Author Archive
April 17th, 2014 at 11:50 am
IRS Assuming Control of Your Tax Preparation? What Could Possibly Go Wrong?
Posted by Timothy Lee Print

In recent weeks, we’ve highlighted the pernicious effort to make the Internal Revenue Service not only the nation’s tax enforcer, but also its tax preparer:

This IRS scheme is part of a broader, ongoing campaign to socialize the tax preparation business in America entirely, which would ultimately make it the nation’s one-stop-shop tax preparation service.   That would obviously create a conflict of interest with the IRS serving as both tax preparer and tax collector, and it would surely result in higher tax calculations to facilitate wasteful federal spending.”

Believe it or not, however, some continue to assert that it’s an idea whose time has come.  Because, according to ProPublica, Barack Obama supports it and the Europeans do it.  And allegedly, the notoriously tax- and bureaucracy-loving Ronald Reagan was also an enthusiast.

But Ryan Ellis of Americans for Tax Reform, one of the most informed and cogent tax experts in contemporary public discourse, throws cold water on the idea in a new commentary entitled “Top Seven Reasons the IRS Shouldn’t Do Your Taxes for You”:

The basic argument is always the same: the IRS has all this information on you anyway, so wouldn’t it just be easier and better if they simply prepared your taxes for you?  Wouldn’t that be better than having to pay some rent-seeking middleman?  This flawed line of thinking fools many a reporter this time of year, but it’s refuted pretty easily once you scratch beneath the surface.”

In trademark fashion, Ellis details those seven reasons in clear, convincing form.  It’s well worth the quick read on an issue that is becoming increasingly important.

But his conclusion is worth particular emphasis:

The bottom line. These tired, annual articles from white collar lefty pseudo-academics living in the Beltway all ignore the really big story here: namely, that it’s a giant conflict of interest for the IRS to determine your tax liability, and then to be able to seize your wages and assets in order to collect that tax liability.  To ignore that is to be criminally-naive about the way the IRS goes about its business.  It betrays either a lack of knowledge of how the tax system actually works, or it’s a giant con job by people whose common cause with the IRS is growing the size of government.

Demonizing the tax prep industry doesn’t change any of the arguments from above.  It does, however, provide a thin shield of self-righteousness for what is otherwise a fool’s errand.”

April 14th, 2014 at 11:10 am
“Sons of Fannie Mae”: WSJ Shares Our View of Current Fannie/Freddie “Reform” Legislation in Senate
Posted by Timothy Lee Print

For weeks, CFIF has detailed the hazard presented by two proposed Senate bills – Johnson/Crapo and Warner/Corker – claiming to offer home finance “reform” of Fannie Mae and Freddie Mac.

It was therefore refreshing to see The Wall Street Journal reach the same conclusion this morning in its opinion piece entitled “Sons of Fannie Mae.”  While reform of Fannie and Freddie is indeed critical, the latest attempt from Senators Tim Johnson (D – South Dakota) and Mike Crapo (R – Idaho) isn’t the answer.  “The bad news,” it reads, “is that the Senators want to replace Fan and Fred with multiple private mortgage bond issuers that would each also have a  taxpayer guarantee.”

It continues:

While Johnson-Crapo claims to end Fan and Fred’s “affordable housing” requirements, the bill is larded with provisions to encourage and subsidize loans to non-creditworthy borrowers while driving up the price of housing.  The bill includes a new 0.1% tax on federally insured mortgages that will be distributed to housing slush funds across the bureaucracy.”

The bill also promises to continue subsidizing mansions that don’t need help:

On that point, Johnson-Crapo also ensures that the universe of loans eligible for subsidies will continue to grow.  Under their proposal, the FMIC could raise the size of mortgages eligible for federal insurance as home prices rise.  But it bars the agency from ever lowering this so-called conforming loan limit.  Guess what would happen the next time a President runs for re-election?

According to the National Association of Realtors, February’s median sales price of an existing U.S. home was $189,000.  Yet Fannie and Freddie offer mortgages up to $417,000 across the country and in high-cost areas they run as high as $625,500.  That means that with 20% down a borrower can get taxpayer help when paying more than $780,000 for a house.  In most places that’s called a mansion.

Beyond the obvious reasons wealthy buyers don’t need subsidies, the “jumbo” market for mortgages above the conforming limits has been thriving.  At times in the last year jumbo rates have been lower than conforming rates and even now are within four-tenths of a percent.”

Fortunately, the piece ends on a high note, highlighting superior alternative legislation from Congressman Jeb Hensarling (R – Texas):

Some of our friends say the political window to kill Fannie and Freddie is closing, and Johnson-Crapo is the only vehicle that can do so because it is the only one that has White House support.  We’re not so sure.  Texas Rep. Jeb Hensarling has a better reform in the House, and a GOP Senate might be able to cut a better deal next year.  The Senate should go back to the drawing board and come up with a reform that doesn’t use the demise of Fan and Fred to create a dozen mini-me replacements that could grow to become the same monsters.”

