Month: April 2016

One of the great questions of the 2016 election—apart from, where’s Adm. Stockdale when you need him?—has involved exactly how GOP frontrunner Donald Trump would get Mexico to pay for a “beautiful wall” on our southern border that would keep Mexicans out of the United States.

Now we know. In a two-page memo sent to Wash Post Bobs Woodward and Costa), Trump says he would threaten to disallow remittances to Mexico, start of trade war with Mexico, yank visas and/or raise the cost of same.

Writes the billionaire xenophobe:

We have the moral high ground here, and all the leverage. It is time we use it to Make America Great Again.

Trump says that if Mexico makes one easy payment of “$5-10 billion” to pay for the wall, our long-term NAFTA trading partner will continue to receive the $24 billion in remittances that get sent south of the border annually. How can we lose? (The Government Accountability Office estimates about $54 billion worth of remittances are sent out of the country every year, with more than half that total going to Mexico).

There’s a lot to take in regarding all of this, and none of it is good or sound or humane.

For starters, there’s the simple fact that Trump (and his Republican and conservative amigos such as Ted Cruz and National Review, who criticize him for being as soft and fluffy on Mexicans as freshly made tortillas) is fighting a phantom menace by his own definitions. Forget for a moment that Mexican immigrants are NOT a drain on America’s welfare state (forget, too, why conservatives are suddenly so concerned about protecting America’s welfare state rather dismantling it). The number of illegal Mexicans in the United States peaked nearly a decade ago, in 2007. Build a wall now and you’re only trapping folks here who are moving en masse back to a country that’s offering them a better life than the sluggish U.S. economy.

Of course, start a trade war with Mexico and help kill its economy, increase joblessness, and…Mexicans will start heading north again…. That sounds about right for government, doesn’t it, whether it’s directed by conservatives or liberals? Address a problem that is declining, implement policy that reverse that decline, and then declare your stupid, pointless intervention is exactly what was needed!

On a more fundamental level, though, Trump’s proposal reveals a mind-set that is hardly limited to Republicans and alt-right conservatives terrified of the Reconquista. It’s the same consciousness that all protectionists and statists instinctively hold. Everything Trump and the “fair trade” Republicans and Democrats propose is built on the assumption that the government has the right to unilaterally stop people from spending the money they earn and possess; that the feds have a right to tell you where you can and cannot go or even send checks.

As Sen. Jeff Flake (R-Ariz.) told Reason during our trip to Cuba, “It is a very, very disturbing trend that we’re seeing in the Republican Party against free trade. It’s always been there but usually confined to a few isolated members, the Jeff Sessions of the world and others, but now it seems to be spreading. Obviously, it’s being given voice by people like Donald Trump and Ted Cruz, who has come out saying that he would not favor TPP, the Trans-Pacific Partnership.” Indeed, free trade is not simply about goods, but a larger worldview that promotes literal and figurative commerce and peaceful engagement with the world. “When goods don’t cross borders, soldiers will,” as Frederic Bastiat once put it. Or, same thing, soldiers will need to patrol not just the border but all other aspects of life.

In his memo, Trump openly relies on various “Know Your Customer” Patriot Act provisions governing banking and commerce that were abusive and invasive (and ineffectual) even in their original conception. In doing so, Trump violates not just long-held (if casually disregarded) beliefs about people owning the fruits of their labor, he threatens the greatest anti-poverty engine ever devised: freer and more open trade.

It’s precisely the sort of increase in economic freedom, globalizaton, and trans-border activity he seeks to regulate and control that has the main driver in reducing extreme poverty. Trump and those who sign on to plans such as his—including less-obviously coercive trade agreements that seek to protect American manufacturers and markets—won’t simply fail to “Make America Great Again.” They betray a lack of confidence and stunted as the delicate snowflakes who populate our college campuses and call for safer and safer spaces from actual engagement with anything (even chalkings about Trump!) that disturbs their ultra-fragile egos.

Last September, Reason TV caught up with Trump at an anti-Iran Deal rally. Before he pushed us out of his way, he said this about libertarianism: “I like it, lotta good things.” I’m starting to think he wasn’t being fully honest. Watch below (20 seconds):

A former U.S. Tax Court judge who was recently accused of cheating on her taxes wrote a 2012 decision that continues to complicate the finances of state-licensed marijuana merchants. According to an indictment announced yesterday, Diane Kroupa and her husband, Robert Fackler, disguised personal spending as business expenses on returns the couple filed from 2004, the year after she was appointed to the court, and 2012, the year she wrote an opinion that made it harder for medical marijuana dispensaries to deduct business expenses by attributing them to services other than the sale of cannabis.

