by Eric Epstein

Pennsylvania is the only state that does not impose an  excise tax on “smokeless” tobacco, cigars or pipe tobacco.  We were also one of the last states to join the cigarette  tobacco suits. Yet the public health costs, loss of revenue, and decreased worker productivity due to illnesses from  these products are well established.

Lip, gum, jaw, mouth, stomach and throat cancer are  among the documented afflictions that society pays for  as a result of the consumption of “niche” tobacco products.

“Smokeless” tobacco contains at least 28 known  cancer-causing chemicals including arsenic, benzene,  cadmium (used in car batteries), cyanide, formaldehyde  (used for embalming), lead (nerve poison agent),  polonium 210 (nuclear waste), and N-Nitrosamines  (cancer-causing agent). The University of Pittsburgh  found that “smokeless tobacco puts more nicotine into the bloodstream than cigarettes, people who ‘chew’ on  a regular basis often find it harder to quit than cigarette  smoking.”  

Especially disturbing is the rising level of “snuff”  use among young males. “For instance, in rural areas,  the rate of  smokeless tobacco usage was 10%  in 2005,  compared to 2% percent in large urban areas or 3.7%  in smaller urban areas. In addition, high school boys  (13.4%) use smokeless tobacco at  much higher rates  than high school girls (2.3%).” (CDC, “Youth Risk  ehavior Surveillance,” 2007).

The CDC suggested that Pennsylvania disperse over  $155 million annually on tobacco prevention and cessation  programs. We currently spend $31 million on these  programs due to funding decreases.

Frankly, it’s inexplicable that our society correctly  views obesity as an epidemic among young people, but  “smokeless” tobacco addiction is splashed to the side  of the baseball diamond.   

Why?

A year after legislation made cigarette, cigar, and  pipe smoking illegal in restaurants, office buildings,  schools, sports arenas, theaters, and bus and train  stations, big tobacco wanted to make sure it didn’t get burned again. The National Institute on Money in  State Politics reported that the tobacco industry donated $415,950 to Pennsylvania candidates and campaign  committees in 2008. By contrast, in 2006 the industry  only invested $161,455 on Pennsylvania politicians.  

Despite the medical facts on the ground and the economic exposure caused by “smokeless” tobacco,  cigar products, and pipe smoking, the legislature is  content to chew its cud .

This situation is a classic example of external  diseconomics when society pays more for a product  - in this case adverse health impacts - than the value  of output produced. An equitable solution is either  for the producer to internalize the costs or charge  consumers the full value for the consumption of the  products.

In other words, you can’t start a fire, watch it  burn, and charge admission while bystanders put the  fire out. Not imposing an excise tax on a public health  menace is a de facto subsidy. It’s the same logic that  allowed coal companies to walk from acid rain, black  lung, mine subsidence, and  contaminating thousand  of miles of Pennsylvania’s waterways.

Although we assess a user fee on everything from  gasoline to gambling, “niche” tobacco products are  viewed as emerging industries that we daresn't snuff out.  Without a dedicated user fee, somebody other than   producer and consumer is picking up the tab for medical bills and reduced worker productivity. That somebody  is the rate payer and taxpayer. Pennsylvania spends  $5.12 billion dollars annually on health care costs linked  to tobacco related diseases.

We need to ensure this “niche” growth engine  shoulders a fair share of the burden for the damages it  causes. However, any excise tax on this industry in the  hands of this legislature and this governor is a risky  proposition as evinced by the table games Wam-a-thon.  Moreover, revenue streams created by assessing these  products must be dedicated to education, cessation, and  medical offsets. Suffice to say it will be up the next  Governor to strike the proper balance between risk and  reward for “just a pinch between your check an gum.”

by Eric J. Epstein

“Stimulus” is a short-term shot-in-the-arm that causes  a response. Government is a long-term  proposition. The  immediate results of the  American Recovery and  Reinvestment Act (“ARRA”) are mixed. The long term recipe  for this nation’s economic health requires personal and  societal discipline.

On the bright side of the stimulus equation the Market  is up, December retail sales increased by 2.8%, the  manufacturing sector grew for the last five months of 2009, and factory employment showed improvement.

Roads were paved, bridges built, and jobs created. And most die-in-the-wool conservative politicians scarfed up  stimulus money to back fill or finance state and local debt  just like their liberal brethren.

However, the structural deficit that is modern American  government will not be cured by the ARRA, arrested by  gimmicks or reversed by Fox television. Stimulus dough  will not reinvent government.

The malaise is far from rectified. Maybe unemployment has crested at 10.1%, but it will take years for employment to rebound to pre-recession levels. Local, state, and federal  deficit mountains have not been capped.  We simply switched  debt from a state to federal pocket.

