Coyote Blog

I know most of you (and I as well, most of the time) are perfectly happy to have the IRS just shut down.   Unfortunately, when one runs a business, there are certain things that have to be done through the IRS, particularly when setting up or reorganizing a new business.  One of my companies made a pro forma request (a subchapter S election) in a request to the IRS dated August 4.  Today, on May 27, I received the one page confirmation that it had been processed.  Unfortunately, I requested the IRS do some more critical things in December, and I am now worried that if there is a FIFO queue then I may have to wait another 4+ months for these to be completed.  The worst of these is we changed our name, and we submitted the change to the IRS to update our FEIN records.  Unfortunately, every time we try to open a bank account or a do a state registration they come back and deny our application because right now the IRS computer shows a mismatch with our FEIN and our new name.  It takes hours and scads of paperwork to explain what is going on every time, making even the smallest things really hard to do.

This is a new one on me, but very similar to the IRS call scams of the last year or two (right down to the odd colloquial language which is entirely inconsistent with how the government speaks in official pronouncements).  Apparently there is suspicious activity on my social security number and it has been suspended and may soon be cancelled along with all my assets unless I call them right away and give them all sorts of private information (starting with my social security number, of course).  Consistent with past observations here that the entire US caller ID system is totally f*cked, the caller ID said it was from a US Government Office in my local area code but the number I was supposed to call was somewhere else entirely.  I forgot to take it down and check it out.

As always, beware.

Someone called one of our locations claiming to be the local utility company (they had the correct name, phone number and service address) said our power was going to be shut off that day for non-payment unless they were paid immediately over the phone.  Fortunately our managers hung up and called the utility main number and found out we were fully paid up and that this was a scam.

Here is the simplest protection for you in your personal and professional life: never give anything -- any information, any passwords, any numbers, any money -- to someone who calls you. If they claim to be the FBI or the IRS or the power company or whoever, you should hang up and if you are worried it might be real, look up their number and call them back. Sometimes a credit card company will call you with legitimate fraud alerts but I still never talk to them when they call me. I hang up and then call the number on the back of the card.

I have gotten three calls in three days with an automated voice message telling me that, in essence, the IRS is seriously pissed at me and I need to call a certain number in 24 hours to resolve it.

The message in some ways is reminiscent of the old Nigerian email scams in that the English sounds like a really bad translation of another language.  I wish I had a recording.  Some of it uses stilted English, as if it is trying to emulate bureaucratese.  But some of the message hilariously uses slang in ways that the IRS would never do in its official communication, most memorable of which was the admonishment that if I did not respond immediately, the IRS would "send the local cops to arrest me."  The IRS would never use the word "cops".  I can't remember an agency every using the word "police" even.  Government officials almost always use the term "law enforcement".

Suffice it to say, the IRS does not generally make calls like this.  If you think it might be legit, ignore whatever number that was left in the message and call the IRS customer support line on their web site.  This latter is always good advice for almost any collection or customer support call.  I get a number of calls and emails, for example, from credit card companies that say they suspect fraud and want to review some transactions.  I always ignore whatever number they leave me, or if they reach me with a live person tell them I will call back, and then I call the number printed on the back on the credit card.

As a libertarian, I find myself constantly saying to folks something like:  "private actors (corporations, businesses, individuals, etc. are inherently more trustworthy than government because they cannot legally interact with you through force or fraud -- the government is free to do both.  If you don't like what a private actor is doing, you can simply refuse to interact with them further, an ability one does not have with the government."  This seems like such an obvious point but few people, particularly on the Left, will ever agree with me.  But I have recent proof that in their hearts, most people understand this perfectly.

What is my proof?  The universal, bipartisan freakout over the man who was dragged off by force from a United flight.  People are focusing on this event for the very fact that this example of a private company deploying force against its customers is so incredibly rare.  The Internet is filled with similar or in fact much worse examples of the government abusing its authority -- false arrests, petty harassment, asset seizures without due process -- but people just yawn and these videos gets 236 views  vs. millions for the United video.  Because, presumably, people have come to expect such abuses from the government but not from private companies.

And to a large extent, this particular example of private violence is the exception that will prove the rule.  Because United is going to experience real accountability.  It is already getting a firestorm of bad press that will cost them current and future business.  They will face lawsuits and possible government action.  But the average police officer or government official (or VA or IRS administrator) who abuses their power retain their jobs for life with no negative consequences from their actions.  Also, we should note that it was a government agent in this case who was the one who actually used force and dragged the passenger off, not a private United employee.  Almost every time one looks deeply at an abuse by private companies, at the end of the day that company is enabled or protected in doing so by so some sort of crony relationship with the government.

So I suppose we should ask, if people really in their hearts understand that private "power" is much less menacing than government power, why do they still support increasing the power of government over private actors?  And the answer must be that they believe (or hope, or expect) that use of this government power will achieve some end they want that they cannot achieve without force.  The problem with this of course is that it is naive -- it assumes that once you give great power to the government, government employees will use this power in the way you would use it, for the same goals and ends.  But this is seldom the case, certainly over the long haul.  I argued for years that the Left under the Obama administration was supporting Presidential power on the assumption they would hold the White House forever and thus get to wield all this power.  Which is why, I suppose, there has been so much freakout over Donald Trump's victory.

Postscript:  Here is an example video of government brutality just from my news feed today.  It will get no real traction because everyone has come to expect the government to act in this manner.

It is hard to pick out the most egregious example of bad legislation that has been considered by our state legislature, but this one is certainly close:

Claiming people are being paid to riot, Republican state senators voted Wednesday to give police new power to arrest anyone who is involved in a peaceful demonstration that may turn bad — even before anything actually happened.

