Puerto Rico's New Tax """Reform""" Explained

This won't take long...

We currently have a Sales/Use Tax, called IVU locally, equivalent to 7%, with 5.5% being "national" and 1.5% being "municipal." Now some municipalities don't charge the 1.5%, or do so to a lesser extent, so the effective rate can vary from 5.5% to 7%, except when the defective excuse for a pimple-headed (mis)government We have cancels the whole shebang when a storm threatens 380 miles away and people then go nuts buying flat-screen Sonys.

Now the IVU tax is applied at retail/use, but in effect, as I predicted looooong ago (you can look it up), the price impact was not 7% or even 8%, but actually 13.2% overall. Why? Because taxing things causes economic friction that consumers ultimately have to pay for. It's one of the very few things economists really know and can prove.

And the IVU tax did not--repeat: did not--generate the expected/projected revenue. Why? Taxing anything--even whoring--causes economic activity to decline and the local economy went cash-centric so fast it made flea markets sprout like mushroom. In essence, the underground economy got better, another trend The Jenius predicted.

Now the """tax reform""" intends to change the Sales/Use tax using a Value-Added Tax, to be called IVA, applied not only at the back-end (retailer and consumer), but at the front end as well (importer and wholeseller).

The idea, according to the pimple-headed peabrains further mucking Our Future up is to generate more revenue for them to pocket and waste egregiously. It's what they do. What they claim, with faces as straight as a pendejo can ever get, is that this will actually help the economy.

Do tell.

That's like claiming that adding pus to coffee makes it café con leche.

With a tax applied from import all the way to retail, one to be collected at every stage, these disgusting excuses for humanity carefully avoid stating the obvious: prices will rise. They have to, because no one in the supply chain is going to take a loss when they can pass it on to the next link. And the ultimate payee is Us, the consumer. Again and again and again.

Welcome to Our New Economy, which won't last long because We now have a new tax on oil that the pimple-headed pricks have used to issue more debt and there's talk of actually increasing the percentages of the current IVU.

Oh, you thought the IVA would replace the IVU? No no no no, it will be added.

And yet, the pimple-headed pus-dripping pukefaces still pretend like Our economy will be rocketed upward, like nitro in Our fuel tank.

Beating a metaphor to death: Our fuel tank is ripped, Our engine blew out long ago and the """"pilots"""" are worse than cross-eyed leeches when it comes to making progress.

The Jenius Has Spoken.

Power(balling) Our Economy, Boricua Style

Look, it's no secret My island is deep in debt. Bankrupt, even. Forty-plus years of political pillaging stacked atop a colonial economy trying to play 3D chess with tic-tac-toe tools and a populace more focused on gossip and innuendo than gains and innovation makes for a sad portrait of heavily-despairing economic distress.

So what does the syphilitic hyena pack of an excuse for an alleged government We have (elected) do to try to clean up the fetid muck of Our economy? Powerball Us.

Yes, Powerball. A lottery. Or in Our case, another lottery that balls Us.

No, Let's be precise: another fucking lottery.

We have the traditional Puerto Rican lottery, sold mainly by elderly folks sitting on stools outside supermarkets, mall entrances, drug stores and alongside roads with major traffic. We have scratchers, with maybe two dozen variants, all of them with prizes that almost certainly don't match the printed odds. (Am I implying that the government is cheating Us? Hell yeah I am. Try to find the actual payout data on these scratch lottery games. Go ahead.)

We have the Pega 3 and Pega 4 to go with the Loto Electrónica, a Pick 6 game. These are now twice a day, so you can get your gaming fix a little more often. Yeah.

Then We have that abortion of fiscal policy known as the "IVU Loto," a lottery based on the sales tax. We already know this lamebrain excuse for a tax collection system is corrupt, so Let's move on, shall We?

Just to be thorough, I'll add the illegal numbers game known as bolita, played by many of My Brethren and the reason Pega 3 was introduced. If you count scratchers as individual games of $1-$5 each, We have 10 legal lotteries ($1, $2, $3, $4, $5, traditional, Pega 3, Pega 4, Electrónica and IVU Loto; you're welcome, staheooders...) and bolita. So in an """economic policy""" that can only be ascribed to the "cheaper by the dozen" school of useless blathering (a.k.a. economics), We now have Powerball.

Of course, to make it different from Loto Electrónica, it has to be BIGGER, BOLDER and MORE LOADED with MONEY. Our Powerball is linked to other Powerball lotteries Stateside, proving that (1) politicians in other places are also greedy bottom feeders and (2) taxes on stupidity have huge participants.

Lotteries have been accurately described as "taxes on stupidity" because they prey on people who eschew rationality and common sense in favor of being consumer drones. Or to state it briefly, folks who choose stupid over smart. The sales pitch for these games is basically "Why not you?" to which the smart response is "Because it's not bloody likely, pal." The irrational, knee-jerk absence of thought reaction is "Yeah, why not?" To which the numbers reply: "It's not bloody likely, pal."

Here's the short version, for Loto Electrónica (Pick 6, numbers from 1 to 42): 6/42 x 5/41 x 4/40 x 3/39 x 2/38 x 1/37. Let Wikihow give you the basic process while I give you the end result: 1 in 5,263,158.

You have 1 chance in 5,263,158 of winning the $2 million prize. (The Powerball format has even worse odds.) And have you noticed that the chances exceed the prize by more than 2-to-1? In casinos, that's called "the house's edge," but in state-run lotteries, it's called "even better stealing from the stupid." .

People play lotteries for "the easy win," and the ads for these games play right into that fantasy. Yes, somebody is going to win the prize--eventually--but the odds clearly say that millions of players will lose and mostly one will win. Now realistically, what group do you think you will be in: the millions who play and lose or the handful that wins?

Most people think they will be in the "lucky handful." That's stupid. And they pay for the privilege of being so stupid.

And Our government--hack cough retch--feeds ravenously off Our stupid people. We vote them in, let them run Our Island into the proverbial wretched hell of financial insolvency and We keep throwing money best used for Our growth to temporarily line their colons. (Yeah, I'm implying that they are shitting Our money away.)

Instead of seeking solutions that call for Us to take clear-eyed stock of where We are and start making the hard choices needed to get on track, We are told to bend over 'cause the Powerballing is about to begin!

To quote a funny guy from long ago: I wish I had a tank.



The Jenius Has Spoken.

Stupid Math = FUBAR Sales Tax

There are times when My Brethren act like the problems We have in Puerto Rico are absolutely, unequivocally, indisputably, undoubtedly, unreservedly and entirely Our own. We act and think that nowhere else on Planet Earth is there a problem like the problem We have or a FUBAR situation like no other FUBAR situation those vaguely-existing people out there ever went through.

Most of the time I react with a restrained "Get over it" attitude, and every once in a while I'll actually engage a few people in a brief round of "Reality check: read something other than lottery numbers." The latter often gets Me a larger "Cone of Silence" than normal, occasionally hedging into "Zip Code of Indifference."

However, there are times when I have to shake My head (known in some parts as "The Crib of Jenius") and concede that, yes, We have problems that no one else on Planet Earth has. In the most recent case, Our revolting excuse for an (un)government is incapable of doing first-grade arithmetic. In their crabbed, greed-lusty, lizard-on-a-bender brains, 6 + 6 = 6.

Allow Me. The local sales tax, called IVU, as in Intravenous Urine, is 7%. However, 1% of that is a Municipal tax, with the proceeds ostensibly going back to the town coffers at some undefined point in time, often related to (A) party affiliation, (B) backdoor politics and (C) whim. The other 6% is the, ahem, National tax, charged at the point of sale.

The current scheme thought up by the Ova, (un)governor Alejandro "Deer in Headlights" García and his sub-moronic ilk, is to "align" the tax rates all over the Island because some municipalities don't charge the 1%. The new system, such as it is, is supposed to "move" the tax from one point to another, using tax credits to "stabilize" prices. So when an item arrives at an Island port, it gets a 6% tax, that the supplier charges the wholesaler (of course), who receives an equivalent tax credit. When the wholesaler sells to the retailer, he pays the tax and gets a credit, and then the customer buys the item and pays the tax. See? """It's just moving the 6% from the end to the beginning!"""