Well said.

April 7th, 2014 at 2:47 pm
This Week’s “Your Turn” Radio Lineup
Posted by Timothy Lee Print

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CDT to 6:00 p.m. CDT (that’s 5:00 p.m. to 7:00 p.m. EDT) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn:  Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 CDT/5:00 pm EDT:  Myron Ebell, Director, Center for Energy and Environment at the Competitive Enterprise Institute – United Nation’s Flawed Report on Climate Change;

4:30 CDT/5:30 EDT:  Robert Zarate, Policy Director of the Foreign Policy Initiative – Responding to Russia’s Aggression against the Ukraine and What’s Next?;

5:00 CST/6:00 pm EDT:  Timothy Lee, CFIF’s Senior Vice President of Legal and Public Affairs – Why the NCAA Should Defend Against Athlete Unionization;  and

5:30 CDT/6:30 pm EDT:  Sally Pipes, President, CEO and Taube Fellow in Health Care Studies at the Pacific Research Institute – Assessing ObamaCare Four Years After Its Passage.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

April 4th, 2014 at 12:01 pm
Latest Jobs Report Confirms Desperate Need for U.S. Corporate Tax Reform
Posted by Timothy Lee Print

April 1 marked an important milestone in America.  Not because it was April Fools’ Day, but because it marked the second anniversary of the United States claiming the inglorious title of the developed world’s highest corporate tax rate.

The U.S. hasn’t achieved comprehensive tax reform since 1986.  Ronald Reagan was early in his second term as President, Michael Jordan was still five years away from his first NBA title and Pixar animation studios first opened.  Over the ensuing three decades, however, our international trading partners and competitors have accomplished reform, particularly in their corporate tax codes.  As a result, America’s 39% rate unfortunately stands as the world’s highest.

Americans can rightfully claim, “We’re number one” in many areas, but it’s simply unacceptable that the highest corporate tax rate remains one of them.  It constitutes a continuing drag on business growth, job creation and wage increases.  And as yet another disappointing jobs report today confirms, we cannot afford to maintain the status quo.  Numerous studies show that a lower corporate tax rate creates jobs and economic growth, so we must shift our current strategy away from government bailouts, welfare and unemployment checks, and more toward restructuring the tax code and empowering the private sector to hire.  Our world becomes increasingly interconnected each day, and we simply cannot cede competitiveness to other nations whose tax codes are far more appealing to new businesses.  The U.S. spent the 20th century building an economy that was the strongest and most powerful in the world, but lack of action on tax reform jeopardizes that global standing.

Moreover, this isn’t a partisan issue.  Republicans and Democrats, including Barack Obama himself, agree that it has been too long since we have undertaken comprehensive tax reform.  Accordingly, there’s no excuse for further delay.

Let’s not let another three decades pass us by without corporate tax reform.  Let’s instead achieve a code that actually encourages businesses to grow and hire workers.

March 28th, 2014 at 11:18 am
WSJ Opinion Agrees: Thumbs-Down on Crapo/Johnson Housing “Reform” Bill
Posted by Timothy Lee Print

We at CFIF have highlighted the grave flaws in two proposed Senate bills – Corker/Warner and Crapo/Johnson – that constitute defective efforts toward housing finance reform.

Instead of proposing sensible free-market answers that could benefit taxpayers while adhering to rule of law, the legislation does neither.  Rather, it reinforces the Obama Administration’s big-government overreach that disrespects our legal system and the people it seeks to protect.  And by creating yet another new federal agency to regulate the mortgage market, Crapo-Johnson uses similar mechanisms that Corker-Warner does.  In so doing, it maintains the same market uncertainty that Corker-Warner does, without any guarantee for future investments into the government-backed agency.

Further, the proposal continues to disregard investors’ rights – the community banks, pension funds and individuals that supported Fannie and Freddie, before, during and after the bailout.  Under Crapo-Johnson, those investors remain left out in the cold, their savings and retirement in limbo.  Meanwhile, taxpayers would remain on the hook because the full faith and credit of the U.S. government would backstop the newly-created entity under Crapo-Johnson.”

Writing in today’s Wall Street Journal, Graham Fisher & Co. managing director Josh Rosner cogently echoes our position.  Of particular note is the way in which Mr. Rosner highlights how the proposed bills offer the false promise of “bipartisanship”:

So why are legislators designing a new system that risks a fragile housing recovery, creates explicitly guaranteed supports for new government-sponsored enterprises, relies on phantom capital, and recklessly endangers the public?  Perhaps the answer is the housing industrial complex — that web of affordable-housing groups that want to deliver loans to “underserved” markets, lenders and other private participants that profit from higher mortgage volumes, and the politicians who like the illusion of homeownership.