SB1142 expands the state’s racketeering laws, now aimed at organized crime, to also include rioting. And it redefines what constitutes rioting to include actions that result in damage to the property of others.

But the real heart of the legislation is what Democrats say is the guilt by association — and giving the government the right to criminally prosecute and seize the assets of everyone who planned a protest and everyone who participated. And what’s worse, said Sen. Steve Farley, D-Tucson, is that the person who may have broken a window, triggering the claim there was a riot, might actually not be a member of the group but someone from the other side....

There’s something else: By including rioting in racketeering laws, it actually permits police to arrest those who are planning events. And Kavanagh, a former police officer, said if there are organized groups, “I should certainly hope that our law enforcement people have some undercover people there.’’

“Wouldn’t you rather stop a riot before it starts?’’ Kavanagh asked colleagues during debate. “Do you really want to wait until people are injuring each other, throwing Molotov cocktails, picking up barricades and smashing them through businesses in downtown Phoenix?’’

This is the sort of law that is almost guaranteed to be abused and enforced in an asymmetrical manner.  This is one of those laws where the "Am I comfortable giving my political opponent this sort of power" test is particularly useful.  Conservatives rightly complained about the Obama Administrations asymmetric IRS scrutiny on Tea Party groups, but this law would create a far greater potential for abuse.  We no longer have Sheriff Joe any more (which is one reason I don't join so many others in complaining about the election of 2016) but does anyone doubt that Arpaio would have used this law to shut down every pro-immigrant protest he could learn about in advance?

Perhaps this has been going on for a while but it is the first I have had it happen to me.  Over the last two days I have had robocalls from two numbers - 626-265-4560 and 413-356-4173.  The robot says in a menacing way that this is the final call I am going to get and that the IRS is about to file a lawsuit against me.  I knew better than to believe this and did not call back, but several websites report that if you call these numbers, you get an operator who demands personal information without giving out any explanation.  Beware.  This is obvious phishing and should be avoided.

Update:  Add 213-447-4831 and 802-673-0582 to the list.

How often does Amazon fail to deliver Prime shipments in two days?  I have no idea -- I know it has happened to me sometimes, but they don't publish the metric.  What is the average wait time on the phone with the IRS?  We don't know.  What is the average wait time at a TSA checkpoint?  We don't know.

One thing we most certainly do know, and can know any time on any day, is the current wait time for any Disney ride.  I bring this up because some goofball in the Obama Administration made this absurd statement trying to justify the lack of transparency for VA wait times:

When you go to Disney, do they measure the number of hours you wait in line? Or what’s important? What’s important is, what’s your satisfaction with the experience?” McDonald said Monday during a Christian Science Monitor breakfast with reporters. “And what I would like to move to, eventually, is that kind of measure.”

Bruce McQuain rightly points out the downside of a longer wait for Space Mountain is just a tiny bit lower than the downside of waiting for heart surgery.

But I want to add that this statement is not even close to being factually correct on its face.  Here is an example of a site that has Disney ride wait times in real time, but there are dozens of apps and sites with this info because Disney makes the data public in an API most anyone can access.  (My favorite is Touring Plans, which has built a whole Disney trip planning business on top of Disney published wait time data -- as an aside, if you are a Disney fan or future visitor, you should join).

But I would go further.  I know for a fact that Disney spends a ton of time internally planning and improving ride throughput and capacity entirely with an eye to reducing wait times (and also, by the way, to making design changes that make ride waits more enjoyable with in-line activities).  They have a sophisticated operational research staff working on this all the time, and they are constantly tweaking their Fastpass system which would not even begin to work correctly if they did not understand ride wait times down to the second decimal place.  And by the way, if their management found out that some folks in their organization were fudging line wait time data, I am pretty sure the offenders would not be working there any more (as they are at the VA).

Postscript:  I am still amazed by the fail here.  Anyone who has been to Disney even once will know that all wait times are displayed all over the park on boards, and that at each ride, every few minutes a customer will get an electronic card at the beginning of the ride that precisely times their wait.   Seriously, where do they get folks like this who can blithely utter nonsense as if they know what they are talking about.  The whole premise is screwed up.  Yes, good service companies measure overall satisfaction. This is marginally useful data, but what does one do with it?  To really fix and improve the experience, one also has to measure many important bits of the experience.  Saying that one should pay attention to only one output metric and nothing else would get you laughed out of any quality course I have ever been to.

Update:  Also, I would add that there is a lot of market pressure on the wait time issue pushing Disney to improvement on lines, market pressure that does not exist on the VA (which is one reason they totally lack any accountability).  Disney has its FastPass system for helping guests manage ride waits, but both Universal and Six Flags have their own different systems (Universal has a higher level ticket you can buy that gets you preferred access to all rides, Six Flags Magic Mountain has a pager system where you tell it which ride you want to do next and they page you when your place is ready).

from my Twitter account:

Your government: IRS web site actually closes after business hours https://t.co/o65g0ZHlhr @instapundit @reason pic.twitter.com/nIMlM16spX

— Coyoteblog (@Coyoteblog) March 24, 2016

As background, I live in a town called Paradise Valley, Arizona.  This town is perhaps most famous recently for installing surveillance cameras all over town hidden in fake cacti.  Here is the one on my block.  There are at least two others within walking distance of my house.
    

These cameras apparently have license plate reading ability and perhaps the ability to do facial recognition, and likely are funded by Homeland Security for the purposes of feeding data into a national tracking database.  I say "likely" because the town of Paradise Valley under Mayor Michael Collins somehow appropriated these things secretly without any public discussion or debate.

So in this context, it was hilarious to see none other than Mayor Michael Collins piously intoning about the importance of privacy in the town of Paradise Valley:

Paradise Valley is considering an ordinance that would make it illegal to fly drones in town without a permit. Backyard hobbyists and law-enforcement agencies that may need to use drones during emergencies would be excluded from the proposed ban.