In a "search for consistency" with the acumen of a slug doing Sudoku, the (un)government wants to "relocate" the tax from the point of sale to the moment of import, extend it to all items, without exclusions, and they say that nothing will change.

Really. No, really?

Oh, they tout "the benefits." They trumpet "the simplicity." They parade "studies," none of which--none--are actually verifiable outside of their own number-twiddling.

And they are flat-out lying. Viciously lying.

In a well-oiled model of lying in the face of overwhelming facts, the Ova and his rotten yolkies are ignoring three very salient and well-documented facts:

1) Our prices are already at "6% level," meaning that they have long factored in the added cost of the tax itself.

2) That added cost is not eliminated by moving the tax. Under this scheme it increases because it now affects several steps of the transaction from port to buyer, rather than just one step. Call it "friction" and in business...

3) "Friction" is a cost that gets passed on as higher prices.

Back when The Jellyfish, Anibal "I Was Really Guilty of Campaign Funding Fraud" Acevedo set-up the IVU tax system, I predicted its impact would not be a 6%-7% rise in prices to offset the new imposition, I said it would ultimately swing prices about 13%-14% and it did.

I'm not an economist: I think for a living. But any brief search about the impact of taxation on consumer prices will show that (1) the price increase is inevitably higher than the tax itself and (2) that consumption goes down wherever the tax takes effect.

So The Ova's awful yolk of a system that """promises""" to equalize taxation is actually going to have a larger, broader impact on prices, close to another 12-15% over the course of the next two years.  And overall tax revenue--what the Ova and his rotten egg-sucking hyenas really want to filch--will go down on a per capita basis.

If they really--chuckle-chortle-scoffing guffaw--wanted to help Our economy, why not equalize the system by eliminating the 1% tax so that folks living in smaller towns get a tiny-but-useful break? If these FUBAR pinheads looked at anything beyond the length of their pockets, they'd notice that the municipalities that eschew the 1% are large, with relatively extensive economic activity. But in terms of population, they account for less than 36% of the total living here. Tax cuts stimulate growth, but they lack the sexy appeal of grabbing the cash at the onset, rather than down the longer road of potential progress. 

Great. We're bankrupt, the hyenas are still hungry, and the corpse We call Our economy will now cost Us more in order to keep hiding from Ourselves the ferocious stench of its abject failure.

Yeah, sometimes We have FUBAR situations that are uniquely Our own...




The Jenius Has Spoken.

Low-Wage Corporate Welfare Must Die

Wal-mart. Taco Bell. McDonald's. KFC. Marshalls. Pizza Hut.

You know these places. You know what the offer. But did you know they are amongst the lowest-paying companies in the U.S of part of A?

According to a 24/7WallStreet.com article, these companies, along with Sears, Macy's, Target, Starbucks, Kroger, Olive Garden and Red Lobster are in the group of the 10 lowest-paying cheapskates.

But unless We work there, what do We care? "Bring on the low prices," We say!

To the employees of these companies, whose average wage is under $10 an hour and most are limited to part-time work to avoid getting benefits, the reality is very different. There's a reason the government tracks a category called "working poor."

Did you know there's a company that made $17 billion in annual profit, paid virtually no taxes in almost every state, has over 1.4 million employees and is by far the company with the most employees receiving food stamps and welfare support? In fact, in some states, their employees are the single-largest group of welfare recipients? Did you know that company is Wal-mart?

Now you do.

And what do you care, right? You don't work at Wal-mart. Bring on everyday low prices!

Okay, but who pays that welfare support to Wal-mart employees? It isn't Wal-mart, who protects its profits with canny accounting. It's Us. Our taxes subsidize Wal-mart underpaying its employees. In effect, We pay for these employees, as We do for those who work in McDonald's, Sears, Pizza Hut and the rest.

You might say that people have to work and at least these folks have a job. Wrong point. Look at the other end: $17 billion in annual profit. How much of that is needed to raise wages to a level that gets Us--you and I and Our taxes--off the hook, so We stop providing welfare to employees and the companies that underpay them? Did you make $17 billion in annual profit last year? So why should your money underwrite the company that made that much and expects to make more this year?

The argument for establishing a "living wage" minimum, which can range (according to whose numbers you believe) from $11 to $25 an hour, is based on the idea that when people earn enough money to sustain themselves, they need less welfare. They can thus consume more and as We have all learned from Saturday morning TV ads, consumption makes the world go round.

The companies listed above are vehemently opposed to a "living wage." Wal-mart and many of these companies are also vehemently opposed to unions, who can organize to negotiate one. Cynically, the opposition is because these companies will then have to get off the welfare teat and actually work for a living. The specific driving force is that the shareholders want profits and profits are harder to come by when the monies have to be paid to the employees, rather than letting the state and federal governments pay out.

But are profits really that hard to come by when paying a living wage? Costco has routinely kicked Wal-mart's Sam's Club ass year after year, generating more sales per square foot and far more sales per employee. Costco workers average just under $17.00 per hour in base pay, nearly all work full-time and thus enjoy benefits such as medical plans and retirement funds. Costco is not as large as Sam's Club, but it generates roughly the same level of profit per store, and that makes them just as attractive to shareholders.

McDonald's has a dominant position in one market, where the stores have above-average sales and wages are equivalent to about $15.50 per hour. There's even plans to open more stores, despite having to pay over twice Our national minimum wage. Where is this magical place of Happy Happy Joy Joy Meals? 

Australia.

Stick that in your low-wage pouch and smoke it.

The largest segment of workers in Puerto Rico are in the "Services" category. Just drive around and you'll see why, with many of the cheapskate companies listed above joined by Walgreens, Pep Boys, Burger King, Auto Zone, Wendy's and Office Max along with local retail chains like Pitusa, Econo, Selectos and Me Salvé. All have the same marginal-wage structure, trying to cap employee hours at 35 per week and letting the welfare system fill the gaps.

A friend of Mine, who has an MBA, lost her job when the multinational she worked for closed with barely 15 day's notice. She went to verify her unemployment benefits and to see if she could get a job through the government agency's resources. She was only offered jobs at Burger King. The pitch? "Take the job and we'll get you food stamps to help out."

She's living in Boston now.

Where Burger King and McDonald's and Wal-mart and Starbucks employees also qualify for food stamps.

You see the problem, right? "Blame it on the system," right?

But aren't We "the system"?  Damn right We are. So it's either fix it, destroy it or stay out of it altogether. 

We can do all three, and We should. Solutions are out there, but like with ideas, it's making them happen, the execution, that makes the difference.

Let's explore that, shall We?



The Jenius Has Spoken.


P.S. -- From today's Cleveland Plain Dealer website: A Wal-mart in Canton. Ohio is holding a Thanksgiving food drive "for their associates in need." Associates, what Wal-mart calls its employees, are in need? Of food? What the hell is Wal-mart paying them? Peanut shells? And how the hell does a company with a $17 billion annual profit have the totally unmitigated gall of asking its customers to directly help feed its employees? Is this the new image of America? 

Damn.


[Update: 20 Nov 2013: You vote more with your dollars than you do with your, uh, vote. Here's the explanation and how powerful it is, via Free From Broke.]

[Update: 21 Nov 2013: How Wal-mart Could Pay Workers a Decent Wage Without Raising Prices. From Mother Jones. The skinny? Take the money the company uses to buy back its stock, to enrich the Walton family, and put it into wages instead. And you thought I was just spewing gall about the $17 billion profit, of which $7.6 billion goes to buying back stock...

And from Bloomberg.com, How McDonald's and Wal-mart Became Welfare Queens. A few words, to sully the palate: "Wal-mart’s 'associates' are paid so little, according to Grayson, that they receive $1,000 on average in public assistance." That's over $1.4 billion a year that taxpayers shell out for "everyday low prices." Shit.

Speaking of which, from the good people that run the other welfare queen bitch: "McDonald's Tells Employees To Consider Returning Holiday Gifts To Get Out Of Debt."

Merry Christmas, everybody!]

[Update: 22 Nov 2013: Counterpoint, also from Bloomberg: Why Wal-mart Will Never Pay Like Costco. A quote: "Costco really is a store where affluent, high-socioeconomic status households occasionally buy huge quantities of goods on the cheap: That’s Costco's business strategy (which is why its stores are pretty much found in affluent near-in suburbs). Wal-Mart, however, is mostly a store where low-income people do their everyday shopping." The article makes, and supports, its valid points.]

