The future in countering tax evasion

Italy is using a tool called redditometro to look for tax evasion.

The new tool, known as the “redditometro,” or income measurer, aims to minimize the wiggle room for evasion by examining a taxpayer’s expenditures in dozens of categories, like household costs, car ownership, vacations, gym subscriptions, cellphone usage and clothing. If the taxpayer’s spending appears to be more than 20 percent greater than the income he or she has declared, the agency will ask for an explanation.

This is an interesting approach in that it focuses on the black market portion of the economy. One could argue that the result of this will be that income generated and not declared would simply not be spent or purchases would be made in cash. Such purchases wouldn’t have an electronic signature to be traced. Wouldn’t there be the potential for an increase in black market type transactions in a society where monitoring for tax purposes went to this degree?

It would be interesting to find out where the tax authorities are getting their data and if the acquisition/purchase of data would be considered legal. If a credit card company is selling your data, would you be ok with the data being sold to the IRS? If this happened in the United States, would there be outrage? Would consumer spending drop? Might a consumer not want to pay for a gym membership that requires an automated form of payment like a credit card or a debit from a bank account? A consumer may not want to upgrade that car they used to upgrade every 2 years for fear of ending up on a list. In an economy that is driven by consumer spending, this might be a very bad thing. Supporters might ask why a tax payer would care about the use of such a tool if they are above board in declaring their income in the first place. Similar to the arguments that are made on the relevancy of encryption to citizens if you have nothing to hide.

When someone that you don’t know stops you on the street and asks you how much you spent and exactly what you spent your money on yesterday, your response might be to look quizzically at them and say that “That’s none of your $$$$ business”. Why would this not be the same response made to tax authorities?  And yes, they should have the ability to request and validate your income since that is what taxes are paid on after any deductions you may have. As citizens, we pay taxes because of the constitution:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” Amendment XVI

The intent of this article is not to provide a summation of all of the positives and negatives of such a thing happening in the US but rather to pose the question for thought.




Healthcare costs

Other than the fiasco that is, if there were to be major reforms of the Affordable Health Care act, what do you think they would be?

We will venture our opinion on this below.

  • Increase competition
      • Insurance firms in each state are protected from interstate competition by the federal McCarran-Ferguson Act (1945) – otherwise known as Public Law 15, which grants states the right to regulate health plans within their borders. Each state must explicitly allow insurance carriers from other states to offer policies in their state. All 50 states regulate Health Insurance but only 7 states have enacted law to allow health insurance to be sold within their state by out of state insurers. The proposed fix in this case would be to repeal the exemption of Health Insurance from Federal Anti-Trust law or provide encouragement to states to pass laws to allow inter state commerce in the case of Health Insurance.

    What is particularly annoying about the original exemption of Insurance from Federal Anti-Trust was the argument used to support the position. “the business of insurance is not commerce, either intrastate or interstate”; it “is not interstate commerce or interstate trade, though it might be considered a trade subject to local laws either State or Federal, where the commerce clause is not the authority relied upon.”

  • Reform tort law to reduce litigation.
    • There is no doubt that there should be recourse for cases of negligence in the provision of medical care. Ideas to accomplish the reduction of frivolous lawsuits include capping settlements or forcing the losing party to pay costs if they are the plaintiff.

However; based on Twenty years of evidence on the outcomes of Malpractice claims:

Malpractice outcomes bear a surprisingly good correlation with the quality of care provided to the patient as judged by other physicians. Physicians win 80% to 90% of the jury trials with weak evidence of medical negligence, approximately 70% of the borderline cases, and even 50% of the trials in cases with strong evidence of medical negligence.

Our comments: So, this infers that if a physician is sued and the physician has exercised risk management against malpractice suits which hopefully does not include running unnecessary cover your butt tests AND the physician has provided good care, the risk of losing a lawsuit is significantly lower than it actually should be based on peer review. So, is tort reform really necessary? Is this simply a case that if the provider is providing the quality care they should be and practicing due diligence in communicating with the patient and documenting all the facts of the case, then the risk of losing because of malpractice law suit are severely diminished as the numbers represent? There might be some point to making the plaintiff pay court costs in those cases that are dismissed at trial time but this would be particularly unfair in those case where the ruling has gone against the plaintiff and there were grounds for winning. As noted above, 50% if trials with strong evidence of medical negligence are lost at trial. Perhaps a screening process before a trial goes to court which provides an opinion on the merits of a case. If the plaintiff proceeds to trial against the recommendation of the panel and subsequently loses, then the plaintiff and his attorney should be responsible for all the defendants court costs. This would significantly reduce the burden on the legal system and reduce court costs for the defendant in the case where the suit is deemed without merit from the perspective of malpractice.