"Our residents move to Paradise Valley because they like the privacy," said Mayor Michael Collins, who presides over a community that counts celebrities, sports stars and Discount Tire founder Bruce Halle, the richest person in Arizona, among its residents.

What Mr. Collins apparently means is that he wants the government to maintain a monopoly on surveillance technologies.  Libertarians like myself cringe at the notion that a monopoly on privacy-invasion should be granted to the government, the only institution in the country that can legally jail you, take your money, and even shoot you. Conservatives, who dominate this community, tend to be blind to this danger, saying that "if you aren't doing anything illegal, you have nothing to fear from surveillance."  I will say, though, that some Conservatives have woken up a bit over the last several years on this with the IRS non-profit harassment and the Wisconsin John Doe investigations.

By the way, extra credit to the Arizona Republic for gratuitously publishing where a wealthy citizen lives in a sentence about privacy.

One can build a very good predictive model of government agency behavior if one assumes the main purpose of the agency is to maximize its budget and staff count.  Yes, many in the organization are there because they support the agency's public mission (e.g. protecting the environment at the EPA), but I can tell you from long experience that preservation of their staff and budget will almost always come ahead of their public mission if push comes to shove.

The way, then, to punish an agency is to take away some staff and budget.  Nothing else will get their attention.  Unfortunately, in most scandals where an agency proves itself to be incompetent or corrupt or both (e.g. IRS, the VA, more recently with OPM and their data breaches) the tendency is to believe the "fix" involves sending the agency more resources.  Certainly the agency and its supporters will scream "lack of resources" as an excuse for any problem.

And that is how nearly every failing government agency is rewarded for their failure, rather than punished.  Which is why our agencies fail so much.

Note that organizations in the private world are not immune to similar incentives.  A company's marketing staff will work hard to get more people and resources for marketing, and in good times their staff and budget may balloon.  The difference is that in the private world, there is competition.  Other companies are trying to sell similar products and services.  And if the marketing department is screwing up a lot, or those resources spent on it are not being used productively, the company is going to lose sales and thus resources.  To survive, massive changes will be made, including likely some deep cuts and large restructurings in marketing.

It is frustrating to work in corporations that seem to lurch from growth periods to cutbacks in an endless cycle.  But it beats the alternative where the organization always grows and never is forced to confront the value of how it spends its resources.

A while back I wrote a long article about all the ways the government is making it nearly impossible to employ low-skilled labor.  I worried that because it is getting harder and harder to profitably employ low-skill labor, the country would soon sort itself into those with skills and jobs and those on government assistance, with little or no opportunity for people in the second category to move to the first.

As part of that article, I observed that much of the capital in this country is flowing to new business models that use minimal numbers of employees.  I wrote:

Is it any surprise that most entrepreneurs are pursuing business models where they leverage revenues via technology and a relatively small, high-skill workforce?  Uber and Lyft at first seem to buck this trend, with their thousands of drivers.  But in fact they prove the rule.  Uber and Lyft are very very careful to define themselves and their service in a way that all those drivers don't work for them.  I would go so far to say that if Uber were forced to actually put all of those drivers on their payroll, and deal with they myriad of labor compliance issues, their model would fall apart.

Well, we are going to find out if my last statement is true.

The California labor commission has ruled that an Uber driver qualifies as an employee, not a contractor, of the company.  As a result Uber will have to reimburse a driver for expenses accumulated in the line of duty. That includes $256 in tolls and the IRS rate of $0.56 per mile for use of a personal vehicle for business purposes.

The actual issue in this case of reimbursement of expenses is pretty narrow, and actually kind of stupid.  Uber is already paying drivers effectively by the mile by giving them a percentage of the mileage-based fee customers pay.  All this will do is cause Uber to reduce the share of revenues drivers get by something like 56 cents a mile and then hand the $0.56 to them in a separate check.  Its an extra accounting and paperwork hassle, but business people deal with mitigating such government-imposed stupidity 10 times a day.

No, the real danger of this ruling lies far beyond expense reimbursement.  A few top of head thoughts

• This would obviously make Uber drivers subject to minimum wage.  How does one even figure that out?  Now that there are local minimum wages (e.g. LA soon to be $15 an hour) how do you compute minimum wage for a trip that begins outside of LA but ends inside the city?  Or vice versa?
• Uber drivers currently only get paid for transporting passengers, but what about their time driving around waiting for a passenger?  Will that be classified as standby time for which the employer must pay for?  You can expect the standby time class action in California in 3..2..1..
• This changes the whole relationship between Uber and its drivers.  Currently, Uber does not have to worry about driver productivity or work ethic, as long as they get good customer ratings when they do drive. Why?  Because Uber is not paying them except when they haul a passenger.  Now, if they have to pay them by the hour, Uber suddenly must police them for productivity and set minimum revenue generation targets for drivers.  The flexibility that drivers love will be gone.
• And then there is Obamacare.  If drivers drive more than 29 hours a week, Uber would have to provide health care or pay really expensive penalties.  Will Uber find it necessary, as my company has and many other service businesses have, to cap driver hours at 29 hours a week max?
• What about California break law?  Employers have an affirmative duty to make sure employees take a 30 minute unpaid meal break after X hours.  And just allowing for it (ie allowing drivers to put themselves in unavailable status) is not enough - employers have to have processes and documentation in place to make sure the employee takes their break (I kid you not).
• What about CalOSHA?  Is Uber suddenly responsible for working conditions and safety in the vehicle?  And how does it do that if it does not own the vehicle?
• Every employee is essentially his or her own manager.  Does that now make Uber subject to ensuring every driver has all state-mandated manager training, such as sexual harassment training?
• Employers are typically liable for actions by their employees, even if those employees are breaking the rules and ignoring the employer's wishes.  Is Uber now liable for a driver who, say, verbally harasses a passenger?  In the past, that gets sorted out pretty fast by the rating system, but does Uber have to take a more direct hand now do avoid a deluge of lawsuits?
• As of July 1, California employers must provide paid sick leave to employees.  They must provide unpaid leave under the family and medical leave acts.  In fact, California requires employers provide and track literally dozens of forms of mandatory paid and unpaid leave (including leave for victims of stalkers, just as one example of the scope of these requirements)
• The taxes and required fees owed by employers for each employee are myriad.  State and Federal income tax must be withheld, Social Security and Medicare taxes paid, California state disability tax paid, unemployment tax paid, and workers compensation premiums paid.
• Unemployment could be real nightmare.  Can drivers choose to drive for a while, then take unemployment for a while, maybe while tourist season in San Francisco is slow, then go back to driving?  You think that can't happen?  A number of my seasonal employees work in the summer, then take unemployment all winter despite having no intention of trying to find work in the winter.  I pay 7% of wages in California as unemployment taxes and would pay more except that scale is capped and I can't get in a worse category than my current F-.
• Then there are a myriad of smaller issues that probably can be solved but consume bandwidth of a company's management that would otherwise be innovating.  As one small example, one has to post about 20 different state and Federal labor posters in CA where all employees can see them.  Where would that be for Uber drivers?