This crisis is not about debating the Keynesian model.  Administrations from FDR to Reagan to George W. have  employed Keynesian injections to refuel the economy.

Our woes extend to the twin challenges of retooling an  aging infrastructure and paying down deficits. We need to  stabilize spending, address debt, and recognize that  conservatives and liberals got us into this mess. As we move  from stimulus shock to debt awareness mode, we will also  require consistency and accountability.

None of the doomsday projections blanketing the air  and audio waves provide a historical context. Many folks  seem to have forgotten the role of the Bush Administration  during their daily rants, and affix blame solely on the  shoulders of Mr. Obama’s 12 month administration.

Mr. Bush actually inherited a balanced budget before  going on a spending spree. Former Treasury Secretary Paul  O'Neill attempted to send a pre-recession flare. He warned  Mr. Bush that the growing budget deficit was poison for the  economy. Dick Cheney quashed Mr. O’Neill, and lectured the secretary on the finer points of priorities: "You know, Paul,  Reagan proved deficits don't matter. We won the midterms (congressional elections). This is our due."

Where was the tea party when Mr. Cheney announced  - on behalf ot the Republican Party - that debt didn’t matter?

O’Neill was fired in December 2002, but as Chris  Edwards of the Cato Institute noted last month, the price  we are paying for political economics goes beyond liberal bashing:

In total Bush increased spending by an average of 4.9% (after adjusting for inflation) per year, the highest by any president  since Johnson. Excluding interest payments, the increase  under Bush was 5.6% per year in real terms, nearly  matching LBJ. And - for those who think Bush only increased  spending on wars - non-interest, non-defense spending increased 5.4% annually in real dollars, which is the highest since Nixon.

It’s bad enough when consumers live off of debt. It’s worse  when conservative vice presidents argue government debt doesn’t matter. As history has clearly demonstrated, both parties are to blame for the mess we’re in.

I’ve been bemoaning budget deficits my entire career, and  proudly stand behind the bipartisan efforts of the Concord Coalition.

Ok, so stimulus loans patched a hole in a wooden tire. What  to do we  next? We educate and preach with missionary zeal that  debt matters. Debt awareness can not be a fad. It has to be a  public awareness campaign. We all need to pledge to be balanced  budget hawks.   

December 23, 2009
by Eric J. Epstein

Only in Pennsylvania can you vote for an illegal pay raise,  refuse to pay it back, receive a “pension bounce,” and get  promoted to Secretary of Revenue.

Former-Rep. Stephen Stetler (D-York) collected $9,189 in “unvouchered expenses,” never paid the loot back, but  donated the money to “undisclosed charities.”

by Eric J. Epstein

The annual ritual of assigning lumps of coal and packets  of candy for “economic development” projects and political  initiatives is usually a dark exercise. This year is particularly forgettable given the budget morass, recession, unemployment,  and dark storm clouds massing for next year. So the challenge is finding six sparkles to brighten a political year corroded  by monumental ineptness.

Candy: Attorney General Tom Corbett’s public corruption investigation into the Pennsylvania Legislature resulted in  the filing of criminal charges against former Speaker of the  House John Perzel and former Representative Brett Feese  and eight current and former aides who allegedly misused  over $10 million for campaign purposes

Coal: Governor’ Rendell’s insistence on a Personal Income  Tax increase during a recession.

Candy: Auditor General Jack Wagner reported in January  2009  that his Office found an error rate of 14% in a review of nearly 12,000 Medicaid applications in 53 of 67 counties. “Even if the error rate were only 4%, as the Department of  Public Welfare has recently asserted, eliminating this  amount of waste would save Pennsylvania taxpayers $320  million a year,” said Wagner.

Coal: The $173,820 the Liquor Control Board spent on  charm school for its employees.

Candy: Conviction of former Senator Vince Fumo on all  137 counts of defrauding the state senate and two  nonprofits out of millions of dollars.

Coal: U.S. District Judge Ronald Buckwalter who reduced  Fumo's sentence from the 15 years sought by prosecutors to 55 months. Buckwalter said he gave Fumo credit for his  extraordinary public service.

Candy: $1 million in projected savings if the House joined the Senate and contributed 1% of their gross pay toward  the cost of their taxpayer-funded health insurance.   

Coal: Governor Rendell’s payment of $100,000 for  “part-time work” to Philadelphia political strategist and  media consultant Ken Snyder to “publicize” federal  stimulus spending, and the creation of a $95,000-a-year  post for former Rep. Dan Surra four months into an  administration-wide hiring freeze.