As for those politicians, this bill provides something for everyone on both sides of the aisle.  The Republicans get to wipe out Fannie and Freddie, punishing their longtime Washington enemies for past political sins.  Meanwhile the Democrats can avoid future political attacks by hiding government support for housing in a new opaque system that looks remarkably like the one that failed miserably a few years ago.”

As Rosner concludes, and as we agree:

The Johnson-Crapo bill reinstates a model in which private players profit from public government support.  If it becomes law, we will have failed to create a sustainable system of building home equity, even among the most at-risk, lower-income borrowers.  We will also have failed to fulfill the real American dream of homeownership.”

March 24th, 2014 at 3:54 pm
This Week’s Lineup on “Your Turn”
Posted by Timothy Lee Print

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CDT to 6:00 p.m. CDT (that’s 5:00 p.m. to 7:00 p.m. EDT) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 CDT/5:00 pm EDT:  Leon Aron, Resident Scholar and Director of Russian Studies at the American Enterprise Institute – the Ukraine situation and Sanctions against Russia;

4:30 CDT/5:30 EDT:  Lana Harfoush, Director of Communications for the Moving Picture Institute – Economic Issues Portrayed in Film;

5:00 CST/6:00 pm EDT:  Rupert Darwall, finance and public policy expert and Consulting Director for White House Writers Group – Climate Change and Global Warming Alarmism;  and

5:30 CDT/6:30 pm EDT:  David Williams, President of Taxpayers Protection Alliance – FCC and the First Amendment.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

March 21st, 2014 at 4:23 pm
Sprint Chairman Misses the Mark in U.S. Telecom Market Comments
Posted by Timothy Lee Print

Softbank CEO Masayoshi Son came to Washington a week ago to discuss “the state of America’s wireless communications industry and the competitive global landscape.”  Despite being Chairman of one of the top wireless companies in America, Sprint, Mr. Son spent the majority of his speech at the U.S. Chamber of Commerce explaining why he believes the U.S. telecom market falls short.  The data we’re looking at, however, tells a far different story.

As an initial matter, peak mobile speed in the U.S. actually doubled from 7.5 to 15 megabits per second between 2012 and 2013, despite the fact that the U.S. is the clear leader in LTE connections.  We make up 50% of the world’s LTE connections, while only constituting 5% of the world’s overall wireless connections.

That data stands in stark contrast to Mr. Son’s claim about lagging LTE speeds in the U.S., particularly in comparison to Japan.  His data derived from anecdotal evidence from mobile users who voluntarily download an app from OpenSignal to track data signal strength.  If he wants to trust that methodology, however, Mr. Son should consider another OpenSignal study claiming Japan had one of the slowest LTE experiences.

Moreover, American consumers  reap the benefits of faster connections for education, health and entertainment at a lower price point.  Americans use their mobile devices significantly more than their European counterparts, with five times more voice minutes and twice as much data.  Despite that, in terms of data alone, the price per MB has fallen more than 93% in the past five years.  That is also reflected in the broadband space, where the U.S. maintains the lowest entry-level price of any OECD country, and that price continues to drop as measured on a per-MB basis.

Most significantly, the U.S. telecom industry has achieved those gains with comparatively fewer burdensome regulations.  Unfortunately, the US company in which Mr. Son now has a significant ownership stake, Sprint, seeks to exploit government intervention and corporate welfare to prop it up against its competitors.  Despite its status as the “king of spectrum,” Sprint wants the Federal Communications Commission (FCC) to set rules for the incentive auction that would artificially favor Sprint and T-Mobile while limiting the ability of AT&T and Verizon to freely bid on coveted spectrum just as a spectrum crunch looms.  Additionally, despite using spectrum in the 2.5 band for its “enhanced” LTE network, Sprint doesn’t want the FCC to count all of its 2.5 spectrum in the spectrum screen.  Keep in mind that the standard for inclusion is suitable and available for mobile broadband use.

In the end, Mr. Son is right:  America’s wireless market is not Japan’s.  Not only are Americans enjoying faster speeds at lower prices, our wireless companies are achieving that by competing in our comparatively free market.  That’s how America’s wireless market was built in the first instance, and that’s the model it should keep in order to continue our global leadership position.

March 21st, 2014 at 11:46 am
House Hearing Provides Progress in Combating Online Piracy and IP Theft through Voluntary Measures
Posted by Timothy Lee Print

Last week, we highlighted an important House Judiciary Intellectual Property Subcommittee hearing on the Digital Millennium Copyright Act’s (DMCA’s) critical “notice and takedown” provisions.  The hearing provided the opportunity for lawmakers to promote a modernized, voluntary and necessary campaign to achieve the DMCA’s underlying goal of fighting Internet piracy and intellectual property theft while maintaining an open Internet.

Fortunately, there’s good news to report one week later.

Almost every member of the Committee, Democrat and Republican alike, concurred that private industry actors must undertake voluntary, market-friendly efforts to correct the massive and improper scourge of online piracy and IP theft.  That is, after all, the purpose of the DMCA structure itself.