From the Federalist

Between 2009 and 2012, the Clinton Foundation raised over $500 million dollars according to a review of IRS documents by The Federalist (2012,2011, 2010, 2009, 2008). A measly 15 percent of that, or $75 million, went towards programmatic grants. More than $25 million went to fund travel expenses. Nearly $110 million went toward employee salaries and benefits. And a whopping $290 million during that period — nearly 60 percent of all money raised — was classified merely as “other expenses.”

Now it may be that the "other"expenses are directly benefiting someone but the numbers here are not encouraging.  There are a number of sham charities out there whose income goes mostly to supporting  the lifestyle of their directors and employees so that they can make good money but simultaneously be self-righteous.   I do not know that this is the case here but I think you can be pretty sure the reason they get most of their donations is to curry favor with the Clintons rather than because the organization is particularly efficient or adept at deploying charitable resources.

I had no problem assuming the "lost" IRS emails were incompetence rather than criminal evidence tampering.  After all, how hard is it to believe the government is incompetent?

But it may be in this case it really was fraud.  Suddenly the emails have been found, and they were apparently always there  -- despite all protestations to the contrary, no one in the IRS had even asked for them.  From the WaPo:

The Treasury Inspector General for Tax Administration testified at a House Oversight and Government Reform Committee hearing on Thursday that it tracked down nearly 33,000 emails from ex-IRS official Lois Lerner.

The records date back to 2001, which is 10 years beyond what the IRS has said it could access for investigators.

The inspector general’s office said it is working to identify any messages that the IRS has not already sent to congressional investigators, who are examining the Lerner’s involvement in the IRS targeting scandal.

The watchdog agency found the backed-up emails by consulting with IRS information-technology specialists, according to TIGTA Deputy Inspector General for Investigations Tim Camus.

“They were right where you would expect them to be,” he said at the rare late-night hearing, which lasted until about 10 p.m.

IRS Commissioner John Koskinen testified before Congress last year that the backups were no help in recovering Lerner’s lost emails, in part because the IRS overwrites them every six months.

Camus said the IRS’s technology specialists told investigators that no one from the agency asked for the tapes, raising doubts about whether the agency did its due diligence in trying to locate Lerner’s emails, or possibly greater troubles.

In the Fast and Furious and IRS scandals, the Administration has purposefully dragged its feet on disclosures.  The strategy is to let as much time pass so that when bad revelations eventually come out, the heat from the original scandal is gone.  Defenders of the Administration will then argue the revelations are "old news", as if there is some statute of limitations on outrage.  This strategy has driven Republicans crazy.

So what do Conservatives do when the torture report comes out after months and months of foot-dragging trying to prevent its release? You got it, they scream "old news".  Scott Johnson:

I confess that I do not understand the rationale supporting the publication of the Democrats’ Senate Select Committee study of the CIA’s detention and interrogation program. On its face, it seems like ancient history (of a highly tendentious kind) in the service of a personal grudge. It is not clear to me what is new and it is not clear that what is new is reliable, given the absurd limitations of the committee’s investigation.

By the way, I want to make one observation on this line from attorney John Hinderaker:

Similarly, the report confirms that the Agency’s enhanced interrogation techniques were used on only a small number of captured terrorists, 39 altogether. These enhanced techniques include the “belly slap” and the dreaded “attention grasp.”

Most important, it appears that waterboarding really was the most extreme sanction to which any of the terrorists were subjected (and only three of them, at that). Given all the hoopla about CIA “torture,” one might have expected to learn that far worse happened at the Agency’s dark sites. But, as far as the report discloses, the Agency stuck almost exclusively to its approved list of tactics, all of which the Department of Justice specifically found not to be torture.

Were some of the captured terrorists treated roughly? Absolutely. Their lives must have been miserable, and deservedly so. Some of the 39 were placed in stress positions for considerable lengths of time, doused with water, fed poor diets, left naked in cells. In one instance, a terrorist was threatened with a power drill. In another case, an interrogator told a terrorist that his children may be killed. There were two instances of mock execution.