The Numbers Add Up...To Disaster

Once again, from Cate Long's insightful blog MuniLand, comes this numerical picture of Our bond issues. The report, written by Alan Schenkel, ws posted on MuniLand on July 27, 2012. Bringing this up right now is just perfect for the upcoming farce of Our elections:

"About half of the ($60 billion) debt is general obligation or otherwise tax backed, while most of the remainder is secured by revenues, including electricity sales, water and sewer utility charges and highway tolls, with all bonds to varying degrees dependent on the fortunes and stability of the island’s economy." (All emphasis Mine.)

Wondering why Our "electrical savings" this month are nothing but a 20% credit, to be charged to Us after the elections? Just read that quoted paragraph again.

"Current general obligation credit spreads, with yields about 200 basis points above AAA benchmarks, do not reflect bondholder risk.

(Cate Long) Translation: An investor is not getting paid enough interest to cover the risk of owning these bonds. Prices need to come down, and yields need to go up."

See that gap, with a green arrow going up and one going down? That gap means that the risk of Our bonds is rising and the revenue backing them is dropping. Which means We'll have to offer more interest to investors = more debt = bigger disaster down the road if Our economy doesn't get stronger... a lot stronger.  Not that The Larva give's a slug's ass: he'll be long gone by 2013.

"The pace of debt growth exceeds that of economic growth, an unsustainable proposition."

You know what it's called when your debt growth exceeds your income growth? Bankruptcy. Or suicide.

Ms. Long then comments:

"I have one quibble with Schankel and the broader market in how they view Puerto Rico’s debt and pension liability load. This data is always presented as debt per capita, but I think it’s more realistic to examine debt per worker, since ultimately the debt must be repaid with revenues generated by the state. Debt/pension liability per capita is $13,449, but per worker, the debt/pension liability figure is about $90,000. This is more than triple the average 2010 wage of $26,870. How are the citizens of Puerto Rico ever going to pay back all this debt?"

If you work in Puerto Rico, think about having a $90,000 you didn't ask for slamming your future earnings. Rough, right? If you don't work because you get welfare, what the hell do you care, right? Here's the thing, worker and parasite: when the economy collapses, We all get slammed. And all of Us are to blame because the thieves We elected are escaping while We have to pay...again.

The numbers keep adding up against Us. You'd think We'd note the tally and do something about this, right?

You'd think.



The Jenius Has Spoken.


[Update: 17 Oct 2012: Huge investment brokers are dumping Puerto Rico bonds.]

The Larva Gives Us Cancer

Doctor comes up to you and says "You have cancer." Serious news with deep and far-reaching implications and you feel...something. Sadness, fear, rage, desperation, need, hope, doubt...

Doctor comes up to you and says "The guy next to you has cancer." Be honest: you don't really care, not that much. Not as much as if it were you that got the diagnosis. Not unless the guy next to you is your father, son, brother, best friend...something like that. Otherwise, you react with a bland "Okay" and move on.

Be honest: it's what most of Us would do.

But what about the person to whom the doctor says "You have cancer" and that person says "Okay" and continues his moseying along unperturbed. Deluded? In deep denial? Stupid? Insane? Any of those would apply, but you wouldn't think the person was "right in the head," would you?

Let Me introduce the pitiful excuse for a (non)governor ("Long May He Waffle And Duck Eggs!") Luis "The Larva" Fortuño, he of the pencil-neck geek physique and equally-pathetic intellectual muscle. The Larva has reacted to the downgrading of Puerto Rico's bonds--that his (non)administration used to shove Us into Our deepest debt ever--with a terse "No big deal." This after crowing like an emasculated rooster that Our bonds had "reached their highest rating in 35 years."

For the uninformed, known around here as "statehooders," downgrading a bond means it is a riskier investment and in order for it to be held or sold, a higher interest rate has to be paid. In short, the downgrading is going to cost Us--not The Larva--a ton of money. A $16 billion tumor is now metastasizing and he can't give a fuck.

But even a nano-brained parasite like The Larva has the basal instinct of needing to feed, so his public "Don't give a shit" stance isn't echoed by actions. To wit:

--The Puerto Rico Electrical Power Authority (abbreviation: DILDO) is doing everything in its power (yeah, "power") to keep its fuel surcharge high in order to keep supporting the massive bond issues it has made during this (non)administration. However, political reality means they've announced a "rate drop" for September...in time for the elections.

--The IVU Loto, a lottery based on your numbered sales tax receipt, is desperately trying to bolster its declining revenue by offering a car and 6 iPad giveaways every week. The bonds Moody's downgraded are exactly these (based on the sales tax revenue), and the downgrade was hinted at over four months ago.

Our debt equals Our Gross Domestic Product. That means We owe as much as We "make". If that were you, you'd be paying debts with every dollar you earn. Does that sound like a healthy arrangement to you?

If it does, you are too stupid to breed and should be euthanized.  Pity We didn't do that to The Larva back in 2008...because he isn't going to be paying anything for the cancer he's unleashed on Us.


The Jenius Has Spoken.


[Update: 23 July 2012: In this NotiCel article, it seems likely that Our government budgets in the near future will pay more in debt service than what it will invest in health and education. So now Our government is pretty much like many of Our families, paying off loans and interest from overspending and thus incapable of paying a medical plan or sending kids to something other than wretched public schools. The difference? Our families are ALSO paying for this government debt. I have to repeat this: the only good politician is a dead one. The sooner We make more good ones, the better.]

Puerto Rican Roulette

The idea has the appeal of greed on both sides. We, as consumers, get a chance to win maybe $1,000 a week in a lottery. The government, taking asswipery to a new low, try to force businesses to report their sales in order to collect the sales tax, known locally as IVU, as in "I violate u."

Enter the IVU-Lottery, or IVU-Loto as it is called. Every customer is now expected to request a receipt with a unique serial number, in order to participate in two weekly drawings of $1,000 each, or after the government takes its cut, about $620.

Not bad money, right? Just for buying stuff? The usual stuff you usually buy? So why, Oh Jenius, is this such a bad idea? In fact, Jenius, you say it's one of the worst ideas from a government that practically perfected the stupid idea factory?

It's a dumbfuck stupid idea because the reward system is wrong: it doesn't reward the customer for forcing the retailer to conform to the law, instead, every week, it punishes all but 2 customers in exchange for the government increasing imposition of a numbnuts tax that doesn't work.

First, a sales tax of 7% was too high to begin with and instead of making the collection of government monies easier and larger, it did the opposite. That was clear to bright minds long before The Jellyfish and his cabal in both major parties rammed the buttplug up Our descending colon. Not only was the tax too high--3-4% would have been better, if at all--but the whole reporting process was so hideously complex and asinine that it cost the government more than triple its expected implementation and management cost...for less revenue.

Second, because the tax was stupid, too high and too complex to deal with easily, it forced businesses to bypass it altogether and opt for a gray market approach. So the stated purpose of "tapping into the underground economy" went unfulfilled and it actually did the opposite: it helped make the underground economy more fertile.

Now the asshats We elected want Us to play the numbers so they can get more money and piss it away like the retarded VD-infested monkeys that they are...and We'll end up paying more for it. 

Ya don't think? Here, take a ponder on this one: what do you think stores that already report IVU will do when their competition has to spend money to become part of the program? Think it through. I pointed out years ago that the IVU would raise prices by about 13-14% and the statistics bore Me out to a penny. Will the situation change just because it's three years later? Uh-uh. Stores that already report IVU will marginally raise prices because the cost of compliance by some (about 35%) of their competitors will be passed on to the customer. It's simple business economics: if I have to pay more to provide goods and services, I pass on the costs to My customers or I close up shop.

And that means that the IVU Loto will place upward pressure on prices that only 2 customers a week will benefit from, while the rest of Us lose another percentage point or two to unneeded inflation.

Woo. And hoo.

What will the underground economy do? Think it through. If the gray market knows it has the advantage of a cash-based economy, with the customer holding the trump card of "I can report you," do you think prices will rise or fall in that economy? Exactly. Now where will you go to buy those "gray market optional" items, which have now increased beyond "flea market junk" to fresh fruit and vegetables, new clothing, electronics, eyewear and even appliances?