Notably, the hearing featured persuasive testimony from Grammy-winning musical artist Maria Schneider, who shared her real-life experiences to illustrate the problem to be addressed.  Ms. Schneider explained how she actually often spends more time and effort removing pirated copies of her performances than she does in the creative process.  In fact, she testified that her battle has cost her over $100,000, and she provided a demonstration of how difficult it is to remove one’s own stolen property from rogue websites.  Ms. Schneider also noted that when YouTube actually agrees to remove pirated material, it unhelpfully posts a scowling frustrated-face icon with the banner “This video is no longer available due to a copyright claim by Maria Schneider – sorry about that.”  That suggests that Ms. Schneider or others who simply seek to protect their hard work and property rights are somehow culpable for the situation, and it certainly doesn’t suggest respect for the rights of creators.

It is therefore critical, as Ms. Schneider noted, that websites, service providers and other market actors more effectively educate consumers and anyone uploading content about the dangers and costs of piracy and IP violations, and make greater efforts to confirm that content being uploaded is done legally.  The current “whack-a-mole” routine is neither effective nor justified.  But through voluntary, market-based, common-sense practices, we can collectively combat online piracy while protecting the rights of creators and consumers alike.

It was good to see the Subcommittee hearing result in steps toward that beneficial end.

March 18th, 2014 at 1:23 pm
Crapo-Johnson Housing “Reform” Bill: More of the Same
Posted by Timothy Lee Print

The Senate Banking Committee’s chairman and its ranking member – Senators Tim Johnson and Mike Crapo, respectively – released their version of housing finance reform on Sunday.  Unfortunately, their bill largely duplicates the problems already found in the proposed Corker-Warner legislation.  Both proposals – focusing on Fannie Mae and Freddie Mac, the two behemoth government-sponsored enterprises (GSEs) – have been touted as a bastion of bipartisanship, but both fail miserably at upholding the rule of law or the rights of property owners.

Instead of proposing sensible free-market answers that could benefit taxpayers while adhering to rule of law, the legislation does neither.  Rather, it reinforces the Obama Administration’s big-government overreach that disrespects our legal system and the people it seeks to protect.  And by creating yet another new federal agency to regulate the mortgage market, Crapo-Johnson uses similar mechanisms that Corker-Warner does.  In so doing, it maintains the same market uncertainty that Corker-Warner does, without any guarantee for future investments into the government-backed agency.

Further, the proposal continues to disregard investors’ rights – the community banks, pension funds and individuals that supported Fannie and Freddie, before, during and after the bailout.  Under Crapo-Johnson, those investors remain left out in the cold, their savings and retirement in limbo.  Meanwhile, taxpayers would remain on the hook because the full faith and credit of the U.S. government would backstop the newly-created entity under Crapo-Johnson.

Since becoming profitable in 2012, Fannie and Freddie have not only made taxpayers whole, they’ve made the government billions of dollars following confiscation by the Treasury Department.  Instead of following the rule of law and marketplace standards, Crapo-Johnson would codify that illegal taking and perpetuate the federal government’s dangerous habit of undermining property rights and sowing uncertainty.  That’s not what our housing market, or our economy generally, need.

You can try to put lipstick on a pig, but you’re not fooling anyone:  Crapo-Johnson is more of the same.

March 12th, 2014 at 5:33 pm
House Hearing Offers Opportunity to Combat Internet Piracy through Voluntary Measures
Posted by Timothy Lee Print

On Thursday, March 13, the House Judiciary Intellectual Property (IP) Subcommittee will conduct a hearing regarding the Digital Millennium Copyright Act’s (DMCA’s) “notice and takedown” provisions.  It provides a critical opportunity for lawmakers to promote modernized, voluntary and much-needed initiatives to better execute the DMCA’s objective of sustaining the most open Internet environment possible while also combating piracy and IP theft.

Congress passed the DMCA over 15 years ago to simultaneously allow the Internet to flourish while ensuring that the IP rights of creators would be safeguarded, and wrongdoing prevented and punished.  The law’s notice and takedown provisions established the procedures for aggrieved creators to alert service providers that illegal content was being distributed by wrongful actors, and creating a “safe harbor” from prosecution for the service providers who follow the law.  When Internet entities receive takedown notices or discover violations themselves, they must remove the infringing material and terminate the accounts of flagrant actors when appropriate.  Seems fair enough.

Unfortunately, those provisions haven’t sufficiently fulfilled the DMCA’s goal of combating piracy.  In particular, Section 512 of the law, which sought “strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements that take place in the digital networked environment,” has instead too often provided shelter for violators because other actors haven’t taken sufficient efforts to stop infringement.  Property rights are no less sacred on the Internet than elsewhere, and theft is theft.