  • Decrease costs for insurers to practice nationally. If a carrier has to meet regulations which are different across states they offer policies in, then the cost of doing business is higher. The cost of licensing in each state is also high.
  • Review the legality of Most Favored Nation clauses and provide more guidance for what is/is not allowed in relationships between sellers/buyers in terms of MFNs. MFNs were designed to be pro-competitive but each is unique and while one may increase competition where for example : seller1 is forced to provide buyer1 the lowest price offered to all their buyers (competitive), another may be anti-competitive in that it doesn’t allow a seller(1) to sell to another buyer(2) at equal or lessor prices than buyer(1).

Poll indicates watching no news is better than watching Fox News



MSNBC and CNN ran a close second to Fox in terms of how informed the respondents were which indicated the worth of those 2 sources. Those who watched no news if they answered the survey accurately did better by guessing at the answers than those who watched Fox/CNN and MSNBC. Unsurprisingly, NPR viewers got the highest number of questions answered correctly for both Domestic and International affairs. According to the original PublicMind poll,  NPR also have the second lowest percentage when respondents were asked which news sources they got their information from over the last week at 28%. And surprisingly, The Daily show was lower at 13%. Fox/CNN/MSNBC were listed at 4th/5th/6th at 55%, 51% and 44% respectively with local TV news being 1st at 76% and local newspapers being 2nd at 72%.

On average, people correctly answered 1.6 of 5 questions about domestic affairs.

That is a pretty sad statistic. Given the outcome of the poll, it does not bode well for our nation when partisan news sources result in consumers referencing those sources being even less informed than those who reference no news sources.

This brings to mind a term used in George Orwell’s book Nineteen eighty four called Newsspeak

Newsspeak – a controlled language created by the totalitarian state as a tool to limit free thought, and concepts that pose a threat to the regime such as freedom, self-expression, individuality, peace, etc. Any form of thought alternative to the party’s construct is classified as “thoughtcrime.”

We are not suggesting that a totalitarian state is the goal in the case of Fox, CNN and MSNBC but there is something awry with a free press which is apparently free to deliberately interpret the facts about events as they choose with the intent to mislead a specific demographic of people who in this case choose to be willing participants/consumers in the misrepresentation of facts or spin because such misrepresentation/spin supports their own world viewpoint. This portion of the free press is pandering to a specific demographic of people for profit and doing so in a dishonest way. What is the difference between this and what trash magazines like The National Enquirer do?  What is happening may not be the same as Newsspeak but the level of partisanship in politics currently  is being contributed to in no small way by this spin reporting for profit with big money interests behind how the news is being reported.

Shadows of Liberty from Link TV is a fantastic documentary about the dark side of the for profit US corporate media.

“In highly revealing stories, renowned journalists, activists, and academics give insider accounts of a broken media system. Controversial news reports are suppressed, people are censored for speaking out, and lives are shattered as the arena for public expression is turned into a private profit zone. Tracing the story of media manipulation through the years, Shadows of Liberty poses a crucial question: why have we let a handful of powerful corporations write the news?”

Our conclusion: Support your local NPR

Murdoch’s Free press


This article from Media Matters discusses what Fox PR Staffers were doing back in 2000 as David Folkenflik writes in his forthcoming book Murdoch’s world. We haven’t read it yet, but it will be in our hands by Wednesday and we will be sure to review it in an upcoming post.

Mandatory spending and Medicaid


This chart from a report by the Congressional Research Service on Mandatory Spending Since 1962: highlights the problem when it comes to Mandatory spending in pretty stark terms. Note the projected 8% increase from  2012 – 2022 and the correlation to the Medicaid portion of the chart. Medicaid provides health care to those with low incomes. It’s funded by general revenue from both the Federal and state governments, and is administered by the states. This is what policy makers are talking about when they discuss controlling/reducing the cost of healthcare and why healthcare is such an important issue.  The report concludes with the following statement:

Reducing the federal deficit significantly by cutting spending without reducing mandatory spending, and in particular entitlements, would be difficult. Further reform of the health programs may be needed to eliminate long term fiscal strains while preserving the goals of these programs.