Right. You'll go where your dollar has greater buying power, not where your dollar gives you less than a 1-in-a-million chance of winning a few dollars...to be taxed.

Once again, the IVU Loto is another boon to the underground economy and its effects will be noticeable within weeks, not months. How will We know? When flea markets expand in size and numbers.

Were there better options? Damn right there were, but what can you expect from retarded VD-infested monkeys other than screeching, scratching and stealing? Here are two options that would have been better-suited to the government's uncontrollable lust to get and thus waste more of Our cash:

1) Drop the sales tax to 4%. It might seem counter-intuitive, but hundreds of economic studies across decades and frontiers have shown that when consumption-based taxes are reduced, consumption--and tax collection--goes up. For one, the 3% difference means customers can get (by demand and competitive pressure) "instant savings," and nothing spurs consumption that the feeling of getting a sweet deal. Just as the underground economy, for Pete's sake.

2) Switch collection to quarterly. Once again, the hassle of complying with the idiotic tax every month needs to be assuaged in order to make it easier to comply and manage. To the monkeys and their monkey-groupies who say that revenue needs to be collected monthly for proper collection, I have two words for you: April 15th. Once a year, and it works (somewhat) okay. Plenty of business and corporate taxes are paid/collected quarterly and with one "free" month in the three-month period, enforcement can take a higher priority.

But no, since these ideas require the R.V.D.I.M.s to (a) drop "their" percentage and (b) reduce "their" control, they will avoid the ideas like cowards flee from dignity. They are and they do. In their disease-ravaged minds, it is better to have Us all play a version of economic Puerto Rican Roulette and increasingly risk suicide than to think things through and do what's right.

So what else is new?



The Jenius Has Spoken.

Where I Talk About Soap Scum

If Our governor talks and everyone's listening, has he really said anything?

Unlike the "tree falling in the forest when no one is there" philosophical launch point, the example above has a direct, incontrovertible answer: nuh-uh.

First, Let's just point out that The Larva, (non)governor Luis Fortuño, has the kinetic intelligence of soap scum. When was the last time you listened to soap scum?

Second, The Larva is waaaaay into his "two years to go before I get drummed out like a mangy dog by my own party" flop-sweat. By standing in front of a microphone and mouthing brain farts related to taxes or other economic issues he understands like soap scum understands particle physics, he expects to somehow, mysteriously, insanely galvanize a party base he's never really had to support a (non)administration he's never really had.

Third, if a tax """""reform""""" (yeah, I did this in the last post, too...) actually eliminates taxes on couples earning $20,000 or less per year, will this translate into votes for The Larva? There is no point in debating whether this will be a boon for Our economy or whatever because there is NO intent whatsoever to have this be an economic """""solution""""". (Okay, I'll stop now. """""Maybe""""".) This is a pre-emptive vote grab meant to become legislation in 2011 and--if The Larva can manage to stay dysfunctionally in office until then--become part of the campaign real estate of 2012.

Fourth, the tax "reform" is totally misguided, for the real (non)government's purpose is to raise money for its continued cancerous growth rate and thus can't afford to reduce government revenue for it will only make a horrid situation worse. The bottom line is that Our government is almost flat broke, will be flat broke soon (as debt exceeds GDP and debt service climbs above 30% of the Budget) and We're not going to be able or willing to pay for keeping it in luxury.

We shouldn't be now...but aside from lip service about the thieves and parasites, most of Us keep voting the same thieves and parasites back and slavishly angle Our lives to join them.

Idiocy. A step above soap scum in intelligence, but not by a hell of a lot.

The Jenius Has Spoken.

Sales Tax Spy Game

Would you spy on someone?

Would you do it for money?

How much money would it take? (If you have a price, that is...)

Second angle: Do you know there are 6 government-sponsored lotteries in Puerto Rico? The traditional "ticket-based" one, and 5 electronic versions (Pick 6, with "Second Chance", Pick 4, Pick 3 and Pick 2.) 

Do you think We need a 7th?

How about one where every purchase you make that has sales tax on it becomes a chance to win some "free" cash?

Are you in?! 

But what if the whole purpose of the "lottery" is to catch businesses that aren't paying the sales tax? It's an idea Our sorry excuse for a government has been considering. So...

Are you in? Are you willing to spy for the government?

You gotta buy stuff, right? And hey, there's a chance to win some cash!

But how broken is the sales tax collection system that it needs spies to work? What kind of government offers speculative bribes to its people to spy on others?

Still don't care? Ready to buy-buy and spy-spy for some (potential) pie-pie? Okay, Let's try again. 

How much, I ask you, is this "spy lottery" going to cost? And what will the payout do in terms of increasing costs of managing the obviosuly broken sales tax collection system?

And what mechanism will be used to offset those costs, to pay for this expensive "solution"?

Could it be that the way to pay for those increased spying costs (equipment and payouts) is to raise the sales tax?

So now I ask you: would you spy on someone...if it cost you money?

Now you're seeing the light...

The Jenius Has Spoken.

Underground Economy, Part III

Thanks again to Janine Mendes-Franco for selecting another Jenius post to appear on Global Voices Online. 

This won't take long...

Add the long tail of a 3-year recession/depression, with an economy tanking like Andre Agassi on crystal meth, with the government finally "forcing" the economic move that was two decades overdue--the firing of government pinheaded parasites--and toss in the repeal of the idiotic Closing Law now letting loose the forces of "shop 'til you drop" mania and what do you get?

Underground economy, Part III.

Part I was the basic "a little cash on the side and off the books" that kept Us slightly above water for decades.

Part II was the rocket-blast impulse to perfect the underground economy due to the new 7% sales tax, which as I predicted, ended up having an impact closer to 13-14% on the consumer and fell far short of projected revenue for the government. Note the widespread increase in "flea markets" and home-based businesses and a perceived increase in online shopping.

Part III will take the online aspect even further, but not as a tidal wave rush to embrace Internet technology, but as a way to bypass local stores for goods. Expect an increase in visits to websites such as Clasificados Online (the most-visited website in Puerto Rico) and a greater number of "barter" systems based on pooling resources. Facebook would be the venue for that movement.

Why? Uncertainty clashes with the seasonal consumer hunger to buybuybuy in order to feel "the Christmas spirit." A culture that views savings as money badly in need of spending is not going to let the vague spectre of a worsening economy make him or her back down from the Prozac-like relief that spending money brings them. So they will buybuybuy...

...But slightly smarter than before. More cash, less credit. More Internet searching, less mall crawling. More flea market and "I know a guy" than Sears-K-mart and "There's a sale!" More options that involve less money changing hands, preferably where the sales tax does not apply.

As the (smart) economists say, the recession is the recovery, but We don't see it that way. Our way is to buy Our way out of a bad cycle. Too bad We aren't fixing the bad cycle: We're just adapting better to it.

The Jenius Has Spoken.

When Jobs = Waste

If adding 100 jobs in Department A will generate 1,000 units of income, but cost 7,000 units of expense, is this a good deal?

And if the described deal got worse over time, where your 1,000 units of income now cost more than 14,000 units of expense, would you keep it going? For 40 years?

Welcome to the empirical experiment in "Jobs = Waste" known as the Puerto Rican Political Economic System. Grab a seat: this is a bumpy ride.

Replace the phrase "units of income" for "tax dollars" and you will have a framework for the disaster I'll discuss here. The basic premise is that government jobs do not really help build an economy and that Puerto Rico's moronic fixation on increasing the number of government jobs--masquerading as an "economic plan"--has led Us to the brink of disaster.

Also known as the Luis "The Larva" Fortuño (non)government.

The late 1960s' estimate of the cost of a government job, when measured in tax dollars, was 1-to-7, in other words, every dollar a government worker received in salary and benefits equaled 7 tax dollars in direct and indirect expenses. This was at a time when the local salary package was about $8,100 a year, so the cost of having that goverment worker was about $57,000.

Obviously, We don't each pay enough in taxes to directly cover that much expense per worker, but that's what tax revenues and other government fees are for: to cover public project and public process costs. 

Now spend the next 40 years adding government workers--who are an expense--while simultaneously reducing the overall tax base and limiting potential private sector business growth. What will that lead to? A bloated government and not enough money to pay for it.

Welcome to the empirical yadda yadda yadda.

