Archive for the ‘Business’ Category

Thune, Johnson, and Noem not only support EB-5 cronyism, but also burdening business owners with immigration enforcement

November 7, 2013 11 comments
Pile of Stones by Petr Kratochvil

Pile of Stones by Petr Kratochvil

The federal investigation into the Aberdeen beef plant and EB-5 program is continuing. So far the best coverage of the situation comes from the Argus Leader and the Madville Times blog (I may not agree with all I read at either source, but it is well worth reading everything they write on this issue). A post by Mr Heidelberger mentioned how Senator Johnson, Senator Thune, and Representative Noem all voted to extend the EB-5 program for three years. Senate Bill 3245 extended the cronyism supported by the EB-5 program with almost no opposition. However the EB-5 program was not all that got extended in this small in size (yet large in scope) bill that passed into law.

Section 2 of the bill reauthorizes E-Verify for three years. For those unfamiliar with E-Verify, here is how the US Citizenship and Immigration Services (USCIS, a part of DHS) markets the program:

E-Verify is a free and easy web-based service that lets participating employers quickly verify the eligibility of their new employees to work in the United States.

That sounds reasonable enough right? Well, that one sentence doesn’t actually tell the whole story. When the E-Verify program was added to the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 it was a ‘pilot’ program. It was not ready for prime-time; it still isn’t. The Department of Homeland Security (DHS) has been lobbying Congress to make this program mandatory for business owners. It is looking like that will be more likely as immigration reform becomes a hot topic again.

Here are some of the problems with E-Verify that seem to be simply ignored by the DHS, Thune, Johnson, and Noem:

  • E-Verify is very unreliable and could account for hundreds of thousands of people not getting jobs or losing jobs because of errors in the system. Sadly some would tout these numbers as ‘acceptable’ because percentage-wise that is less than 1%. That will be very little comfort the thousands who will get caught in a bureaucratic nightmare trying to clear their name from a government naughty list. Remember the DHS also handles the “no fly list“.
  • E-Verify is a step towards national ID. The E-Verify system holds all personal data relevant that would be required to implement national ID. It also ties data from multiple government agencies together, thus allowing one-stop shopping for any federal agency that wants to know anything about anyone in the United States. The only part of National ID the E-Verify system does not include is a physical card. But honestly it isn’t the ‘card’ that makes National ID such a bad idea, it is the centralization of collecting all data on citizens.
  • E-Verify uses private sector businesses to enforce immigration law. It was estimated that E-Verify would have cost small businesses $2.6 billion in 2010 if the program had been mandatory at that time. I can only imagine the cost will have increased since that time. According to those same 2010 estimates the startup costs for businesses to comply would have been between $1254 to $24422 for the first year and average a cost of $435 for each additional year the program is in place. This “free” website is not so free to struggling small businesses with finite resources (namely time and experience in federal regulation compliance). This very simply is an attempt by DC to outsource immigration enforcement to the private sector.
  • The program has not been proven effective in states that have implemented mandatory E-Verify.

There are other reasons I don’t like the E-Verify system, but the above four are the ‘big ones’. It should be noted that all three South Dakota legislators in DC voted yes to extend the E-Verify system. They voted yes despite the very public and troubling problems with the quality provided by the E-Verify system. I’ll be watching the immigration bills that are debated in the House/Senate for the next couple of months. I would wager any immigration bill that makes headway will include an amendment to permanently make the E-Verify program mandatory. At that time it will be interesting to see if Thune, Johnson, or Noem will reject proven bad program; or will they vote yes to make it look like they are ‘tough of on illegal immigrants’.

PS.  SB3245(112th) also extended the Special Immigrant Nonminister Religious Worker Program, and the Conrad State 30 J-1 Visa Waiver Program. These are two subjects I have no experience with. If I find problems with those I will post that separately.

Democrat opposition to the Working Families Flexibility Act favors public over private employees

June 18, 2013 Comments off

faceless_familyA little over a month ago I posted about the House passing the Working Families Flexibility Act of 2013 (HR1406). The bill passed with a very partisan vote. Almost all Republicans voted Aye while almost all Democrats voted No. Personally I think this bill takes the wrong approach. Instead of increasing labor law I believe it would be better for employees and employers to reduce labor regulations; thus allowing greater flexibility for employers and employees to come up with such agreements on their own. However since that is not likely I think this bill should pass to equal labor law between the private and public sectors.