Candy: Rep. Barbara McIlvaine-Smith was the first  lawmaker  to sign up and support a Constitutional  Convention. She was also the first to take-on legislative cost-of-living adjustments by crafting legislation that  would repeal Act 51 of 1995, ending automatic COLAs  for the legislature, judges and executive branch officials.  McIlvaine Smith donated her COLA to five local charities.  Sadly, Rep. McIlvaine Smith decided not to run for  re-election next year. "When I was elected, I got to  Harrisburg with 50 reformers. But the leaders pulled them  in.... I can't tell you how many times I heard, 'We don't  want to hear any more about reform; we're done with  reform.'"

Coal: Democratic Majority Leader Todd Eachus - who never gave back his  pay raise from 2005 - for hiring Chris Casey  on December 2, 2008 for a 45 day contract at an undisclosed  hourly rate. Casey is still conducting a “top to bottom review”  of the House Dems. Mr. Eachus insists the caucus is under  “new management,” but recently received a invitation to  testify before a grand jury investigating whether state money  and resources were misused for political purposes.

Candy: To anybody or anything that can induce Governor  Rendell to leave Harrisburg a year early.

Coal: The $532,000 taxpayer bill for legislative per-diems in July and August not to get the budget done.  

by Eric Epstein

 

Pennsylvania is the only state that does not impose an  excise tax on “smokeless” tobacco, cigars or pipe tobacco.  We were also one of the last states to join the cigarette  tobacco suits. Yet the public health costs, loss of revenue, and decreased worker productivity due to illnesses from  these products are well established.

Lip, gum, jaw, mouth, stomach and throat cancer are  among the documented afflictions that society pays for  as a result of the consumption of “niche” tobacco products.

“Smokeless” tobacco contains at least 28 known  cancer-causing chemicals including arsenic, benzene,  cadmium (used in car batteries), cyanide, formaldehyde  (used for embalming), lead (nerve poison agent),  polonium 210 (nuclear waste), and N-Nitrosamines  (cancer-causing agent). The University of Pittsburgh  found that “smokeless tobacco puts more nicotine into the bloodstream than cigarettes, people who ‘chew’ on  a regular basis often find it harder to quit than cigarette  smoking.”  

Especially disturbing is the rising level of “snuff”  use among young males. “For instance, in rural areas,  the rate of  smokeless tobacco usage was 10%  in 2005,  compared to 2% percent in large urban areas or 3.7%  in smaller urban areas. In addition, high school boys  (13.4%) use smokeless tobacco at  much higher rates  than high school girls (2.3%).” (CDC, “Youth Risk  ehavior Surveillance,” 2007).

The CDC suggested that Pennsylvania disperse over  $155 million annually on tobacco prevention and cessation  programs. We currently spend $31 million on these  programs due to funding decreases.

Frankly, it’s inexplicable that our society correctly  views obesity as an epidemic among young people, but  “smokeless” tobacco addiction is splashed to the side  of the baseball diamond.   

Why?

A year after legislation made cigarette, cigar, and  pipe smoking illegal in restaurants, office buildings,  schools, sports arenas, theaters, and bus and train  stations, big tobacco wanted to make sure it didn’t get burned again. The National Institute on Money in  State Politics reported that the tobacco industry donated $415,950 to Pennsylvania candidates and campaign  committees in 2008. By contrast, in 2006 the industry  only invested $161,455 on Pennsylvania politicians.  

Despite the medical facts on the ground and the economic exposure caused by “smokeless” tobacco,  cigar products, and pipe smoking, the legislature is  content to chew its cud .

This situation is a classic example of external  diseconomics when society pays more for a product  - in this case adverse health impacts - than the value  of output produced. An equitable solution is either  for the producer to internalize the costs or charge  consumers the full value for the consumption of the  products.

In other words, you can’t start a fire, watch it  burn, and charge admission while bystanders put the  fire out. Not imposing an excise tax on a public health  menace is a de facto subsidy. It’s the same logic that  allowed coal companies to walk from acid rain, black  lung, mine subsidence, and  contaminating thousand  of miles of Pennsylvania’s waterways.

Although we assess a user fee on everything from  gasoline to gambling, “niche” tobacco products are  viewed as emerging industries that we daresn't snuff out.  Without a dedicated user fee, somebody other than   producer and consumer is picking up the tab for medical bills and reduced worker productivity. That somebody  is the rate payer and taxpayer. Pennsylvania spends  $5.12 billion dollars annually on health care costs linked  to tobacco related diseases.