Government jobs, that sinecure of mediocre, senescent and feeble minds (sometimes known as "the teacher's union"), are an economic boost on paper only and only with the "lies, damn lies an statistics" factor thrown in. It boils down to three factors:

1) As noted, a government job is a government expense. There is no such thing as a "profitable" government job for the government is not a profit-centric entity. (When it is, there's usually a dictator involved.) There's only "efficient " government jobs and efficiency is never achieved by endlessly increasing the number of workers.

2) Government workers are not production, they are either maintenance or administration. To simplify, the government doesn't "sell" (costs + profit), it serves (cost.) (I'm speaking in ideal, abstract terms. In reality, governments serve themselves and the devil take the hindmost.) For a government to operate well and serve its higher purpose, it must balance costs with revenues, with costs being determined by a limited--limited, people--set of services based on common defense (military, police, courts), common infrastructure (roads, public buildings, airports, ports), common administration (laws, offices, elections) and common revenue collection (taxes and fees). The government only supervises or supports what the private sector builds or operates within the legal framework of the state. That is how an economy is built, not by making the government the job-creator to replace the private sector.

3) The government can become bloated by failing to understand (often willfully) Point #2 and because Point #1 is rendered irrelevant by recourse to "public deficit," "extraconstitutional debt" or "pettifoggery." Hence, welcome to Puerto Rico, the empirical yadda yadda yadda.

Note I did not include "education" in the four services of Point #2. It doesn't belong there. Having the government control education is an excessive and unneeded intrusion, not to mention a demonstrably colossal waste of tax monies. But under the "common defense" factor, the government can (and should thus limit itself) to developing general standards for what will constitute a "well-prepared citizen for national progress" and let citizens--individuals and groups--decide on how best to develop said future citizens. 

The increase in ratio from 1-to-7 all the way up to 1-to-14 is based on the increasingly heavy expenses needed to sustain the overly-complex government bureaucracy, higher wages and benefit packages (especially consultants and legislative greed-bags), a reduced corporate tax base giving incentives away willy-nilly and--here it comes--corruption. A former Ethics Office director estimated the cost of corruption in Our government to be about 10% of the total budget, or about a billion tax dollars a year. Uh-huh. And McDonald's has sold millions of greasy burgers...

Any way you slice it, by shuffling tax dollars around like pieces of confetti, We have proven over four decades that goverment jobs = waste. Human waste. (heeheehee...I couldn't help Myself...) But don't take My word for it:

"Economic growth results from producing more goods and services (not from redistributing existing [government] income), and that requires productivity growth and growth in the labor supply. A government's impact on economic growth is, therefore, determined by its policies' effect on labor productivity and labor supply."

Or take these:

"Before you go away thinking I’m opposed to all government jobs, I understand there are a great many public works jobs that are useful, even essential. Government monies (read: taxes we’ve paid) which get channelled into public projects like highways, bridges, parks, water and sewer services, etc. represent reasonable and proper ways to spend our money. You can even include the paper-pushers who are needed to keep public projects organized, documented and running efficiently. (I speak idealistically, of course, as there certainly is nothing efficient about the current bureaucratic behemoth…)

The point is simple: it’s only jobs in the private sector, in the areas of manufacturing, sales, service, construction and repair, that are the generators of economic growth, health and wealth. The vast majority of the jobs Obama is proposing and trying to create (whether actual agency jobs within the government, or hirings by private companies using government funds offered as incentive to hire) will invariably cost taxpayer money just to create them, and then more taxpayer money to sustain them. The process becomes a black hole – collect taxpayer money, spend it to ‘create’ jobs for which there is no consumer demand, sustain them with more taxpayer money, tax that new job along with the rest of us, ‘create’ some more jobs, raise taxes to sustain all those ‘new jobs’ — I think you see how the very concept requires a constant raising of taxes and draining of resources to maintain the ludicrous cycle of bogus job creation and sustainance."

Oh, yes, there's an Obama reference in that second quote. Maybe it will serve as a wake-up call before the U.S. of part of A. also joins Puerto Rico as an empirical yadda yadda yadda.

The Jenius Has Spoken.

Tax Funneling or No Tax?

"In recent years, Congress has graciously refrained from raising our income tax rates. However, Social Security taxes have risen dramatically. Simultaneously, inflation, prompted largely by the rapid growth of government spending, has shoved more and more Americans into higher and higher income tax brackets. 

Thus there is less and less incentive to earn incomes that are taxable. So unless we like more leisure, we are increasingly inclined to enter the so-called 'underground economy'... 

...The phenomenal growth of such activities has become so substantial that, by some estimates, our “underground” activity may now be the equivalent of 20 or even 30 per cent of Gross National Product. Certainly, this production is, in some sense, less desirable than it would be if everything were out in the open. Besides that, our government is losing tax revenue which might otherwise be used to build schools or shore up our national defense. 

If tax rates fall, American workers will have greater incentives to produce goods and services for American consumers. Some people who are already working will leave the underground for the more efficient open economy. Thus, income subject to taxation will grow. 

In fact, it’s even possible that, though income tax rates fall, the increase in taxable economic activity will be so great that tax revenues will rise. That is the thesis underlying the now-famous Laffer curve, originated by the economist Art Laffer. The implication is that, while tax rate cuts will directly benefit individuals, in the end society as a whole will prosper."

This quote, from an article written by Russell Shannon in 1981, illustrates a couple of key points about taxes:

1) The economic impact of increasing taxes is largely counter-productive to an economy.

2) The "underground economy" will thrive to secure income by avoiding taxes.

These two points are obviously closely related and they have become the gist of a lengthy--very lengthy and very interesting--series of exchanges between The Insider and The Jenius over at his blog Puerto Rico: A Paradise Lost?

Fair warning: the exchange is very long, has a few dozen discussion points and is carried out with elegance (by The Insider) and a mildly snarky attitude by Yours Truly. I even apologized for it, which The Insider graciously waved away. In any case, the discussion is quite extensive and intense. You have been warned.

Oversimplifying as only a Jenius can, The Insider wants to use the local sales tax revenue to establish a points-based system of socioeconomic development. I, on the other hand, think We can do that simply by eliminating the sales tax altogether. I suggest We tax the monies held in banks as capital gains unless they are invested in Puerto Rico (at present they are almost always invested overseas) and adjust property taxes from their ridiculous 1950s values to at least 1995 market values, while exempting homeowners from the excess tax if the property has been developed since 1980 or is their single residence.

(Yes, I explained My side more than The Insider's. He does his side much better than I can. Go ahead and see what I mean.)

The evidence of sans sales tax economic benefit is clear, but does that mean that The Insider's plan is less likely to work? That's where the debate stands, with Me on one side looking to slash the sales tax to force government shrinkage and stimulate the economy and The Insider on another side getting Our society involved in making better decisions at the individual level. (You didn't see that coming? Well, he did that. I told you it was interesting.)

I'm sure We--The Insider and Moi--would both agree that there are other sides to this debate. We're on record as stating We'd like to hear about those other sides, or receive feedback about the sides We espouse. Bottom line, We are at least engaged in a debate; it still bears watching to see if this debate becomes something more.

The Jenius Has Spoken.

Furgonazo Time

On the heels--or under, actually--of Our (non)governor's presentation of his government recovery plan, wherein some 30,000 public sector deadbeats need to be culled (not enough, but that's a topic for another day), can you guess what appears as part of the "We have to avoid junk bond status" plan?

A tax on every shipping container coming into the Isle of Enchantment.

Uh-huh. A tax. On every shipping container. And We being an island, you know.

Was this part of Luis "The Larva" Fortuño's address to the people? Nuh-uh. It was released as part of the plan, tucked into the middle somewhere, like a forgotten shopping list in a really boring book. Only this particular shopping list kills any chance of a recovery We might have had for at least several years.

Remember when I said the impact of the 7% sales tax would be actually closer to twice that much? According to recent (January 2009) economic studies, the cost to the consumer of the sales tax is just over 14%. The 7% tax didn't replace the former 6.6%: it got added to it. 

Took the damn economists three years to catch up with Me. The Fools never will.

The shipping container tax already has a moniker: furgonazo. "Furgón" means shipping container and the -azo suffix means "Holy shit." Even if the tax is as low as 2.5% (the chances of it being that "reasonable" are the same as The Larva growing a pair...), the impact will severely cut into every aspect of business and daily life here. If it is as high as the expected 5-6%, in essence re-placing the import tax the sales tax was supposed to replace (only this time, nothing is exempt), then you can expect the same doubling effect, though this time, it won't be because of business "friction," but because of sheer added cost.