Fortunately, Congress can help correct the situation. Voluntary measures such as the 2007 User-Generated Content Principles, and the 2013 Copyright Alert System offer some helpful initiatives that ensure an open Internet while also protecting creators against rampant theft.  All stakeholders can pursue agreement on how to identify and address flagrant offenders, standardized technical measures such as filtering can be discussed, legitimate sites can be promoted in search results while illegitimate sites can be minimized and notice practices can be modernized and streamlined.  As another example, the Copyright Alert System (CAS) through which the music and film industries, along with the five largest Internet service providers, inform consumers about online piracy and direct them toward alternatives has received positive feedback to date.

Again, a wide array of voluntary, beneficial measures can be addressed and pursued.  What Congress shouldn’t do, however, is follow the defective advice of so-called “libertarian” and “conservative” opponents of IP rights employing flatly false scare tactics while turning a blind eye to piracy.  By working together, all interested parties can ensure continued Internet growth and enjoyment, while better protecting creators and innovators against unfair theft of their works.

March 10th, 2014 at 2:58 pm
Today’s “Your Turn” Lineup
Posted by Timothy Lee Print

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CDT to 6:00 p.m. CDT (that’s 5:00 p.m. to 7:00 p.m. EDT) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 CDT/5:00 pm EDT:  Cameron Seward, Heritage Foundation Program Manager – President Obama’s Budget;

4:30 CDT/5:30 EDT:  Shona Holmes, Canadian Healthcare Refugee – ObamaCare and Patient Rights;

5:00 CDT/6:00 pm EDT:  Bruce Herschensohn, Political Commentator, Professor at Pepperdine University School of Public Policy and CFIF Board Member – The Situation in Ukraine and Foreign Policy; and

5:30 CDT/6:30 pm EDT:  Troy Senik: FLOTUS and Food Labels and Why is the Middle Class Leaving California.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

March 6th, 2014 at 10:59 am
STELA Reauthorization: An Opportunity for Pro-Market Reform
Posted by Timothy Lee Print

On December 31, 2014,the Satellite Television Extension and Localism Act (STELA) is set to expire.  The House Energy and Commerce Subcommittee on Communications and Technology is in the process of reauthorizing the law, and that provides a critical opportunity for pro-market reform by modernizing anachronistic regulations like retransmission consent agreements and must-carry provisions of the 1992 Cable Act.

So what is STELA, and why should conservatives and libertarians care?

Well, when the Cable Act became law in 1992, the prevailing concern was that cable operators might somehow employ monopoly power to block local broadcast stations in their home areas.  Accordingly, the Act tipped the scales in favor of broadcasters by granting them the right to guaranteed carriage or the right to compel cable operators to pay stations for consent to retransmit their broadcasts to local subscribers.  STELA, enacted in 2010 and due to expire at the end of this year, essentially maintained many of those outdated rules.

Today, more than two decades later, the television marketplace is much more competitive and no longer resembles the 1992 state of affairs.  Consumers now possess innumerable options in channel selection and the means to access them, from cable to fiber optics to online to multiple satellite and cable providers.  Yet despite that evolution, the government-imposed advantage for broadcasters remains.  Multi-channel video programming distributors (MVPDs) like cable, satellite and fiber providers are prohibited under current outdated regulations from disconnecting service during sweeps week, but broadcasters remain free to do the same thing during such events as the World Series in which the local team is playing.  Thus, broadcasters maintain government-created negotiating power through the retransmission consent rules, and are guaranteed a place on cable companies’ basic tier.  That tipping of scales has resulted in consumers suffering service disruptions and cost increases.

Fortunately, the opportunity has arrived for Congress to do something about it, and allow greater negotiating balance and a more even playing field.   As part of STELA reauthorization, Congress can at the very least jettison the prohibition against MVPDs disconnecting service during sweeps week if necessitated by a negotiating impasse with intransigent broadcasters, as well as broadcasters’ government-granted right to placement on cable companies’ basic tier, which it appears ready to do.

The federal government simply shouldn’t be playing favorites or tipping the scales in an industry as dynamic as this, and STELA reauthorization provides the perfect opportunity to correct those existing defects.

February 25th, 2014 at 11:47 am
Homeland Security Hearing Should Emphasize Intellectual Property Protections and Stopping Piracy
Posted by Timothy Lee Print

At 10:00 a.m. tomorrow, the House Homeland Security Committee will hold a hearing with new U.S. Department of Homeland Security (DHS) Secretary Jeh Johnson entitled “The Secretary’s Vision for the Future – Challenges and Priorities.”  The hearing provides a perfect opportunity for Chairman Michael McCaul (R – Texas) and his committee to emphasize America’s commitment to Intellectual Property (IP) protections, and to ensure that combating IP theft – both the anti-counterfeiting operations and efforts to stop online IP piracy – remain on the front burner.

Correctly and justifiably, many divisions and agencies within the Department focus on national security, but it would also be useful for the Committee members to discuss others that have a role in our economic well-being.  A large and diverse coalition of businesses recently came together to write Secretary Johnson, stressing upon him the importance of protecting American ingenuity and our competitive edge by reinforcing the need for strong enforcement of IP.  American companies continue to create the world’s most innovative goods and products, and fully two-thirds of all U.S. exports come from industries that depend on the recognition of strong IP rights.