A few observations:

• The fact that they were "terrorists" seems to justify the mistreatment for him.  But how do we know they were terrorists?  Because the Administration said so.  There was no due process, no right of appeal, no ability to face witnesses, no third party review, none of that.  A branch of the Administration grabbed the guy, said you are a terrorist, and started torturing them.  I am not saying that they did this without evidence, but I am sure Mr. Hinderaker know from his own experience that every prosecutor thinks every person he or she tries is guilty.  That is why both sides get to participate in the process.
• "Terrorist" is an awfully generic word to give us automatic license to torture people.  My sense is that there are all kinds of shades of behavior lumped under that word.  Conservatives like Mr. Hinderaker object, rightly, to a wide range of sexually aggressive actions from unwanted kissing to forced penetration being lumped under the word "rape".  But my sense is we do the same thing with "terrorists".
• In my mind the casualness with which he can accept these kinds of treatments for people he does not like is morally debilitating.  It is a small step from accepting it for one to accepting it for many.  It is like the old joke of a debutante asked if she would have sex for a million dollars and saying "yes", then getting asked if she would have sex for $20 and responding "what kind of girl do you think I am?"  We've already established that, we are just haggling over price.
• For those on the Right who say that all this stuff about due process does not apply because the "terrorists" were not citizens, then welcome to the Left!  Individual rights are innate -- they are not granted by governments (and thus by citizenship).  The Right generally says they believe this.  It is the Left whose positions imply that rights are favors granted by the state to its citizens.

A lot of discussion has gone into the costs of the employer mandate.

These costs certainly were potentially high for my company.  If we had to provide health care for all of our employees, it would cost us an annual sum between 3 and 4 times our annual profit.  As many of your know, my company runs public parks and campgrounds.  Already, we have struggled to get government authorities to approve fee increases driven by local minimum wage increases.  Most of these authorities have already told us that they would not allow fee increases in most cases to offset the costs of the PPACA employer mandate.   So we have spent a lot of time converting between 90 and 95% of our employees to part-time, so the mandate would not apply to them.  I have gotten a lot of grief for my heartlessness on this in the comments, but I have zero idea what else I could have done short of simply shutting down the business.

Yesterday I was in an information session about the employer mandate and saw that the other shoe had dropped for companies -- the reporting requirement.  Despite the fact that the employer mandate was supposed to kick in almost 9 months ago, until recently the government had still not released the reporting requirements for companies vis a vis the mandate.  Well, apparently the draft reporting requirements was released a few weeks ago.  I may be missing something, but the key requirement for companies like mine is that every employee must receive a new form in January called an IRS 1095-C, which is parallel to the W-2 we all get to report income.

I know that many of you have probably been puzzled as to what some of those boxes mean on the W-2.  Well, you are going to love the 1095C

Everyone is scratching their heads, wondering what this means.  For someone like me who has seasonal and part time workers, this form is a nightmare, and I have no idea how we are going to do this.  Just to give you a flavor, here are the code choices for line 14:

1A. Qualified Offer: Minimum Essential Coverage providing Minimum Value offered to full-time
employee with employee contribution for self-only coverage equal to or less than 9.5% mainland
single federal poverty line and Minimum Essential Coverage offered to spouse and
dependent(s).

1B. Minimum Essential Coverage providing Minimum Value offered to employee only.

1C. Minimum Essential Coverage providing Minimum Value offered to employee and at least Minimum Essential Coverage offered to dependent(s) (not spouse).

1D. Minimum Essential Coverage providing Minimum Value offered to employee and at least Minimum Essential Coverage offered to spouse (not dependent(s)).

1E. Minimum Essential Coverage providing Minimum Value offered to employee and at least Minimum Essential Coverage offered to dependent(s) and spouse.

1F. Minimum Essential Coverage not providing Minimum Value offered to employee, or employee and spouse or dependent(s), or employee, spouse and dependents.

1G. Offer of coverage to employee who was not a full-time employee for any month of the calendar year and who enrolled in self-insured coverage for one or more months of the calendar year.

1H. No offer of coverage (employee not offered any health coverage or employee offered coverage not providing Minimum Essential Coverage).

1I. Qualified Offer Transition Relief 2015: Employee (and spouse or dependents) received no offer of coverage, or received an offer of coverage that is not a Qualified Offer, or received a Qualified Offer for less than all 12 Months.

Completing lines 14-16 will require an integration of our payroll provider with our health insurance information that I have no idea how we are going to pull off.

In Halbig, the DC Circuit argued that the plain language of the PPACA should rule, and that subsidies should only apply to customers in state-run exchanges.  I am going to leave the legal stuff out of this post, and say that I think from a political point of view, Obamacare proponents made a mistake not sticking with the actual language in the bill.  The IRS was initially ready to deny subsidies to the Federal exchanges until Administration officials had them reverse themselves.  When the Obama Administration via the IRS changed the incipient IRS rule to allow subsidies to customers in Federal exchanges, I believe it panicked.  It saw states opting out and worried about the subsidies not applying to a large number of Americans on day 1, and that lowered participation rates would be used to mark the program as a failure.

But I think this was playing the short game.  In the long game, the Obama Administration would have gone along with just allowing subsidies to state-run exchanges.  Arizona, you don't want to build an exchange?  Fine, tell your people why they are not getting the fat subsidies others in California and New York are getting.  Living in Arizona, I have watched this redder than red state initially put its foot down and refuse to participate in the Medicaid expansion, and then slowly see that resolve weaken under political pressure. "Governor Brewer, why exactly did you turn down Federal Medicaid payments for AZ citizens?  Why are Arizonans paying taxes for Medicaid patients in New Jersey but not getting the benefit here?"