I happened to be at a payroll law seminar today and was quite surprised how few people realized this is an option for public sectors. (I’m sure it was a an accidental omission that those speaking out against the Working Families Flexibility Act usually fail to mention public sector employees have this option. Right?) There seemed to be a lot of confusion in this seminar as to why public sector employees should get this flexibility when private sector employees do not. To me there are two possible reasons Democrats are fighting against the Working Families Flexibility Act:

  1. Democrats believe public sector employees are a higher class of citizen and thus get more rights
  2. Democrats are using this bill as a political opportunity to fight against “evil business owners”

I don’t believe the first scenario to be true. However even if Democrat politicians don’t believe that public sector employees are a “higher class” than private sector employees; by the very action of voting against this bill they are continuing the unintended consequence of giving public sector employees more rights.

I do believe the second scenario is true. If Democrat politicians truly believed compensatory time was so “exploitative” of employees they would work to repeal section 7(o) of the Fair Labor Standards Act (pdf). That would remove this exploitative behavior used on public sector employees. Why aren’t Democrat politicians doing so? Because the backlash from public sector employees that use this right would be tremendous. No, Democrat politicians opposing compensatory time for private sectors is not about saving exploited workers. Rather it has everything to do with getting political points from their base by “fighting evil business owners”. What better way is there for Democrat politicians to gain political points than by standing up to “the man”. The fact Democrats have been opposing private sector compensatory bills for over a decade gives them a continuous issue to raise political points.

The bill is current stuck in the Senate Committee on Health, Education, Labor, and Pensions. I don’t really expect the bill to gain any traction soon. The Democrat controlled Senate simply cares more about gaining political points with its base than actually offering more flexibility to the private sector employees and employers that help build the economy.

Americans are losing confidence in the medical system, but gaining confidence in banks

June 15, 2013 1 comment

On June 13, 2013, Gallup released the poll results of American confidence in 16 societal institutions. Their big story with that was Congress being reduced to a confidence level of 10%; this is the lowest confidence level for any of the 16 institutions ever on record! But that isn’t surprising, I know very few people who have anything nice to say about Congress. Instead I thought it was worth looking at some other numbers. Here are the results:

Image Source: Gallup

Image Source: Gallup

Looking purely at ‘big changes’ it is hard to miss the Medical System losing 6 points from its confidence level last year. With a confidence level of 35% it can be said that a third of the country has no faith in our current medical system. This brings confidence levels back to their 2009 levels. Looking at the chart below the confidence has been around 40 since the passing of Obamacare. What caused a full six point drop at this point? I would speculate that fear of the mandates and their impact upon small business owners is driving down confidence.  I would also wonder if all of the DC scandals are making people lose confidence in Obamacare. No matter what the reason, it is quite evident that confidence in the medical system has dropped sharply. The insurance and medical companies that lobbied so hard to get Obamacare passed may have shot themselves in the foot by evaporating their customers confidence.

Image Source: Gallup

Image Source: Gallup

Another interesting change is the increased confidence of 5 percentage points in banks. This one seems odd to me. After four years around 20 percentage points banks have suddenly surged to 26 percentage points (see chart below). I find this odd because banks have done little to show they are now responsible. I guess most of America is more forgiving than me. If these banks had not acted in such a haphazard fashion (along with the governments help) the economy would not have crashed quite as hard. It is troubling that people are gaining confidence in an institution that has done little or nothing to show it has amended its ways.

Image Source: Gallup

Image Source: Gallup

Other than those big changes not much in the confidence poll results are overly surprising. It is however nice to see confidence in small  business grow. Hopefully that will translate to increased confidence in people wanting to start new businesses; provided fear of Obamacare mandates don’t counteract the confidence in small businesses.

Working Families Flexibility Act passes the House

May 9, 2013 1 comment

Yesterday the Working Families Flexibility Act of 2013 (HR1406) passed the House by a vote of 223 to 204 (with 4 not voting). This law amends the Fair Labor Standards Act of 1938 (29 USC § 207) to allow overtime to be paid out as compensation time instead of via money. South Dakota’s lone Representative Noem voted Aye to this bill (not surprising she was one of 168 co-sponsors).

It’s interesting to see how much along party lines this vote fell:


I guess the Democratic leadership felt that giving workers and employers flexibility was somehow bad? I’ve seen it said that this bill ‘exploitative of workers’. Actually when I read the bill I think employers have more to worry about than the employees. Anytime labor laws are created/changed it adds confusion for business owners. Maybe I’m the only one that finds it ironic the Democrats are rallying against a bill that creates flexibility and extra protections for employees.

Overall I agree with what this bill is trying to do. However the libertarian in me thinks this is the wrong approach. Instead of adding to the labor laws Congress should be reducing the restrictions placed upon business owners so they have the flexibility do things such as compensation time without the governments ‘permission’.