We need to ensure this “niche” growth engine  shoulders a fair share of the burden for the damages it  causes. However, any excise tax on this industry in the  hands of this legislature and this governor is a risky  proposition as evinced by the table games Wam-a-thon.  Moreover, revenue streams created by assessing these  products must be dedicated to education, cessation, and  medical offsets. Suffice to say it will be up the next  Governor to strike the proper balance between risk and  reward for “just a pinch between your check an gum.”

April 8, 2008

House Reform Committee Member Socks Taxpayers

 

(Harrisburg, Pa) - State House Minority Whip David Argall’s (R-Schuylkill & Berks Counties) expense records reveal that the incumbent is collecting an exorbitant amount of supplemental, tax-free income in the form of “per diems.” A thorough review of Rep. Argall’s expenses for the period 2005 through 2007 indicates he routinely collected the maximum per diem allowable even as he assumed his duties on the Speaker’s Commission on Legislative Reform.

Eric Epstein, Coordinator of the RockTheCapital.org stated, “Mr. Argall has a history of abusing per diems. Unfortunately for the taxpayer, there is absolutely no accountability built into the system. With all the money spent and all the miles traveled by Mr. Argall, Pennsylvania's bridges and roads continue to crumble beneath our feet. ”

“Per diems” are extra cash that House and Senate members receive for every day they are in session or attend official meetings more than 50 miles from home. This “per diem” income is in addition to a legislators’ base salary and the money representatives bill for mileage while traveling to Harrisburg.

Mr. Epstein added, “Elected officials are allowed to make a living, but they are not entitled to make a killing. The amount pocketed by Rep. Argall should raise questions from his constituents as to whether or not he is bilking taxpayers.”

According to the Internal Revenue Service, “per diems” are reimbursements for expenses related to business travel, food, and lodging. In the real world, “per diems” are reported as income, and employees must provide their employers with vouchers or receipts that prove what the employee spent.

However, on “Planet Harrisburg,” legislators are not required to submit receipts or verification of the actual amount of expenses they incur for food and lodging. Many legislators routinely take the maximum per diem amount allowed – currently $152 - as set by the U.S. General Services Administration.

 

2005

Mr. Argall collected a “per diem” for 129 separate days in 2005, totaling $15,009 in cash. Argall took the maximum per diem 85% of the time, and his average was $116. The per diem rate for most of 2005 was $129 before climbing to $141.

The U.S. Census Bureau reported the per capita income for Berks County was $21,232, and Schuylkill County recorded a per capita income of $17,230. While many working people in Argall’s district face the prospect of a 35% electric rate increase, Mr. Argall zapped the taxpayers for $15,009 just for food and lodging for 129 days.

Mr. Argall said he donated all of his unvouchered cash to the United Way (Morning Call, Harrisburg Bureau, November 17, 2005), and he told the Republican Herald that he reported the $7,000 as income and took a deduction on his federal tax for the charitable donation.

 

2007

Mr. Argall’s appetite for “per diems” actually increased in the post-pay raise era. Rep. Argall collected a per diem for 149 separate days in 2007, (including Reform Commission meetings), totaling $16,794. Argall’s average per diem was $113. The per diem rate in 2007 rose by 5% and was set at $148.

Taxpayers should ask Mr. Argall why he is charging them $113 a day for food and lodging. The average resident in Schuylkill County lives on $41.93 per day, and the average resident in Berks County lives on $49.43 per day for rent/ mortgage payments, health care, food, electric, gas, water, and taxes. (United States Census Bureau)

Mr. Argall resides in Lake Hauto, Schuylkill County. According to MapQuest.com, it is only 78 miles from Argall’s home to the Capitol (a drive of 1 hour and 28 minutes). Rep. Argall is often able to drive home from the Capitol after a session day or nonvoting business day.

On many occasions, Mr. Argall (like many regional legislators) is pocketing a $152 per diem and either spending it all on the finest cuisine at the taxpayers’ expense, or dining modestly and pocketing the remainder of the per diem, tax-free – which is good ole-fashioned “double-dipping.”

During “busy session days” representatives are usually provided with catered meals out of leadership accounts or lobbyists simply pick up the tab.

The fundamental question confronting Rep. Argall is: “Are you collecting – and pocketing tax-free – per diem money that significantly exceeds what is actually necessary to cover his true expenses for food and lodging?”

 

* Copies of Argall’s expense report are available in PDF format upon request and the document will also be posted at RockTheCapital.org.