Unfortunately, whenever creators succeed in building brands that consumers come to trust, there will in turn be nefarious characters who seek ill-gotten profit from someone else’s good name and hard work.  Fake consumer products, medicines, apparel and other goods can be found online, and unsuspecting shoppers end up with inferior, even dangerous products from unknown sources both domestic and abroad.  Consequently, absent significant effort by U. S. enforcement agencies, those knock-off goods can end up in hurting both the purchaser and the company unfairly being copied.  Whether manifested by state-sponsored theft of U.S. military technology, Eastern-bloc crime bosses using revenue of fake goods to fund their syndicates or simply domestic swindlers trying to scam consumers, U. S. policy makers and officials need to do what it takes to stop the bad guys to help ensure fair play as well as our safety.

Emphasizing that point at tomorrow’s hearing will provide an important step in that path.

February 21st, 2014 at 11:09 am
CFIF TechNotes
Posted by Timothy Lee Print

The tech policy arena in recent days has understandably been dominated by two issues in the news – the proposed Comcast/Time-Warner Cable merger and the refusal of Net “Neutrality” proponents to allow that pernicious campaign to finally die a justified death.

Regarding the Comcast/Time-Warner  Cable merger, the Heritage Foundation’s James Gattuso offers one of the better primers.  He rightly criticizes the anti-merger hyperbole, and notes that the agreement is actually a sign of increased competition, not diminishing competition:

To begin with, these companies do not compete with each other.  Comcast and Time-Warner Cable (not to be confused with Time-Warner, the media firm from which TWC was hived off in 2009) operate in geographically distinct cable TV franchises around the country.  They do not overlap.

Moreover, while they are the largest and second-largest cable TV firms nationally, that metric is largely meaningless.  The paid television marketplace includes many other competitors, ranging from telecommunications firms such as Verizon and AT&T to satellite providers such as DIRECTV, to a growing band of Internet TV providers such as Netflix and Apple TV.  It’s a diverse marketplace, in which Comcast and TWC together serve barely 30 percent of subscribers. (In fact, Comcast has pledged to divest cable systems to keep the share below that figure). “

The Wall Street Journal provided the same reassurance, confirming that “a merged Comcast and TWC still has plenty of competition”:

[U]nlike the markets for beer, air travel and wireless, cable companies don’t compete with each other.  They have local franchises and compete against telephone, wireless and satellite companies.  So there’s no market overlap between systems owned by Comcast and those of Time Warner Cable.  Comcast, which is dominant in Philadelphia, will get millions of new customers in New York and Los Angeles.  But how can dominance in one geographic region give Comcast new pricing power in a different area?”

And the following day, the  Journal’s Holman Jenkins takes a nice swipe at the toxic un-dead specter of Net “Neutrality” as it relates to the proposed merger:

But standing in the way is the tired concept of ‘net neutrality,’ beloved by regulators and mau-mau groups but never enacted by Congress and frequently questioned by the courts. Yet now, thanks to America’s deranged merger approval process, Time Warner and Comcast risk having just such rules imposed on them (and no one else) as extortion for regulators approving their deal.”

With federal overregulation already exacerbating what has been the most sluggish economic recovery in recorded U.S. history, and with the American public listing big government as the nation’s foremost threat, the bottom line is that bureaucratic interference via Net “Neutrality” or in the private proposed merger of Comcast and Time-Warner remains a bad idea.

On a different and more optimistic note to end the week, however, Notre Dame philosophy professor Don Howard and the Manhattan Institute’s Mark Mills anticipate the upcoming arrival of self-driving automobiles, so long as overactive government regulators referenced above don’t spoil the party:

The self-driving-car solution is clear.  Congress should pre-empt Nhtsa and the trial lawyers and pass a National Autonomous Vehicle Injury Act.  The Fords and Nissans and Googles and Qualcomms should voluntarily create an Autonomous Vehicle Event Reporting System.  And industry players should also create a National Autonomous Vehicle Compensation System.  (Vaccine compensation is funded with a de minimis tax on each dose.)  Last November, Nhtsa Administrator David Strickland told Congress that ‘in addition to the devastation” that “crashes cause to families, the economic costs to society reach into the hundreds of billions of dollars.  Automated vehicles can potentially help reduce these numbers significantly.’

That potential has already been realized, whether regulators understand it or not.  If the human toll from highway accidents were a disease and we knew there was a cure, it would be immoral not to marshal every corner of government and industry to deploy it.”

So allow the private sector to move forward, whether through voluntary mergers or technological innovation, beyond the interference of overzealous government regulators.  What a novel concept.