Don't get me wrong, I would like to see Obamacare go away, but I think Obama would be standing in much better shape right now had he limited subsidies to state exchanges because

1. The disastrous Federal exchange roll-out would not have been nearly so disastrous without the pressure of subsidies and the data integration subsidy checks require.  Also, less people would have likely enrolled, reducing loads on the system
2. Instead of the main story being about general dissatisfaction with Obamacare, there would at least be a competing story of rising political pressure in certain states that initially opted out to join the program and build an exchange.  It would certainly give Democrats in red and purple states a positive message to run on in 2014.

One of the great dangers of historical analysis is applying our modern standards and ex post facto knowledge to analysis of historical decisions.  For example, I see modern students all the time assume that the Protestant Reformation was about secularization, because that is how we think about religious reform and the tide of trends that were to follow a century or two later.  But tell John Calvin's Geneva it was about secularization and they would have looked at you like you were nuts (If they didn't burn you).  Ditto we bring our horror for nuclear arms developed in the Cold War and apply it to decision-makers in WWII dropping the bomb on Hiroshima.  I don't think there is anything harder in historical analysis than shedding our knowledge and attitudes and putting ourselves in the relevant time.

Believe it or not, it does not take 300 or even 50 years for these problems to manifest themselves.  They can occur in just four.  Take the recent Halbig case, one of a series of split decisions on the PPACA and whether IRS rules to allow government subsidies of health care policies in Federal exchanges are consistent with that law.

The case, Halbig v. Burwell, involved the availability of subsidies on federally operated insurance marketplaces. The language of the Affordable Care Act plainly says that subsidies are only available on exchanges established by states. The plaintiff argued this meant that, well, subsidies could only be available on exchanges established by states. Since he lives in a state with a federally operated exchange, his exchange was illegally handing out subsidies.

The government argued that this was ridiculous; when you consider the law in its totality, it said, the federal government obviously never meant to exclude federally operated exchanges from the subsidy pool, because that would gut the whole law. The appeals court disagreed with the government, 2-1. Somewhere in the neighborhood of 5 million people may lose their subsidies as a result.

This result isn’t entirely shocking. As Jonathan Adler, one of the architects of the legal strategy behind Halbig, noted today on a conference call, the government was unable to come up with any contemporaneous congressional statements that supported its view of congressional intent, and the statutory language is pretty clear. Members of Congress have subsequently stated that this wasn’t their intent, but my understanding is that courts are specifically barred from considering post-facto statements about intent.

We look at what we know NOW, which is that Federal health care exchanges operate in 37 states, and that the Federal exchange serves more customers than all the other state exchanges combined.  So, with this knowledge, we declare that Congress could not possibly meant to have denied subsidies to more than half the system.

But this is an ex-post-facto, fallacious argument.  The key is "what did Congress expect in 2010 when the law was passed", and it was pretty clear that Congress expected all the states to form exchanges.  In fact, the provision of subsidies only in state exchanges was the carrot Congress built in to encourage states to form exchanges. (Since Congress could not actually mandate states form exchanges, it has to use such financial carrots and stick.  Congress does this all the time, all the way back to seat belt and 55MPH speed limit mandates that were forced on states at the threat of losing state highway funds.  The Medicaid program has worked this way with states for years -- and the Obamacare Medicare changes follow exactly this template of Feds asking states to do something and providing incentives for them to do so in the form of Federal subsidies).  Don't think of the issue as "not providing subsidies in federal exchanges."  That is not how Congress would have stated it at the time.  Think of it as "subsidies are not provided if the state does not build an exchange".  This was not a bug, it was a feature.  Drafters intended this as an incentive for creating exchanges.  That they never imagined so many would not create exchanges does  not change this fact.

It was not really until 2012 that anyone even took seriously the idea that states might not set up exchanges.  Even as late as December 2012, the list was only 17 states, not 37.  And note from the linked article the dissenting states' logic -- they were refusing to form an exchange because it was thought that the Feds could not set one up in time.  Why?  Because the Congress and the Feds had not planned on the Federal exchanges serving very many people.  It had never been the expectation or intent.

If, in 2010, on the day after Obamacare had passed, one had run around and said "subsidies don't apply in states that do not form exchanges" the likely reaction would not have been "WHAT?!"  but "Duh."  No one at the time would have thought that would "gut the whole law."

Postscript:  By the way, note how dangerous both the arguments are that opponents of Halbig are using

1. The implementation of these IRS regulations are so big and so far along that it would be disruptive to make them illegal.  This means that the Administration is claiming to have the power to do anything it wants as long as it does it faster than the courts can work and makes sure the program in question affects lots of people
2. The courts should give almost unlimited deference to Administration interpretations of law.  This means, in effect, that the Administration rather than the Courts are the preferred and default interpreter of law.  Does this make a lick of sense?  Why have a judiciary at all?

If you were getting investigated by the IRS, and you gave the IRS the answers that they have been giving the public over Lois Lerner's and others' lost emails, do you think that the IRS would accept your answer?

By the way, a system crash that makes a hard drive totally unreadable is just vanishingly rare nowadays.  It is possible to corrupt certain system files in the root that will make it impossible to log on to the computer or access the hard drive files normally, but they are still there.  Something with the hard drive's motor or read heads could fail, but the data is still there.  Even if you highlighted every file in your hard drive and hit the delete key, they are still there.  When you hit delete they are taken out of the file directory and may get overwritten if you add new data to the computer, but without special software, it is actually hard to totally delete files (this is why you have to be careful when you donate or dispose of computers).  It actually can take the better part of an hour to really remove all files from a hard drive so that they are unrecoverable.

Given all this, I think the odds are that 6 or 7 computers of a group of senior leaders in the same office all crashed at roughly the same time in a way that wiped out all the data from their hard drives such that all data would be unrecoverable is simply beyond credulity.