This is a recovery plan? The worst part about this is that it's the best The Larva can do, not only because he's lacking a notochord, but because We have been brought to this point by 6 successive dolts with egos the size of stadiums, with brains and integrity that fit in a thimble with space left over for a teaspoon of sugar.

These 6 numbskulls--Ferré, Hernández (three terms), Romero (two terms), Rosselló (two terms), Calderón and Acevedo--made this mess and made it worse. Now after 40 years of multi-party incompetence, We are left with The Larva to somehow find a way to clean it all up. That's like having the Mafia take over the docks and sending Spongebob in to kick them out.

Spongebob... heh-heh. I actually voted for him over The Larva. 

Will We have to deal with the furgonazo? Damn right We will. We're no longer even in supposed control of Our economy. The shot-callers now are bond raters, those happy-go-lucky tapeworms who buy and sell mathematical illusions. Only Our illusion has come crashing apart and We gotta do what incompetent money-handlers gotta do.

Except that the money-handlers aren't paying as much as We--the people that cheered them and voted them in--are going to pay. 

Cheer now, suckers. The wake-up call was long overdue.

The Jenius Has Spoken.

False Dilemma, True Options

So the headline stated that 40,000 government jobs had to be eliminated or the sales tax raised to 25% (up from 7%).

That's known as the "false dichotomy" or "false dilemma" error in logic. What the headline implies is that "For Puerto Rico to survive, 40,000 parasites must be dumped or We get slammed with a 25% sales tax." That is a false "black or white" framing of the situation. 

Let Me give you statehooders an example: "For Puerto Rico to survive, Luis "The Larva" Fortuño must resign or be abducted by space aliens." 

Okay, wait a minute, that doesn't prove My point.

This one does: "For Puerto Rico to survive, 400,000 people must leave the Island or We declare bankruptcy." What the false dilemma does is frame a larger debate into a convenient window, an either-or limitation meant to prove an often indefensible point.

Note that the false dilemma occurs even if one of the options is actually true. In the headline's case, at least 40,000 government workers need to be fired. There's no rational argument against this, for not only does Our (non)government employ far too many people, Our economic morass simply cannot continue to feed that many blood-sucking mouths.

"But, Jenius," you say, "What will those 40,000 workers do? Most of them support families. Think about the children!" Economic corrections never satisfy everyone. And the longer they are delayed, the larger the impact of the correction.

What could have been easy in the 1970s, after (pseudo)governor Luis "Hire 'Em Sideways" Ferré packed the government with walking vegetables (his percentage increase in government workers over 4 years is exceeded only by the increase seen in 1952-1956, the first four years of Our stupid commonwealth "experiment" in colonialism), and may have been difficult-but-manageable in the 1980s, became a Godzilla in the 1990s and a catastrophe under Sila "Quitter" Calderón and Aníbal "Jellyfish" Acevedo. At this point, We have four decades of political cronyism, corruption, outright theft and rampant cowardice to overcome.

And it demands a correction We can no longer delay.

Raising the sales tax to 25% is not an option. To state that is to blather and babble like an acephalic cretin (a synonym for "politician" or "journalist" in Puerto Rico.) Firing 40,000 workers is just one possible option, but it is virtually a requirement now. Here are others along those lines:

A) Close or consolidate government agencies: Why do We have a Public Buildings Authority, when practically every agency owns, manages or supervises its own buildings? Why do We have separate agencies for Planning and Permits for each of residential, commercial and industrial needs, not to mention environmental issues? Why do We have agencies in Ports and Agriculture that do nothing but mirror Federal government personnel who are the only ones who can carry out the legal functions? 

B) Privatize: It's a dirty word to unions--who should be banned from government--and it's a dirty word when the government keeps its grubby tentacles in the pie. I've said it before and it bears repeating: Privatization of government functions (such as utilities) works well when the government leaves operations entirely in private hands and retains the consumer protection oversight function. There may be problems (cable TV, anyone?), but part of the oversight is to seek out competitive options to improve overall service.

C) Fire sub-contractors: From consultants to advisors to supervisors, Our government hands out sub-contract work like the money to pay them isn't theirs. Here's the golden standard: Unless they're building something, no sub-contractors allowed. 

D) Fix the government's budget to GDP: The fallacy We have proven beyond a shadow of a doubt is that government-based jobs help an economy grow. They don't, because for every dollar in "consumerism" supposedly created by a parasite, two or three times that is lost in wasted time and money. (Bureaucratic deadbeats, anyone?) However, if the government wants to grow its budget and (gasp!) actually help the economy, increasing the Gross Domestic Product--the value of what We produce--is a great way to go about it. A rising tide lifts all boats, but the ebbing tide We have now is creating a "too few lifeboats on the Titanic" feeling.

E) Cut taxes and drastically reduce government spending to energize the economy: Yes, that means government shrinks all over. If it worked for The Great Depression--and it did--then it will work for Us. Especially since We get a $5 billion+ free ride on Uncle Sam(e Old Same Old)'s musty wallet.

That We lack credible leadership is a given. That We have for decades is beyond question. That We can continue with such, with airheads and numbskulls playing the "either-or" game to suit themselves, is not an option. Either We step up and make positive things happen, or We watch what's left of Our future spiral down a gutless drain.

False dilemma? I wish...

The Jenius Has Spoken.

Speed-to-Business Equals Growth

Kevin Shockey and I have had many lenghty conversations (Genius-to-Jenius, as it were) about Puerto Rico's general and specific problems. A significant number of My posts cover topics he has either discussed with Me, were triggered by his comments or lead into more discussions with him.

One We touched upon recently was the oft-noted observation that Puerto Rico fosters new business growth like penicillin fosters infection. (To you statehooders out there: We're killing new businesses.) I noted that the overgrown legal system (laws, regulations, licenses, permits, taxes etc.) did that to legitimate businesses, and that in fact this was the prime motivator for the recent spurt of the "underground" economy, as evidenced by the huge proliferation of flea markets.

I touched upon this before, noting that flea markets have gone from "one or two, only on Sunday events" to "dozens, some open every day" with a parallel expansion from "mostly old junk" to "plenty of new stuff, groceries, electronics and services." Here's an example from a recent flea market visit I made:

Tony is a hair stylist who works Friday through Sunday at a flea market. His stall has two large chairs and several metal folding chairs, bright lights, two fans shoving air in semicircles and a 27-inch TV set on a pedestal playing a popular movie still in theaters. He cuts hair, trims beards and eyebrows and charges from $6 to $20 per client. In an average 9-hour day he pockets $250-$350, averaging about $1,000 on a weekend.

His Tuesday-Thursday job is manning a chair at a large local salon, in the Mall, with 11 other stylists, male and female. He has a few regulars, but he's young and hasn't built a clientele yet. The salon charges from $10 to $34 for the same hair cut, beard trim and eyebrow plucking services. Of the amount charged, Tony gets to keep roughly 40%, for he pays a "chair fee" to work at the salon, a cleaning fee to keep his chair area neat and an override commission to cover utilities . His average per 9-hour day at the fancy salon in the Mall: $60-$80. 

Yes, Tony makes more in one day at the flea market than he does in three days at the salon.

Tony pays $200 a week for his space at the flea market, signing a guaranteed 20-week contract after his credit was verified. He gets space, electricity, security, even debit and credit card payment processing in the deal, which he worked out in about 2 hours one Thursday afternoon, when he called in sick at the salon and went to the flea market. Tony was even offered an instant loan of up to $3,000 to get his barbershop set up, at a very fair 15% interest rate, with only his stall's furnishings as collateral, even though they totaled about $550. 

Would he consider opening a salon like the one he works in? Would you? Even before finding out it took the salon's owner 19 weeks to simply take over the salon from its former owner, who took 29 weeks to open it back in 1997? And since then, the legal system has thrown another 3-8 weeks of red tape, a.ka. garbage, to increasingly keep businesses from starting up efficiently.

