar and stick a couple of quarters in a pinball machine you'll see a tax sticker on there -- that's the licensing for them.  Those taxes have been around forever and are sort of a "sin tax."

The funny part of this is that "everyone knows" that the best and highest use for the Internet is to consume porn, so I guess the view of the city that this constitutes an electronically delivered amusement would arguably be correct.

smiley

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No, really?  smiley

“The debt is not payable,” Mr. García Padilla said. “There is no other option. I would love to have an easier option. This is not politics, this is math.”

Well I'll be damned.

On the other side of the table, of course, are hedge funds that bought the debt when Puerto Rico got in trouble at a deep discount and expect 100 cents on the dollar.  They're not inclined to bargain, and will now (of course) look to the government to hand them a gun to use on Padilla.

Unfortunately that doesn't change the math either.

You cannot spend more as a government than you can take in via taxes -- period.  That's a fact, and while we seem to think we can here in the US when it comes to various governments all such attempts are short-term answers that must invariably lead to spending less than one takes in via taxes so as to pay the debt off.

If now, well...

smiley

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