Comments of Eric J. Epstein,
January 6, 2010

 

On August 4, 2000 Governor Tom Ridge announced that electric competition would lead to job growth, economic expansion, and decreased rates. According to Governor Ridge, “Pennsylvania’s national leadership in electric competition continues to bring dramatic savings and economic benefits to Pennsylvanians.” Gov. Ridge added, "And, according to this new report, those savings and benefits will continue for some time to come!”

by Eric J. Epstein
 

Competitiveness studies essentially analyze tax structure, labor pools and relative business climates. Rarely do they  discuss the nature of competition or who we are competing  against.

As a nation, we unquestionably implement domestic and  foreign policies that survive Administrations and incent and  subsidize the American brand. We protect steel, defend oil  and extract minerals from under the ocean floor - not in the  name of competition - but under the manifest guise of  protecting the American way-of-life.

Many of the “American” corporations that seek to capitalize  on state and federal competition polices are based in Bermuda,  manufacture in Mexico and import from China, yet remain “uncompetitive.”

When was the last time a talking head or political mouth  muttered a word about whether or not America's competitive  edge is undermined or strengthened by these policies?

On that rare occasion when an international referee  sanctions foreign nations for knockoffs, corporate espionage, or illegal dumping, America still finds itself on the short end  of the competitive stick.

Then again, how aggressive have we been in dealing with  insider trading, mortgage packaging or corporate fraud? We can not jump-start competition when consumers,  entrepreneurs and markets do not believe that there are fair  rules of engagement or objective referees with enforcement powers.

The bigger question to ponder is whether the American  lifestyle is conducive to competition. Is the contemporary  American-way-of life overweight, sluggish, and self-indulgent?  And if so, should we not fashion policies to target the American  psyche rather than write blank checks to create artificial  competition?

Twenty years ago in the wake of Tiananmen Square,   China’s leaders were scared and embarrassed into action.  The Communist Party decided that making money was good  and competing against the US was better. We celebrated the  demise of the Soviet Union, and accepted the mantle as the  world’s only superpower.

The current reality is that we can not compete against China.  They are agile, repressive and not slowed down by the  machinations of democracy, lobbying or sound bites. There are  no workplace rules, lax environmental regulations, and  consumer safety recalls are nonexistent.  Forget human rights, clean air and toxic crayons. Red China is a competitive juggernaut  without a democratic middle-class.

At some point the Chinese will be pushed by the appetite of  their workers to buy whatever we are still manufacturing. But  that won’t cure the apathy and inertia that has supplanted the  American can-do attitude.

We need to have a frightening fireside chat about what we  can learn from China while preserving and maintaining a  modern democracy.

We are a consumer society, not a competitive culture. We  do not allow failure, and will not tolerate the emotional bruises  that result from competition. Rules are not meant to be broken.  Not all kids deserve four strikes, a “progress” trophy or a gift  certificate to self-esteem camp. These kids grow up to become  adults who demand a European sedan, mental health days for  a hangover and a time-share in the Caribbean.

If we are serious about competition, than we need to rethink  who and what we are as a culture. All the tax abatements,  giveaways and subsidies that politicians rush to adorn businesses  with in the name of competition  will not cure our cultural  addiction to soft-landings for everybody.

By Eric Epstein

Governor Tom Ridge predicted that electric competition  would lead to job growth, economic expansion, and decreased  rates. According to Governor Ridge, “Pennsylvania’s national  leadership in electric competition continues to bring dramatic  savings and economic benefits to Pennsylvanians.”  (August 4, 2000) The success of electric competition would  shave business costs and give employers more money to invest  thereby creating multiplier effects on the state economy.   “Competition” would also produce savings that would give  consumers more money to spend.

Mr. Ridge’s Secretary of Revenue, Robert A. Judge Sr.,  stated:    "We expect electric competition will help create more than 36,000  jobs between 1998 and 2004, and have a major  positive impact on our state’s economy. And millions of  Pennsylvania families and employers continue to save money on their electric bills — without even lifting a finger."

(Harrisburg, Pa November 9, 2009) - Lawmakers, the Governor and his cabinet, and all judges are set to receive an automatic, annual cost of living adjustment (“COLA”). Lawmakers get the COLA on December 1. The Executive and Judiciary branches receive a COLA on January 1. The COLA is the percentage increase in the cost of living in the Philadelphia metropolitan area. The cost of living adjustment is computed by the U.S. Census Bureau using a 12-month period from November 1 to October 31. 

Eric Epstein, Coordinator of the RockTheCapital.org said: “Act 51 needs to be abolished, or at a minimum, COLAs should be announced one week prior to the general election so voters can decide if a pay raise is warranted.” Epstein added, "State government is a publicly held corporation with by-laws that specifically exclude COLAS (Article III, Section VIII). If lawmakers want a bonus plan than they need to submit a proposal to taxpayers for ratification."