Now it's true that Tony faces a hike in his rate soon, to about $225 or even $250 a week. Competition, you know. But he has seen a steady increase in clients as the months have gone by, with his salon regulars now dropping in--by appointment--to save themselves a few bucks. And as he told Me: Why bother for months with bureaucracy when you can have your business in a day? 

And that, as they say in cardiology, is the heart of the matter. The more the Fools (politicians of every stripe, scar, birthmark, mole, open sore and leprosy) throw roadblocks at business, trying stupidly to skim even more of Our money as it changes hands, all they're doing is reducing legitimate businesses in favor of ad hoc--underground--commerce.

Like crack addicts, they can't stop what they're doing even if their microcephaly gives them a glimpse of a better way. As the economy worsens--and it will get much worse for Us--it is this ad hoc economy that will sustain Us. The huge amount of cash it represents is the underlying foundation for Our economic resistance to outright swooning. The moment that cash flow is interrupted, We will see an abrupt contraction of this underground economy and that will be like chopping the roots of Our economic tree.

Is this underground economy "right"? Isn't it, in fact, illegal to generate income and avoid paying taxes on almost all of it? Yes, the underground economy is illegal--because the legal economy is unfair, abusive and ineffective. How else could the ad hoc economy match or even exceed the legal type? When the benefits outweigh the risks, people will do what is wrong. When the benefits clearly outweigh the risks and no other viable option is allowed, many more people will do what's wrong. In this case, it means going undergroud. Either that or they leave,  go on welfare , beg, steal, prostitute themselves or deal drugs. But they won't starve, that's for sure.

Should We do something about the underground economy, even though it allows rapid entrepreneurship, has a venture capital system that places greater value on the person's skill set and knowledge rather than his contacts in government, makes money quickly and consistently and keeps thousands of Our people "gainfully employed"?

Yes We should. As soon as We make the "legimitate" economy just as good.

The Jenius Has Spoken. 

Casting Light on Cockroaches

Okay. You are one of the persons in charge of Our government's (hahaha) economic policy (hahahaha) (Sorry. I'm not laughing at you...) and you have three basic choices:

1) Leave taxes as they are.

2) Raise taxes.

3) Cut taxes.

Let Me add some very simple Truths:

---Tax revenue has fallen short of all projections--even the worst case scenarios--since the implementation of the 7% sales tax three years ago. Now part of that shortfall can be laid at the feet of a global recession, but the numbers are woeful anyway.

---Real income in Puerto Rico is anywhere from 6% to 19% lower than it was in 2000. Bottom line: We each have less money to do everything than We did nine years ago.

---Tax studies from around the world have shown that raising taxes in a weak economy is like jackhammering a stopwatch: It pretty much ruins the whole thing.

So, given these simple premises, what do you choose to do? Right. Cut taxes. It makes a ton of sense simply because it make a ton of sense. But of course, sense and government parted ways back in Paine's day. (That's Thomas Paine, you statehooders, not Sila.) So Our crap-for-cerebrum excuse for (non)government-in-hiding is looking real hard at options 1 and 2 above for one reason only: to keep their (non)government intact.

What I'm saying is that Our elected leaders are looking at the current economic crisis as an "Us versus Them" deal, with "Us" being all the walking bags of cheap fertilizer that represent some 24% of Our total workforce and "Them" being you and I. Yup, they're looking to protect their own and leave you and Me as the subsidizing suckers.

That Our (non)government represents 24% of Our workforce is humiliating and obscene. That this same (non)government is acting with the brilliant insight and decisive action of a dead turtle is also humiliating and obscene. But to let them continue this fiscal attack on Our pocketbooks to keep themselves comfy is beyond humiliating and obscene, it is criminal.

And We are the aiders and abetters of this crime.

We, as a society, don't understand how fragile the power the government has really is. It rests on the basic premise that We allow them to do certain things, and that only so long as We allow thngs to happen, they will continue. And no, it doesn't require massive protests or marches or firing weapons to make the government stop what it's doing, it simply requires that We pay attention and cast light on what they are trying to do. Just as light scatters cockroaches, so does light scatter the cockroach asses We call politicians.

And who casts the light? We, as citizens. The media. Corporations. Non-profits. Opposition party members. (An aside: That was the role the Independence Party had until they joined the greed-grabfest the two major parties had long indulged in. And it's the role the PPR should have had if its leader had had more than a half-teaspoon of brains.) In short, Us.

A nation cannot be run for long on an "Us vs. Them" mentality, but it can never make any real progress when the "Us vs. Them" is defined by the elected leaders. "Them" work for "Us." Any other arrangement ceases to be democracy and becomes a rule by cretins... as We have shown for too long.

The Jenius Has Spoken.

Recycle This Plan

From the grabby pen of Jenniffer "Gluttonny" González comes a proposed law to create a recycle, reuse and recovery industry centered on electronic goods.

Pros: Electronic products are loaded with plastics, toxic metals, precious metals and glass that needs to be processed for proper disposal and to make use of key components. We don't do that now. Safer landfills, less waste and an economic incentive from entry (collecting the waste products) to exit (raw materials and inert trash) are good things that benefits Us all.

Cons: Oh, hell, where to begin?

1) "Gluttonny" wants to charge every company that makes, imports, distributes and/or sells electronic goods at least $5,000 for "a registration fee" to "help pay for the recycling and disposal plan." Which hasn't been defined yet and won't be until 6 months after the bill becomes law.

2) "Gluttonny" wants to charge each company in the computer, TV/monitor and cell phone industries a "market participation fee," adjusted annually and equivalent to 0.5% of the total volume of sales. This "fee" also includes cable TV and satellite TV companies, the kind of grubby-greedy grasp that makes a cardinal sin look ugly, you know what I mean?

3) "Gluttonny" specifies in the proposed bill that companies are "forbidden" to pass on the "fees" to their customers in monthly billings or contracts, most especially they are barred from stating that they are charging "to cover a goverment-imposed fee." Heeheehee. Is it Me or am I hearing "Gluttonny" say "You can't blame the government for tacking on extra charges by law to your business?" Okay, "Gluttonny," I'll bite: Who the hell do We blame?

4) "Gluttonny"'s proposed bill would have each business that deals with electronic products have (a) space to receive discarded electronic products; (b) a plan to deal with discarded electronic products approved by the government; (c) an up-to-date log of what happended to each discarded product handled by the company (reused, recycled, sent for recovery or processed for disposal) and (d) offer all that free of charge to their customers.

5) And to top it all off, if after the bill becomes law you want to open a new business dealing with electronic products, "Gluttonny" wants you to pay $5,000 non-refundable fee up front and have your Recovery and Disposal Plan written, reviewed and approved by the government at least 30 days before you open your brand spanking new digs. 

Do We need some reuse, recycling, recovery and disposal system for electronic products in Puerto Rico? Of course We do. According to industry statistics, only about 15% of electronic category units are recovered in some methodical fashion (mostly cell phones.) There's a huge opportunity for developing a local industry with excellent export prospects, local sales of raw materials and top-notch positive environmental impact. But you can't do that by throttling the opportunity under stupid fees and government bullshit.

Any fee--any fucking fee--the government throws on businesses and industries is going to end up being paid by the customer. That's simply basic economics. By making the disposal of an electronic good a crime if not done "under the law," "Gluttonny" is imposing a series of "cascade costs" that range from bookkeeping to man-hours to taxes to extra gas for that throw-the-damn-thing-in-the-right-place effort. 

Is a recycling and disposal plan expensive? Yes it is. But just because it is doesn't mean that the government should be running the show. In fact, the government is the last entity that should be running this show.

Why? Because the whole process only benefits private businesses and industries, with the only public benefit being "cleaner" landfills. Therefore, the government's only task--it's ONLY task, "Gluttonny"--is to establish the standards for "clean" landfills and the punishment for not achieving those standards. Then it should back off and let the private entities come up with their own plan.

The environmental standards are already set. What We really want to achieve--those of Us who are looking at the practical, valuable end result--is a significant or even complete reduction of electronic products in Our dumps and landfills. To do that, We simply have to create a system that rewards collection and proper processing of electronic goods. If We start from that point of view, We can see every party benefitting without need of any moronic "market participation fee," a lengthy empty phrase that can be abbreviated as "tax."

Here's how a private entity-based plan would work at the different levels:

Consumer: A discount for handing in electronic products upon sale or rental of a new one or cash for bringing in large amounts, such as We do with aluminum.