With that said, there are some important things for employers to understand about this bill if it passes in its current state:

  • Employees must have worked for the employer for at least 1000 hours in the last year when entering into a compensation time agreement. For the average full-time employee that is roughly a half years worth of employment.
  • Employees cannot bank more than 160 hours of compensatory time. That is a lot of hours. That’s the equivalent of four work-weeks.
  • Compensation time cannot be saved from year to year. In January the employer must pay out any remaining compensation time that was not used during the previous calendar year. Employers will want to be careful with this, if a lot of time is banked by employees it could make for a very expensive payroll and payroll liabilities month.
  • Upon termination of employment (voluntary or involuntary)  the full amount of compensation must be paid out. Here again the employer will have to be ready for such situations. Thanks to our current tax system business owners are heavily credit dependent and cash short. A couple of employees with comp time terminating employment could really hurt the cash reserves of a company.
  • Labor law posters must be updated. Employers are required to post the Labor Laws (usually in a place like a break room). The added cost of new labor compliance posters will have to accounted for.

I’m not sure if this bill will pass the Senate. It appears the Democrat leadership has decided their dislike of business will blind them to the benefits available for workers (and there are many benefits, I just chose to focus this post on things for employers to watch out for). The Senate vote should be interesting to see.

Categories: Business Tags: , , ,

Then maybe you shouldn’t work for Walmart! Oh wait… You don’t?

November 23, 2012 2 comments

It’s that time of year again: Black Friday! Personally I hate Black Friday, I can’t see standing in crowds for junk I don’t like. However it does warm the heart to see anti-corporation liberals spending their money on useless junk just like most everyone else! Of course this is also the time of year when anti-Walmart sentiment peaks. This Black Friday the United Food & Commercial Workers International Union (UFCW) tried to rally support for picket lines in front of Wal-Marts around the country.

According to the UFCW “Walmart Associates have long endured: low wages, poor working conditions, and inconsistent schedules.” In addition there are claims that Wal-Mart retaliated against employees that speak out against any of these items. These claims have been debunked many times, so I won’t bother here. A good place to see how crazy Wal-Mart hatred has become is to watch this episode of Bullshit from Penn & Teller.

Here in South Dakota KSFY posted this story: Protesters outside east side Wal-Mart in Sioux Falls on Black Friday. The most interesting part of this article is this little quote:

“You can’t support a family, you can’t even afford to pay your bills by working full time at Wal-Mart,”

I believe this is probably a true statement. However how is it Wal-Mart’s fault that someone working at Wal-Mart doesn’t have all they want and/or need? It isn’t. Companies like Wal-Mart set their wages upon the laws of demand and supply. But again I digress, I’ll leave the debunking out of this post and focus on one key problem I have with the above quote: the person quoted did not work for Wal-Mart!

The person quoted above drove from Brookings to Sioux Falls in order to protest in front of the east side Wal-Mart. They don’t even work for Wal-Mart. In fact none of the protesters in front of the Sioux Falls Wal-Mart actually work for the company. Apparently only about 50 employees chose to protest against Wal-Mart nationwide. In addition Wal-Mart appears to have the best Black Friday it has ever had in its history.

And how does Wal-Mart treat its employees that didn’t quite their job and start protesting? They do the following evil capitalist moves listed in an Examiner article:

Walmart said employees receive a 10 percent discount year round on general merchandise, and those who worked on Black Friday received an additional 10 percent discount on a basket of goods. Employees also received holiday pay, the company said.

Oh wait, that doesn’t seem so bad. Well at least you have people driving from another city (that also happens to have a Wal-Mart) to protest your right to work!

Full Disclosure: I rarely shop at Wal-Mart and hate their junk. But that doesn’t meant I think they are evil, just not my type of store.

Has the tanning excise tax helped poor people?

November 17, 2012 7 comments

Proponents of the Affordable Care Act (ACA, Obamacare) usually tout poor people unable to afford healthcare as the reason behind Obamacare. If that is to be believed it is hard to understand why an inclusion of a 10% excise tax on indoor tanning services is included in ACA. This excise began on July 1, 2010. From that point on company’s selling tanning bed services had to file and pay the tax with the Quarterly Federal Excise Tax Return.

Supposedly the tax was implemented for the following two reasons:

  1. Discourage the use of tanning salons. This ‘sin tax’ would supposedly reduce the number of melanoma cases in the US.
  2. To help pay for the cost of ACA.

I fail to see how either reason ‘helps the poor’. We all knew Obamacare had nothing to do with poor people, it was about social change. But I digress, lets move on and see how successful the two reasons for the tanning tax have been.