Are you in the American center

centerAccording to the Benenson Strategy Group who were the pollsters for Obama in 08 and 12, the center is alive and kicking and comprises 51% of the electorate and growing. The following is a high level synopsis of the article with more nuts and bolts and pretty graphs and charts in the original article.

Lots of people in the center do not consider themselves to be in the center. The center is mostly white and turn off when diversity is discussed. They do not like the 2 party system or politicians. They trust Democrats more than Republicans. They believe God plays no part in politics and own guns but have no problem with background checks for owning a gun. The center believe that people should get help from their government when they need help for their basic needs (food, health) but that the government should leave everyone else alone. Focus on domestic rather than issues outside the US. Spend/Regulate less. Raise taxes on the rich and on polluters. They support drilling, the death penalty and being accountable for your own actions. 44% of them believe the Democrats and the Republicans get it wrong most of the time.

This definition of center is based upon comparing the views of 2,410 nationwide registered voters who even though may have identified themselves as Republican/Democrat/Tea Party/Independents did not fit the typical mold for those identifiers based upon their views.

Russian Roulette..

  1. The National Debt includes securities, bills etc. offered to investors that provides said investors the confidence that the full faith of the United States is behind the payment of the yield on said securities. This facilitates not only borrowing on the part of the government but also a savings/investment/management vehicle for investors/banks/businesses/other governments.
  2. Investor confidence in the ability of the US to pay its bills impact the % yield the US Treasury has to pay on notes offered to investors. If confidence is down because of the possibility of default or unstable politics, then the interest rate offered goes up to attract investors. Mortgage interest rates closely correlate to these interest rates.
  3. The cost of interest payments on the National debt would go up if confidence in the US went down - ironic given the Republican stance on reducing the national debt while concurrently risking the reputation of the United States fiscally.
  4. Tax revenue pays for the costs of the debt and is used to pay down the debt.

So given all of this..

  • Republicans have a focus on the National debt and they should as should all of us voters at $40k per capita in National debt equivalency as a nation.
  • Republicans have a focus on never raising taxes. It is called the Grover Norquist Taxpayer Protection pledge. In light of how tax revenue is used with reference to the debt, it seems short sighted to eliminate it as a potential tool if paying down the National debt truly is so important to the conservative base.
  • Republicans want to reduce spending. But if you don’t raise taxes, and you reduce spending, and you play Russian Roulette with the confidence of the rest of the world in the US currency by brinksmanship politics, how do you grow the economy? Oh wait, reduce taxes you say? But what about that rise in interest rates that also affects the economy both domestic and globally as a result of extreme politics with little regard for consequence. Oh that, that won’t happen you say. Just like the Treausury won’t run out of money soon just because you happen to not believe the US Treasury.
  • Republicans want to reduce entitlements, no issue there. Raise the retirement age and fix affordable health care. But wait, Obamacare is bad, we want to repeal it completely. How do you know? The exchanges just went into effect on Oct 1st. Oh, you just know. Just like you knew the Democrats would cave on negotiating the repeal of Obamacare as part of the funding of government and the debt ceiling debate. Got it, and that’s worked so well thus far.

How can one debate with people who appear to live in an alternate reality unless you believe that their position is deliberate and malevolent?

Can we please get back to moderate politics, pretty please and cut these tea party folks free from the Republican party so that they lose their position of negotiating power? How this could be done would be interesting but it is apparent that they don’t want to govern or be governed. Whether it is deliberate or not, the result is that their actions infer that they want to destroy the ability of government to actually govern.


Notes of interest


  • Fidelity has sold off all Short term US government debt due in October/Early November.
  • America’s AAA rating was cut to AA+ by Standard & Poor’s in Aug, 2011 after the last exercise in brinksmanship. Is another cut possible or inevitable given the current gridlock and an upcoming potential default on October 17th? Below are some of the comments from S&P on the last cut.

We lowered our long-term rating on the U.S. because we believe that the
prolonged controversy over raising the statutory debt ceiling and the related
fiscal policy debate indicate that further near-term progress containing the
growth in public spending, especially on entitlements, or on reaching an
agreement on raising revenues is less likely than we previously assumed and
will remain a contentious and fitful process



Piers Morgan – Journalism at its finest


  • Piers Morgan is English.
  • Piers Morgan is not an American.
  • Piers Morgan is not a green card holder.
  • Piers Morgan is not directly impacted by the constitution except as it relates to his ability to exercise a right to free speech.