Retailer/Distributor: Collected units can be sold to a recycler/processor for extra revenue, or if still useful, reused in a donation program for tax breaks.

Importer: Tax breaks for finding "green" electronic products to import and export sales of discarded units for added revenue.

Manufacturer: Big tax breaks for "green facilities and products," as well as tax breaks for developing processing or proper disposal facilities.

New businesses: Appearing in the form of collection, transport, storage, reusing/donation, recovery of raw materials, processing and final disposal companies or even non-profit organizations. Some would be extensions or divisions of current industry players. Tax breaks for setting up the businesses according to standards and continued tax breaks only if standards are met every quarter. Government support for private financing would be useful.

Notice I'm saying tax breaks. Tax breaks, "Gluttonny." Why? Because adding layers of costs and red tape is what's killing Our economy and has been for the past 40 years. To put the goverment in charge of this program, as you so greedily lust for, will make the whole thing a Byzantine boondoggle where We'd be lucky to see a 30% recovery rate of electronic products by 2012, but We will see a 6-8% impact on Our cost of cell phones, cable TV subscriptions and new doodad purchases.

Think I'm joking? Here's the breakdown: A 0.5% tax on each company means roughly a 1.0-1.5% increase in price/rate for consumers, as shown in hundreds of tax studies around the world. The administrative cost of the tax and fees to established businesses will amount to 2-3% of current expenses, which in turn means a 3-5% increase passed on to consumers. (We've seen this with Our own sales tax, that actually added costs to almost all items.)

Add to this mess the "friction" of doing business with new companies (in recycling and disposal) and the lost opportunities due to red tape and fines and compliance (estimated as averaging 1% per company) and you can double that before a final tally: about 6% at the low end; as much as 8.5% on the high end. 

What "Gluttonny" wants is money. What We want, albeit as a minority, is cleaner environs. If We let "Gluttonny" slap fees and taxes on many of Our best businesses while unleashing the empty-headed "hounds of hell no" on something as complex--and valuable--as a recycling and disposal plan, We can only expect an expensive chaos ending in abject failure.

A failure We continue to pay into "Gluttonny"'s grubby hands day after day after sucking day.

The Jenius Has Spoken.

There Goes The Neighborhood

Imagine your neighborhood as an economic system. Every year, some rich dude gives your neighborhood about $2,600 per household, seemingly a good deal since the average household makes about $18,400 a year.

Now imagine that your neighborhood gets hit with a 7% tax on purchases, which ends up eating an extra $940 from your yearly take. Without a raise or tax cut, you have essentially lost 5% of your income. The gas prices go up 260% for a while and that takes an extra 3% from your annual income. You're down 8%...and other prices are going up.

Now a new guy comes in and says he wants to--hold on to your hibachis--increase your gas prices by 24 cents a gallon, tax your cell phone minutes at a penny a minute and make you pay more for liquor and cigarettes... but no tax relief for making the same amount of money.

A gas tax of 24 cents a gallon ends up costing the average household an extra 2% of their stagnant income, if gas prices don't rise like they did in 2007-2008. There are more cell phones in use in Puerto Rico than landlines, and though Our cell phone market is the true definition of dog-eat-dog competition, an additional penny per minute tax hits the local household at almost 2% a year. Now throw in booze and ciggies and you can see some households losing 2-4% more.

To summarize: Your income stays the same, the rich dude's money comes in at the same level, but your income could now be 5% + 3% + 2% + 2% + 3% = 15% less than it was in 2006.

Fifteen. Percent. If you're lucky. Could be as high as 20-22%. Woo-hoo.

This is what passes for economic stimulus in Puerto Rico, with a program that governor Luis "The Larva" Fortuño is proposing that merely throws another 7% (at least) upon the 8% We've shouldered this past year.

And how the hell is this crapfest supposed to stimulate the economy?

It doesn't. It's single purpose is to allow the government to maintain itself.

Let Me repeat that: It's single purpose is to allow the government to maintain itself.

That's it. This does nothing to stimulate the local economy, for only in the minds of greedy sycophantic idiots (I'm talking about everyone involved in this dungheap plan) does taxing a and reducing the avialable monies of a recession-trapped populace equal "growth."

And why do I toss in the rich dude's money when it's impact per household is quite low? Because it serves to show just how negligible it is where it's supposed to matter. When shown at the household level, you can see that Uncle Sam's pity cash isn't that big a boost, and with waste, politicking and outright theft reducing its limited impact even more.

Is The Larva already crumbling under the strain of trying to be what he isn't, a leader? Could be. If his nominations for the three key cabinet posts (Education, Health and Treasury) and this economic "stimulus" plan are any indication, The Larva is as far from being a leader as I am of being a Martian.

The Jenius Has Spoken.

Going Out of (Brains) Sale!

The newest retail sales strategy in Puerto Rico is easy to describe:

1) Wait for a major storm system to blanket the Island.

2) Pray--beg the gods, dammit--for the storm system to lay waste across Our homes through wind and water.

3) Open the store early.

What happened to turn "natural disaster" to "retail boost"? Thanks must be laid at the gelatinous hemline of Our UnGovernor Aníbal "Jellyfish" Acevedo who promoted the idea of eliminating the sales tax on such disaster-related essential items as plasma screens, laser printers, washing machines and  stereo systems. Spank My hiney and call Me Becky! This is great news!

See, now, when the weather turns foul beyond belief and the ravages of Nature slap Us around to the point of desolation, now We don't have to sit around just munching Vienna sausages, saltines and drinking lukewarm water while bemoaning the lack of air conditioning and cable TV...now We can go shopping!

Isn't this just political genius? Turning a disaster into a holiday for mass consumption? And doesn't it just warm the cockles of your heart to know that at a time when people could be coming together to rebuild Our Island, We can have one group rebuilding and another mall crawling? Isn't this f-----g brilliant?

Now We can look forward to a time when by the vagaries of Nature, Our home is spared the ravages of wind and water so that, when the sun comes out, We can trundle down to the big box retailer and load up on a home entertainment system that'll knock the socks off anything the freaking neighbors might have (left) AND save the 7% tax to boot! 

But.

Make sure to buy a heavy-duty electric generator before the storm-based tax holiday, for you see, electrical generators, very useful when the power grid is down (which has been known to happen even before a storm hits Us), are not exempt from taxes after a storm hits. Funny thing, right? Post-storm, plasma screen: tax-free. Post-storm, electric generator: taxed. 

But you can get a tax credit for buying one before the storm. Only you have to pay the 7% tax to get the tax credit... Buy hey, there's still a few days before the election. Send your wish list of "To Buy" items to The Jellyfish, imply you're undecided about your vote and maybe he can set up some more nifty discounts for you.

The Jenius Has Spoken.

Flea-cing the Fools

Hark back to that day, the long tail of My birthday celebration, when a relationship between the 7% sales tax--to be implemented the next day--and the underground economy was made clear.

And here's the proof, in two simple words: Flea markets.

A curiosity as recently as the first half of 2007, flea markets have simply exploded in the past few months. From one-morning events on Sundays to three-day, 8 a.m.-to-6 p.m. weekly events, flea markets are now a common sight. In My neck of the Island alone there are seven flea markets operating regularly, and one tiny flea market operating daily, as a sort of Salvation Army on rickets.

Why so many? Allow Me to quote Myself: Cash beats taxes.

Is it any wonder that both The Jellyfish governor and his Larval Jellyfish opponent scoot to grab the title of "Sales Tax Eliminator"? It's a no-brainer that even these two invertebrates can wrap their notochord around: Wallet-enhancing, easy to talk about and too complex to actually have to think through. The perfect political sound-bite generator for the modern democracy!

How much money is moving through flea markets? I don't know, but here's an informal, yet telling, observation: About 20% of the flea market stalls are operated as "full-time" businesses. In other words, the people who run them have no other source of income. No job, no other business. Just their canopied stall.

Whether that observation holds up for all flea markets around the Island or not, it does lay the basis for a conclusion: Taxes and the overly-idiotic rigamarole of starting a business here have forced--yes, forced--some people to find alternatives. And they have done so by improving--dare I say perfecting--the underground economy the government, "led" by Jellyfish and Fools thought they could eradicate.

Nothing I didn't predict. So why am I not laughing?

The Jenius Has Spoken.