February 18th, 2014 at 4:57 pm
New Study: Digital Thieves’ Profits from Ad-Supported Content Theft Reached Quarter-Billion Dollars in 2013
Posted by Timothy Lee Print

An alarming new report from the non-profit Digital Citizens Alliance (DCA) calculates for the first time the sheer advertising revenue improperly gathered by online thieves who pirate copyrighted material:  a quarter of a billion dollars in 2013 alone.

These content thieves flagrantly steal others’ artistic creations and offer them on low-cost sites, making for a low-risk/high-reward crime that deprives creators of the fruits of their efforts and imagination.  It’s a large and growing racket, and the advertising revenue at the center of this study is merely one way that online thieves obtain profit.  Content theft sites in many cases also profit from subscription fees that often dwarf ad revenues illicitly obtained (the illegality sometimes unbeknownst to the advertisers).

Among the new study’s findings:

  • Content theft sites reaped an estimated quarter of a billion dollars in ad revenue alone in 2013.
  • The largest content-theft sites in the sample made more than $3 million in ad revenue in 2013
  • The 30 largest sites that make revenue exclusively through ads averaged $4.4 million in 2013.
  • The most heavily trafficked BitTorrent and P2P sites, which rely exclusively on advertising revenue, averaged a projected $6 million per year in 2013.
  • Even the smallest content theft sites were projected to average $100,000 in ad revenue in 2013.
  • 30% of the most heavily trafficked content theft sites carried premium brand advertising and 40% carried secondary brand advertising
  • The sites studied in the sample had a profit-margin of 80-94%.  Content thieves rely on stealing the rights-protected work of others, and distributing on low-cost sites.  It’s a low-risk, high reward business.”

Fortunately, solutions exist.  Legitimate advertisers can boost their existing best practice standards, as the technology used to identify and stop rogue sites already exists.  After all, legitimate companies and brands don’t place ads on pornography or racist/hate websites, and they can similarly increase efforts to ensure that they’re not advertising on thieves’ sites. Although no single, simple, foolproof, immediate solution exists (just as no such solutions exist to any other crime afflicting society), well-meaning and legitimate Internet participants should unite and implement voluntary, reasonable and technologically-feasible efforts to cut into online piracy.

As the new DCA report demonstrates, copyright thieves profit enormously from improper ad revenue.  The harm they inflict, however, stretches far beyond that particular method ill-gotten gain.  The works they steal cost billions to create, and such crimes deprive the innovators who pour their time, resources and hard work into creating them of the rightful rewards for their labor. Hopefully, DCA’s new data can help bring an end to that.

February 10th, 2014 at 5:00 pm
MPAA’s Ben Sheffner Sets the Record Straight on the Value of Copyright Protections
Posted by Timothy Lee Print

Do America’s copyright protections stifle artistic innovation?

Obviously, that question answers itself.  After all, no nation in human history even approaches the United States in terms of sheer scale of musical, film and other creative innovation.  And that’s due precisely to our strong copyright laws that reward creativity and incentivize more.  Moreover, Americans’ ability to access a greater amount of artistic content, more easily, more cheaply and via more outlets increases daily.

Bizarrely, however, the contrary assertion remains regrettably fashionable even among some self-proclaimed “libertarian” and “conservative” circles.  Fortunately, voices of reason rebut the pernicious anti-intellectual property (IP) movement’s myths, and bring clarity to the debate.  One such voice of reason is Ben Sheffner, the MPAA’s Vice President of Legal Affairs.  In this abbreviated and this full-length debate video recently released, Mr. Sheffner clarifies the realities and refutes the curious claim that copyright laws inhibit innovation.  Quite the contrary, he makes clear, strong copyright laws not only preserve the fruits of creators’ labor, they incentivize the risk-taking and investment critical to spark additional creativity now and into the future.

Mr. Sheffner does an excellent job, and absolutely schools Derek Khanna multiple times on both the broader and finer points of intellectual property generally, and copyright more specifically.

February 10th, 2014 at 4:02 pm
This Week’s “Your Turn” Lineup
Posted by Timothy Lee Print

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CST to 6:00 p.m. CST (that’s 5:00 p.m. to 7:00 p.m. EST) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 (CST)/5:00 pm (EST): Marc Scribner, Research Fellow at the Competitive Enterprise Institute: Vehicle-to-Vehicle Communications;

4:30 (CST)/5:30 (EST): Leighton Steward, Chairman of Plants Need CO2: Global Warming and the Supreme Court;

5:00 (CST)/6:00 pm (EST): Slade O’Brien, Florida State Director of Americans for Prosperity: Why ObamaCare is Harming Florida; and

5:30 (CST)/6:30 pm (EST): Peter Roff, Contributing Editor at U.S. News & World Report: The IRS “Smidgeon” of Corruption Keeps Growing.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

January 31st, 2014 at 4:49 pm
Corporate Tax Reform: Don’t Waste This Crucial Opportunity
Posted by Timothy Lee Print

In his otherwise lackluster State of the Union address this week, President Obama stated to bipartisan applause that he’d like to lower America’s corporate tax rate and reduce the Byzantine array of loopholes in our code.  That policy is actually supported by leaders in both parties, including Speaker John Boehner, and the Republican and Democratic chairmen of the House and Senate tax-writing committees.