One could say that much like Ted Cruz is making his career from being Anti-ObamaCare, Piers Morgan is making a career on CNN from being pro gun control or anti-gun lobby.

Watch this video of Morgan attacking Alan Gottlieb. Ignore Morgan’s bluster and insults and listen to the responses from Gottlieb. It appears that Alan Gottlieb is a very smart guy and more than capable of defending his position. Morgan starts the interview with several personal attacks which highlight the caliber of journalism he practices. One resorts to personal attacks if you think that you cannot win a debate through rational conversation. The only alternative to that is if you want to be one of the Rush Limbaugh(s) of the left which may be his goal.

The Second Amendment Foundation originally set Dec 14th as their “Guns Save Lives Day” which also happens to be the anniversary of the Sandy Hook Shootings. While we agree that this was not in good taste, the Second Amendment Foundation had already announced that they had changed the date to Dec 15th after a national outcry.

And then there’s the following:

  • Morgan is irritating.
  • Morgan is condescending.
  • Morgan is highly partisan.

See him for what he is, an entertainer for people with a specific world viewpoint.


A reasonable tone from the tea party

We re-tweeted this article and found it interesting. The author does a good job of staying on point with questions but the answers from Christine Morabito who is the president of the Greater Boston branch of the Tea Party follow the same theme encountered with every tea party supporter we have met, at least the ones we could listen to.

  • It is perfectly OKAY for State government to do what the Federal government has attempted to do  Note this from Christine’s response on Universal Healthcare in Massachusetts since 2006. Apparently it is different because it was passed in her state. She talks about the tea party being against centralized government but whether it is the state or the federal government, government is centralized and it seems irrational on the one hand to decry federal government involvement in your business in the case of healthcare being over reach but on the other hand state that it is fine for state government to do exactly that. The real difference is that it is hard to argue against Universal Health Care in Massachusetts because it works.
  • She states “young people are going to make the decision that it’s cheaper for them not to buy insurance, to pay the fine. Because they know if they ever get sick, they just have to sign up for insurance and there’ll be no penalty“. This is flat out incorrect. There are only certain conditions where by an individual can enroll in ACA outside the enrollment period which is from Oct 1st through March 31st of the following year. You can only enroll outside this period on the occurrence of certain qualifying events like a job loss, a birth in the family or divorce. So NO, you cannot pay the fine and then enroll and expect to get insurance. You can however pay the fine for one year and then enroll the next year. However, the risk of being uninsured still exists. Say a healthy person without insurance who has paid the fine the prior year is diagnosed with a serious condition in April, they would have to wait until Oct to enroll unless they are also fortunate or unfortunate enough to meet one of the qualifying cases at the same time. So from April to Sep, they would incur all costs of their healthcare and then also pay higher premiums because of their pre-existing condition when they enroll in October.
  • Massachusetts- residents are required by law to have insurance, or pay a fine. To date, 99% of the state’s residents have health insurance, up from around 90% before healthcare reform.” This is a deal arrived at by a Republican – Prior Governor and Republican Presidential hopeful Mitt Romney. To quote Christine “There have been proposals by the Republicans to deal with the uninsured. I really think we could have done it without the government taking over the healthcare system.” Ironic perhaps?
  • My heart goes out to the people who are suffering, who aren’t getting paid right now, but we really need to… you know, in our own homes, when we look at budgeting issues, we look at things we could do without. And I think we need to do that as a country as well.” This is the naiveté and ignorance of economics that makes the Tea Party people difficult to listen to. Attempting to compare the budget and management of the federal deficit and government to a household budget is being deliberately obtuse if not manipulative. The tea party do not support raising taxes and yet it is exactly that, tax revenues, that are used to pay down the debt. Tax revenues are used to pay both interest on treasury securities to consumers like us who have invested in treasuries and to pay down the debt. The national debt per capita is sitting currently at around $40k which is a huge problem and one that needs to be addressed but it is not as simple as managing a household budget Focusing on having a budget surplus would be a fantastic first step that puts the US Treasury in a position where it doesn’t need to issue notes, bonds, or bills to compensate for the difference between the money the US Government receives in taxes versus what it spends. Given the cost of the budget shutdown to the economy (you can’t receive taxes on money never earned) on a daily basis, these people are talking from both sides of their mouths.  And the result of all this will probably be an increase in the deficit.