Ken White at Popehat offers some useful insight to non-lawyers among us about compelled testimony (in the context of the Louis Lerner/IRS saga)

Some people have argued that Lois Lerner should be compelled to testify, either by court order or by grant of immunity. Lerner and her lawyers would love that, as it would make prosecuting her for any suspected wrongdoing incredibly difficult.

Compelled testimony is radioactive. If a witness is compelled to testify, in any subsequent proceeding against them the government has a heavy burden to prove that no part of the prosecution is derived from the compelled testimony, which is treated as immunized. This is called theKastigar doctrine:

"Once a defendant demonstrates that he has testified, under a state grant of immunity, to matters related to the federal prosecution, the federal authorities have the burden of showing that their evidence is not tainted by establishing that they had an independent, legitimate source for the disputed evidence." 378 U.S. at 378 U. S. 79 n. 18. This burden of proof, which we reaffirm as appropriate, is not limited to a negation of taint; rather, it imposes on the prosecution the affirmative duty to prove that the evidence it proposes to use is derived from a legitimate source wholly independent of the compelled testimony.

If I read this right, if the House were to compel her to testify, they might as well grant her immunity and be done with it.

Further on in the post, Ken points out an issue that I have been wondering about myself -- Those who want Lerner to testify are concerned with government arbitrary abuse of power for political purposes.  Given that, how can these same folks have any doubt as to why Lerner might plead the Fifth in front of a hostile and partisan House committee

I've been seeing a lot of comments to the effect of "why should Lois Lerner take the Fifth if she has nothing to hide?" Ironically these comments often come from people who profess to oppose expansive government power, and from people who accept the proposition that Lerner was part of wrongdoing in the first place — in other words, that there was a government conspiracy to target people with the machinery of the IRS for holding unpopular political views. Such people do not seem to grasp how their predicate assumptions answer their own question.

You take the Fifth because the government can't be trusted. You take the Fifth because what the truth is, and what the government thinks the truth is, are two very different things. You take the Fifth because even if you didn't do anything wrong your statements can be used as building blocks indishonest, or malicious, or politically motivated prosecutions against you. You take the Fifth because if you answer questions truthfully the government may still decide you are lying and prosecute you for lying.

Pardon me: if you accept the proposition that the government targets organizations for IRS scrutiny because of their political views, and you still say things like "why take the Fifth if you have nothing to hide", then you're either an idiot or a dishonest partisan hack.

If you want to get bent out of shape about something, you are welcome to wonder why Lerner is being investigated, apparently, by the hyper-partisan civil rights division of Justice rather than the public integrity section.  That, combined with President Obama's pre-judging of the DOJ's conclusions, is more of a red flag than Lerner's taking the Fifth.

Remember, Martha Stewart did not go to jail for securities fraud of any sort.  She went to jail for statements she made during the government investigation.

This is just sick, via Fox News and Bryan Preston

Consider what administration officials announcing the new exemption for medium-sized employers had to say about firms that might fire workers to get under the threshold and avoid hugely expensive new requirements of the law. Obama officials made clear in a press briefing that firms would not be allowed to lay off workers to get into the preferred class of those businesses with 50 to 99 employees. How will the feds know what employers were thinking when hiring and firing? Simple. Firms will be required to certify to the IRS – under penalty of perjury – that ObamaCare was not a motivating factor in their staffing decisions. To avoid ObamaCare costs you must swear that you are not trying to avoid ObamaCare costs. You can duck the law, but only if you promise not to say so.

As I have written about before, our company closed some California operations in December and laid off all the employees.  As with most business closures, we had multiple reasons for the closure.  The biggest problems were the local regulatory issues in Ventura County that made it impossible to make even simple improvements to the facilities.  But certainly looking ahead at costs soon to be imposed due to looming California minimum wage increases and the employer mandate contributed to the decision.

So, did I fire the workers over Obamacare?  If Obamacare were, say, 10% of the cause, would I be lying if I said I did not fire workers over Obamacare?  Or does it need to be 51% of the cause?  Or 1%?    Or 90%.  Business decisions are seldom based on single variables.  I am just exhausted with having my life run by people whose only experience with the real world was sitting in policy seminars at college.

Update:  The actual effect of this will not likely be to change business behavior, but change how they talk about it.  Worried that there will be too many stories next election about job losses due to Obamacare, the Administration is obviously cooking up ways not to limit the job losses, but to limit discussion of them.

The creeping regulatory / corporate state gets a setback

Faulting the IRS for attempting to “unilaterally expand its authority,” the D.C. Circuit today affirmed a district court decision tossing out the agency’s tax-preparer licensing program. Under the program, all paid tax-return preparers, hitherto unregulated, were required to pass a certification exam, pay annual fees to the agency, and complete 15 hours of continuing education each year.

The program, of course, had been backed by the major national tax-return preparers, chiefly as a way of driving up compliance costs for smaller rivals and pushing home-based “kitchen table” preparers out of business. Dan Alban of the Institute for Justice, lead counsel to the tax preparers challenging the program,called the decision “a major victory for tax preparers—and taxpayers—nationwide.”

The licensing program was not only a classic example of corporate cronyism, but also of agency overreach. IRS relied on an 1884 statute empowering it to “regulate the practice of representatives or persons before [it].” Prior to 2011, IRS had never claimed that the statute gave it authority to regulate preparers. Indeed, in 2005, an IRS official testified that preparers fell outside of the law’s reach.

Perhaps a first indication that the Obama Administration strategy to pack the DC Circuit with Obama appointees may not necessarily protect his executive overreach.

PS - you gotta love the IJ.