In June of this year CNN reported the following:

When the tax was implemented in 2010, the Congressional Joint Committee on Taxation projected that it would raise $200 million in 2011 fiscal year and around $2.7 billion by 2019. However, the IRS only collected $36.6 million in the first half of the 2011 fiscal year, according to the Treasury’s inspector general for tax administration.

Imagine that, the governments projects were wrong. But at least they are sticking it to those evil tanning bed owners right! Well, I guess if you consider an industry that is small business driven and has mostly women owning those businesses as evil. Women business owners apparently don’t fall under those ‘women’s issues’ so often touted by both the Democrats and Republicans. Based upon the purely financial reasoning of this ACA provision it should be striked from the books.

But how about the social engineering aspect of this provision? Well CNN went on to provide this:

A full 78% of the salon owners polled reported that their clients did not seem to care about the tax, according to a study conducted by Northwestern University’s Feinberg School of Medicine

That is a vast majority of customers that won’t drop tanning just because a new sin tax has been added to it. It’s hard to see keeping this sin tax; especially since it doesn’t actually appear to reduce the markets demand for a product.

I can see where some will now say that the problem is these evil women small business owners are not collecting, filing, and paying the new excise tax. Well, it’s not that simple. Here are some reasons revenues will never reach the levels touted by the architects of Obamacare:

  • The following exception in the IRS words: “There’s also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.” So private fitness clubs can be exempt, as long as they do not charge individually for the tanning bed. I personally know a few tanning salons that decided to close their doors, and their beds went to a fitness club. I can’t find any reliable research as to how much of this has happened in the industry. But any time this happens it removes the 10% revenue going towards ACA.
  • Many beauty salons are now offering this service for free. Tanning services are given for free to loyal customers that have purchased other services. This walks a grey line and will likely receive intense IRS scrutiny. But I think its a pretty smart loophole.
  • The requirements of this sin tax are not as simple as they appear. Take the case of companies that bundle services. If tanning in bundled directly with other services an excise tax is still required on the tanning portions of that bundle. Or how about situation where tanning services are sold through an online social buying site? The IRS has a FAQ that cover such scenarios. However trying to keep up with such scenarios makes it difficult on a small business owner. They will likely refrain from paying the tax and hope they never get caught.

Now as I get to the end of this post I once again want to mention something: ACA was implemented to ‘help the poor’. Yet where in this misguided excise tax on tanning is there any relief for poor people within the United States?

We may never know what killed the Twinkie

November 17, 2012 Comments off

Earlier this week Hostess announced it will be closing their doors for good. The letter left on their website touts the following reasons:

The Board of Directors authorized the wind down of Hostess Brands to preserve and maximize the value of the estate after one of the Company’s largest unions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), initiated a nationwide strike that crippled the Company’s ability to produce and deliver products at multiple facilities.

I have no doubt the move by the BCTGM Union move caused the final nail in the coffin for Hostess. However it is worth considering multiple factors that likely worked together leading to their demise:

  • Collective-bargaining rules used by unions have driven companies like Hostess to their knees. A modern company must be flexible and be able to adapt to changes. Union mentality simply does not allow this to happen.
  • Sugar is a key ingredient in the hostess lineup of treats. Due to misguided import barriers (PDF) placed upon sugar, manufacturers like Hostess have to pay much more than the global rate for sugar. Forcing companies to pay more for key ingredients puts them at a disadvantage in the market.
  • Consumers becoming more health conscious in their shopping. It would be interesting to see if healthier shopping habits from consumers played a role. If this were to be the case it would be interesting to see if a ‘healthy Twinkie’ would make it on the market.
  • Government regulations, both state and federal, that Hostess had to comply with in its operations. It would be interesting to study all of the regulations that Hostess had to comply with. Once all regulations are known it could be analyzed to determine if there was a positive, negative, or null effect from these regulations. People from all political persuasions should be interested to see the results.
  • Poor leadership at the top of Hostess. The leadership decisions of Hostess should be studied to determine if there were better directions that could have been taken. This includes ethical decisions made by leadership. As pointed out by the union the top leaders at Hostess have been given unusually large pay increases during this process. Was this a factor that lead to the company closing its doors? Was it the leadership trying to grab anything they could before the ship sunk? Or is it the union bringing up a non-issue? To me it looks like a money-grab during the sinking of the ship; which would lead to ethical concerns about the leadership at Hostess.

There are probably more factors than these. I just think its worth looking at the situation from as many angles as possible. Since it is very unlikely that one single factors lead to the demise of Hostess, we can use this as a chance to determine what factors had the greatest amount of impact so they can be avoided in the future.

Categories: Business Tags: , ,
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