Kroupa was applying Section 280E of the Internal Revenue Code, a provision aimed at drug dealers who are conscientious enough to file tax returns. Section 280E says “no deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business…consists of trafficking in controlled substances…which is prohibited by Federal law.” Since marijuana is still banned by federal law, Section 280E applies even to cannabusinesses that states consider legitimate.

Citing a 2007 U.S. Tax Court decision that let Californians Helping to Alleviate Medical Problems (CHAMP) deduct expenses related to “counseling and other caregiving services” even though the organization also distributed marijuana, Martin Olive, the owner of another San Francisco dispensary, the Vapor Room Herbal Center, argued that the bulk of his expenses likewise were unrelated to “trafficking in controlled substances.” Kroupa rejected that claim, saying Olive essentially was engaged in the business of selling pot, even if those sales were accompanied by “incidental” services such as advice and yoga classes.

At the same time, Kroupa said Olive should be allowed to subtract his full “cost of goods sold” (COGS), which consisted mainly of his marijuana purchases, from his gross revenue, because COGS, which “is subtracted from gross receipts in determining a taxpayer’s gross income,” does not qualify as a “deduction” under Section 280E. Kroupa’s ruling was upheld by the U.S. Court of Appeals for the 9th Circuit in 2015.

The upshot of the distinction between COGS and business expenses is rather counterintuitive. A marijuana merchant cannot deduct ordinary business expenses such as rent and wages unless he can persuasively attribute them to activities other than selling marijuana. But he can deduct the cost of the marijuana he sells—either the price he paid for it or the expenses he incurred in growing and processing it. While a can of coffee in the break room may not be deductible, a jar of Purple Urkle buds in the sales area is.

The maneuvers that led to charges against Kroupa and her husband sound straightforward by comparsion. Federal prosecutors in Minneosta say they falsely reported money they spent on vacations, jewelry, clothing, spa treatments, pilates classes, wine, dry cleaning, homes in Minnesota and Maryland, and other personal items as expenses related to Grassroots Consulting, a business run by Fackler. According to the indictment, these bogus business expenses reduced their tax bill by a total of “at least $400,000.”

Kroupa and Fackler are each charged with conspiracy, tax evasion, making and subscribing false tax returns, and obstruction of an IRS audit. The first two charges are each punishable by up to five years in prison, while the latter two charges can get you up to three years and one year, respectively.

“Reporting personal expenses as business expenses on your tax returns is not tolerated, regardless of your job or position,” said Richard Weber, chief of criminal investigation at the Internal Revenue Service. “We expect all taxpayers to follow the law—whether you are a business owner, individual, or government official—we all must play by the same rules and pay our fair share.”

Many of the expenses the feds say are phony, including money spent on computers, travel, Mandarin lessons, cellphone service, housing expenses (assuming Fackler had home offices in two locations), and even wine (for entertaining clients?), sound like they could be at least arguably related to Fackler’s consulting business. You can read this case as well-deserved justice for someone who cheated on her taxes while punishing others for doing so, or as an attempt to scare taxpayers away from claiming legitimate deductions that cut into the government’s revenue. Or both.

Mary Lou Wesselhoeft, who runs the Ocheesee Creamery in Florida, wanted to tell the truth about the product she sold by labeling her pasteurized skim milk as “pasteurized skim milk.” 

The Florida Department of Agriculture and Consumer Services has its own peculiar regulatory definition of that product, which requires vitamin A be added to it. She prefers a pure and natural product without any additives, and refused to do that. So the state ordered her to not call her skim milk what it was.

They demanded she call it “imitation milk product,” ordering her to lie to and mislead consumers as a condition of doing business.

She sued last year to overturn this labeling law, with the help of the Institute for Justice. And alas last week the U.S. District Court for the Northern District of Florida rejected her challenge.

U.S. District Judge Robert L. Hinkle calls back on the authority of the Federal Food, Drug, and Cosmetic Act in 1938 to allow the federal government in interstate commerce to create a “reasonable definition and standard of identity,” for food in interstate commerce, and notes that Florida has taken upon itself that authority within the state as well.