PPS - The IRS justified its actions under "an obscure 1884 statute governing the representatives of Civil War soldiers seeking compensation for dead horses"

This is a pretty amazing chart from Jed Graham and IBD which I have annotated a bit

Note first that the diversion between high and low-wage** industries did not occur during the recession, and in fact through the recession the two groups tracked each other pretty closely until early 2010.  Then, in early 2010, something made the two lines start to diverge and in 2012-2013 they really went in opposite directions.

Well, my suggestion for the "something" is Obamacare.  In March 2010, the PPACA was passed.  Looking at the jobs data, one can date the stall in the economic recovery almost precisely from the date the PPACA was passed (e.g. here).

The more important date, though, is January 1, 2013.  This is a date that every business owner was paying attention to at the time but which seems entirely lost on the media.   All the media was focused on the start-date of the employer mandate on January 1, 2014.  Why was the earlier date important?  Let's go back in time.

At that time, the employer mandate had yet to be delayed.  The PPACA and IRS rules in place at the time called for a look-back period in 2013 where actual hours worked for each employee would be tracked to determine whether the employee would classified as full or part-time on the Jan 1, 2014 start date.  So, if a company wanted to classify an employee as part-time at the start of the employer mandate (and thus avoid penalties for that employee), that employee needed to be converted to part-time as early as possible, preferably before 2013 even started and at worst by mid-year 2013 [sorry, I typo-ed these dates originally].

Unlike the government, which apparently waits until after the start-up date to begin building large pieces of major computer systems, businesses often tackle problems head on and well in advance.   Faced with the need to have employees be working 29 hours or less a week in the 2013 look-back period, many likely started making changes back in 2012.  Our company, for example, shifted everyone we could to part time in the fourth quarter of 2012.  I know from talking to the owners of several restaurant chains that they were making their changes even earlier in 2012.  One employee of mine went to Hawaii in October of 2012 and said that all the talk among the resort employees was how they were getting cut to part-time over Obamacare.

Yes, the employer mandate was eventually delayed, but by the time the delay was announced, every reasonably forward-looking company that was going to make changes had already done so.   Having made the changes, there is no way they were going to switch back, and then back yet again when the Administration finally stumbles onto an actual implementation date.

If this chart gets any traction over the next few days, expect to see a lot of ignorance as PPACA defenders claim that the fall in low-wage work hours can't possibly have anything to do with the PPACA because the employer mandate has not even started.  Now you know why this argument is wrong.  The PPACA, and associated IRS implementation rules, drove companies to convert full-time to part-time jobs as early as 2012.

Usual warning:  Correlation is not causation.  However, I will submit that I was predicting exactly this sort of result years before it occurred.  This is not a spurious correlation that is ex post facto blamed on whatever particular bete noir I might have.  I and many other predicted that Obamacare would drive down work hours per week in lower-wage industries, and now having seen exactly that correlated with key Obamacare dates, it is not going to far to hypothesize a connection.

** Why could low-wage industries be impacted more than high-wage?  Two reasons.  One, low-wage industries are far less likely to offer a full Obamacare-compatible health plan to employees than high wage industries.  Second, the fixed penalties ($2000 and $3000 per employee) for lack of insurance plans are obviously a far higher percentage of the total pay in low-wage vs. high-wage industries.   A penalty that is 15% of annual pay is much more likely to cause employers to shift or reduce work than a 3% penalty.

Glen Reynolds brings us this bit from a letter to the WSJ about the IRS and 501c4's:

For example, if an IRS official subjects citizens to incredibly burdensome demands for irrelevant information just to harass them for their political or religious beliefs, no 501(c)(4) group could later criticize that official’s nomination to be IRS commissioner, without engaging in restricted activity. That’s because the IRS’s proposed regulation defines even unelected government officials, like agency heads and judges, as “candidates” if they have been nominated for a position requiring Senate confirmation. The IRS’s proposed rules are an attack on the First Amendment that will make it easier for the government to get away with harassing political dissenters and whistleblowers in the future.

The part about classifying Senate-confirmed officials as "candidates" seems to be part of the same initiative as the changes to the filibuster to make it easier for the President to confirm controversial judges and administrators.  I wonder if this is a general effort or battlespace preparation for a specific confirmation battle.

I try to read a couple of team-politics blogs from both the red and blue side, to stay in touch with what they are saying and stay out of an echo chamber.  Also, of course, libertarians make common cause with both parties on various issues.  But the mindless team politics angle can really be a bore.

One of the reasons I like to read Kevin Drum on the left is that his initial reactions to things often seems pretty honest.  When his side really screws up, like the IRS scandal or failing Obamacare exchanges, his initial reaction will generally be to honestly critique a bad situation.  And then about 3-5 days into the scandal or crisis or discussion of an issue, he will catch on to and adopt the party line on an issue and then become incredibly tedious (for example, on the IRS scandal, he was honestly critical for a while and then adopted the silly "leftish groups were equally targeted meme" and has stuck to it by rote since).  But at least there are those few days of honesty, which separates him from a lot of the left and right team politics blogs.

So the timing is just about right for the Left to pick a meme to explain away the millions of people who are getting their policies cancelled despite being told that they could keep their health insurance.  Mainstream outlets like CBS and NBC are pushing the story, not just right-wing and libertarian blogs, so the Ezra Klein's of the world must be working diligently to pick a meme and then enforce it.  It will be interesting to see what they choose.

Update:  Well, here is an early entrant from Valerie Jarrett:

FACT: Nothing in #Obamacare forces people out of their health plans. No change is required unless insurance companies change existing plans.

This is hilarious.  Technically true, since my cancellation came from Blue Cross and not the government, but obviously the Blue Cross decision to cancel me was forced by the terms of the law.  This is obviously absurd, but is it too absurd for the media?  I don't know, and of course it gets extra lefty bonus points for blaming government-caused problems on private businesses.  Next up, Exxon to blame for gasoline taxes!