Politics, fraud and common sense
"The ability to simplify means to eliminate the unnecessary so that the necessary may speak," — Hans Hoffman, painter (1880-1966)
Using the words fraud and politics in the same sentence is no surprise; they go hand-in-hand all too often.
Other times, politics just get in the way of how things should be done.
To the first point, why can’t we give rewards to people who report fraud in the welfare system? It seems like the strategy we used after the 9-11 attacks and it seemed to energize our country and keep us all accountable. I’m not for a vigilante system, nor do I like what happened with George Zimmerman when he and his group “self-policed," but common sense tells me that there is something in the middle.
Perhaps a better approach to fraud is to take it out of the equation by getting rid of ETB cards and creating a voucher system for necessity foods. Having vendors supply supermarkets or special outlets with healthy foods that will promote healthy living would push our nation further ahead in so many ways and in the end save us some health care costs as well.
Finding and cutting out abuse will increase the initiative to work. Having welfare participants take mandatory drug tests (including tobacco and alcohol) would go a long way to curb the abuse. Having strings attached to hand outs, doesn’t seem oppressive to me. It’s seems less punitive than watching an ETB card holder use the card, on taxpayer’s nickel, to buy food and then taking cash out of their pockets to pay for tobacco, alcohol and lottery tickets.
The biggest challenge in our social welfare system is the incentive to work is taken away; that’s the way we now operate most of our social programs. I have given raises to employees that have assistance only for them to tell me they will lose their subsidy housing or their benefits will diminish if I pay them more. How does not giving them a raise help them get ahead? Is there something wrong with that picture?
We should have a system committed to getting people off the doles, whenever possible, rather than keeping them tied to a welfare state of mind.
To the second point, what happens when a budget is passed and a tax exemption is abolished that creates a nightmare of interpretation questions and a path of destruction that appears on the horizon because of “unexpected consequences”?
That’s the question I asked just days before a new tax on newspapers and magazines was to go into effect Oct. 1.
The newspaper and magazine industries were not happy about being singled out but, as with all negotiations, a compromise was reached and the budget passed with language that clearly stated beginning Oct. 1, 2013, newspapers (both in print and on-line) and magazines would lose their exemption and consumers would have to pay the new 5.5 percent sales tax when purchasing these products.
Just weeks before this was to go into effect, the Maine State Revenue Service sent out some draft guidance to printers and the newspaper association that indicated the elimination of the exemption statute would now cause all free newspapers, advertising circulars and publications previously exempt, to be subject to Maine sales and use tax.
We have agreement
The consensus on both sides of the aisles of the state representatives and the governor himself is that this was not what was intended.
The exemption from taxation on the printing of free newspapers and inserts is long-standing because they provide consumers with the information needed to buy things that are then taxed when sold to the end user. To put a tax on the printing used to promote the goods and services Maine people buy is double-taxation. This may not be the desired outcome of the budget change, but it appeared, from the Maine Revenue Service guidance draft, that it might just be the reality.
The ripple effect
When you tax free newspapers or ad circulars, it creates a spiral effect that leads to less commerce and creates a negative business climate for our valued Maine entrepreneurs.
For instance the tax on the local Free Press (and the hundreds of other free publications in this state) would create a financial burden to them that would be off-set by cutting down on circulation (affecting not only consumers depending on them for information, but also advertisers who look for help in selling their goods and services).
With the inserts, retailers might either cut back their current distribution geography or go from eight flyers a year to six. From my experience, once a client cuts back, it is difficult to get the business back.
This results in a reduction of business for the printer — in an already struggling environment, this is critical. This results in less use of newsprint and pulp, which are produced in Maine and is another struggling industry trying to survive. These Maine-based industries touch thousands of Maine workers. Simply put, cutting back on printing is not good for Maine businesses and this is perhaps landing a knock-out punch to two staggering industries (printing and paper/pulp) and creating loss of jobs.
And there is more
Under the interpretation I read, the flyers now coming in the mail would also no longer be exempt. This will affect another struggling industry as retailers cut down, or cut out, what they spend with the postal service. This is just at the time when the survival of the USPS business model depends more and more on delivering newspapers, magazines and retail circulars to the homes in Maine as email and paying bills online continues to erode their 1st class revenues.
This new tax will also create a nightmare in regards to enforcement. For all the major retailers printing out of state the “use tax” must now be applied while Maine printers must charge at time of invoicing. Do our Maine companies, or our Maine printers, really need another competitive disadvantage?
When pressed, the Maine Revenue Service told us that the figure from the draft guidance, compared to the budget number $2.5 million, was much higher. They would not share with us firm numbers. It is a difficult number to come up with because nobody really knows exactly what will be taxed and what won’t but I would estimate that it would be more than 10 times higher than the original estimate in the budget if strictly enforced. Pinning down a number will be like putting a nail in Jello without clearer guidance.
One of the interesting consequences of this would be the competitive advantage it gives the daily and weekly paid newspapers over the free publications. Their printing remains exempt because of resale exemptions still on the books. It is the consumer that pays their sales tax liabilities, whereas the free papers and insert retailers pay it themselves and end up passing it down the line to advertisers and consumers.
At the 11th hour, the Maine Revenue Service offered their final guidance that fixes the problem, sort of. While everyone agrees that these are “unintended consequences," the exempt statute is gone and must be put back in during the next session, four months away. In the meantime, we will have to abide by the law with the guidance that, if Legislation fixes it in January, the tax is retroactive.
While a far from perfect solution, I do appreciate that it is the best that they could do, under the circumstances, but it still frustrates me how complicated this all is even when everyone agrees that these are “unintended consequences." That’s the price of democracy. That’s the frustration of American citizens and business owners. One loud “Sheesh."
Turn the Page. Peace out; Reade
Reade Brower can be reached at: firstname.lastname@example.org.