Judge Hinkle leans on the 1980 Supreme Court case Central Hudson Gas & Electric Corp. v. Public Service Commission of N.Y. to defend his belief that the First Amendment is not implicated in “a restriction on commercial speech” that meets these criteria:

(1) the asserted governmental interest in restricting the speech is substantial; (2) the challenged restriction directly advances the asserted governmental interest; and (3) the restriction is not more extensive than is necessary to serve that interest.

The Judge noticed something alarming: that if Wesselhoeft could win based on the notion that her “vitamin-deficient nonfat milk is wholesome, not harmful, and nobody has been misled or otherwise complained,” that conclusion could “initiate a frontal assault on the Federal Food, Drug, and Cosmetic Act and its state counterparts, whose validity was established long ago” since many of its regulations don’t require that the regulated item be unwholesome, harmful, misleading, or have led anyone to complain.

It’s all about instituting what the judge thinks is a reasonable “requirement for skim milk: it must include the same nutritional value, that is, substantially the same amount of vitamin A, as unfortified whole milk.” Thus, the demand to add vitamin A that is removed when the milk has its cream content reduced—that is, when it is skimmed—is legit in the judge’s eyes. Wesselhoeft’s business sells the cream, and also wants to sell the skim milk.

I.J. issued a press release on their loss, quoting Wesselhoeft as saying “I just want to tell the truth…Our skim milk was pure skim milk, and nobody was ever confused when we called it skim milk. I refuse to lie to my customers, so I have stopped selling skim milk until I am allowed to tell the truth again.”

The Institute for Justice says it intends to appeal.

I reported on this case last year, stressing the deeply disturbing implications of the government’s very power to make laws like this last year.

At least one official at the United Nation says Liberia is acting “void of moral and legal justification” by turning to a private company to help it offer a better education for Liberia’s public school students.

Marian Tupy writes:

While the data is scarce, only 42 percent of Liberians over the age of 15 knew how to read in 2007. The primary school enrollment rate was a paltry 38 percent in 2014.

As is common in much of Africa, the public education system is plagued by graft, poor quality and truancy on the part of both the students and teachers. The democratically-elected government of Ellen Johnson Sirleaf, a former World Bank official, has decided to try something new—outsourcing primary education to a private, for-profit firm, with student fees paid for by the taxpayer.

View this article.

• Wisconsin’s primaries tonight could spell trouble for the frontrunners.
• Villanova won its first NCAA Men’s Basketball Championship in 31 years with a stunning buzzer-beater last night over the University of North Carolina.
• Lots of talk about a shadowy Paul Ryan for President campaign.
• The evolving dynamics of an 8-person Supreme Court.
• Will Alabama’s governor face impeachment?
• Americans appearing in the Panama Papers.

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Anyone who has flown in the United States in the past 15 years or so knows the drill: A friendly agent or sub-contractor of the Transportation Security Administration (TSA), the demonstrably useless and expensive security-theater troupe created in the wake of the 9/11 attacks, directs you to go right or left at some point.

Recently, TSA started using an iPad or other high-tech gadgets in the process, the better to confound countless numbers of underwear bombers.

Did you know that such procedures are scientifically randomized via a particular “randomizer” program?

As Geek.com reports, the app that helps TSA agents direct us this way of that didn’t come cheap. The program itself cost at least $336,413.59 and the overall total for the project was around $1.4 million.

We know this thanks to developer Kevin Burke, who submitted a Freedom of Information Act request asking for details about the app. And if you think paying over $336,000 for an app like this is ridiculous, well, that’s just the tip of the iceberg.

The contract for the TSA Randomizer app was won by IBM. The total paid for the project is actually $1.4 million, but the cost is not broken down in the documents Burke received in response to his request. It could be IBM supplied all the iPads and training as well as the app itself. Even so, the cost of the project is crazy. It’s an app that is just randomly selects left or right.

More here.

Burke pulled the info via Freedom of Information Act (FOIA) requests and writes

We don’t know everything the TSA got for that $1.4 million. They might have just gotten the iPad app; they might have gotten iPads, or work on multiple different apps, including the TSA Randomizer. We only know it’s associated with the TSA Randomizer based on the FOIA request that returned this document.

I should mention that the Obama Administration, the “most transparent”, has set numerous records for delays in turning over files and refusing to fulfill requests for access, and none of the candidates seem likely to reverse that trend. If you think this is important, consider writing your elected officials and asking them to prioritize this, or making decisions in November based on this.

Hat tip: The crazy, mixed-up, rage-inducing, laff-producing Twitter feed of Mike Hewlett.

Back in 2010, Reason TV presented “44 Ways To Say TSA.” Add your own in the comments.