And as we recently noted, reform is necessary, given the complexity of America’s nearly three-decade old tax code.  The problem remains that Congress has been too timid to take the hard steps necessary to lower America’s corporate tax rate to 25% from 35% – which is the highest rate amongst all OECD nations.  Because of this anticompetitive rate, the United States is at a huge comparative disadvantage globally.

And CEOs have taken notice.

Several hundred corporations have unfortunately chosen to reincorporate abroad to dodge U.S. taxes in recent years.  While the practice is technically legal, the opportunity costs for the United States are huge.   Some 484 U.S. companies were bought by foreign companies in the first half of 2013, for a total of $43.6 billion, according to Thomson Reuters.  That provides a wake-up call that action on corporate tax reform is absolutely crucial.  President Obama called for a ‘year of action’ in this week’s address, and threatened to use his executive powers in a constitutionally dubious manner.

For tax reform, Congress needs to act swiftly to ride this rare bipartisan wave and introduce legislation that supports a fundamental overhaul of America’s tax code.  American-owned businesses lead globally in innovation and economic growth, and our tax reform should support their success, not drive it overseas.

January 17th, 2014 at 12:51 pm
Time to Fix the Corporate Tax Code, While Fleeting Bipartisan Consensus Exists
Posted by Timothy Lee Print

There is no better example of Washington’s dysfunction than the U.S. tax code.  With President Obama’s annual State of the Union Address less than two weeks away, discussion about how to fix our broken tax code is growing.  In particular, the House Ways & Means Committee released a video this week highlighting its problems, and some proposals about how to fix it.


The last time America’s tax code was overhauled was in 1986, under President Ronald Reagan.  Obviously, very much has changed since then, from the dot-com boom-and-bust, the rise of China as an economic powerhouse and the sub-prime mortgage crisis, just to name a few.  What’s more, the tax code continues to grow more complicated with each passing day.   According to House Ways & Means Committee research, more than 4,400 changes to the tax code have occurred in the last 10 years, amounting to about one change per day.  While other countries have been simplifying their codes and reducing rates, America’s tax burden continues to grow in scope and complexity.

While the fleeting political will do something still exists – even President Obama himself proclaimed, “Our corporate tax rate is too high” – action is urgently required.  The best solution is one that makes America more competitive globally and leads to economic growth.  America’s corporate tax rate currently stands at 35% – the highest in the world.  Accordingly, a proposal to lower that corporate rate, while broadening the base, will result in a simpler, fairer tax code that both sides of Congress can get behind.

In today’s Wall Street Journal, former Japanese Diet member Mieko Nakabayashi and former U.S. Deputy Assistant Secretary of the Treasury James Carter spell out in stark terms the need for reform and reduction of U.S. corporate taxes, now the highest in the industrialized world.  In particular, they highlight the alarming exodus of large corporations from America to more hospitable tax regimes with this statistic:

When the U.S. last cut its corporate tax rate in 1986, 218 of the world’s 500 largest corporations measured by revenue were in the U.S.  Today, that number is 137.  Similarly, the number of Japanese corporations in the Fortune Global 500 fell to 68 last year from 81 in 2005.  While there is no single explanation for the drop, Tax Foundation chief economist William McBride tells us:  ‘The common thread behind all of this is the U.S. corporate tax, which is the most punitive in the developed world.’”

We live in a period of unprecedented political polarization.  The need to reduce our corporate rate, however, has actually achieved bipartisan agreement, with Barack Obama himself proclaiming the rate too high.  Accordingly, the time is now to enact reduction and reform, lest America’s legacy of economic leadership deteriorate further.

January 16th, 2014 at 4:12 pm
Free Trade Negotiations Offer Opportunity to Improve Intellectual Property Protections
Posted by Timothy Lee Print

In our Liberty Update this week, we highlight the new 2014 Index of Economic Freedom, which itself highlights the critical importance of property rights and free trade in generating prosperity.  The facts, and that correlation, are simply beyond dispute.

On that note, current Trans Pacific Partnership (TPP) free-trade agreement negotiations provide a critical opportunity to upgrade intellectual property (IP) protections that have gradually become outdated since the landmark North American Free Trade Agreement (NAFTA) was signed two decades ago.  That was the expert conclusion of Mark T. Elliot, Executive Vice President of the U.S. Chamber of Commerce’s Global Intellectual Property Center, in testimony this week before the House of Representatives at a hearing entitled “NAFTA at Twenty:  Accomplishments, Challenges, and the Way Forward.”

At the time of signing, NAFTA intended to create the best levels of IP protection and enforcement…  It was a testament to how important IP was viewed by Mexico, Canada, and the United States.  However, as this was signed twenty years ago, this level of IP protection is now a very low bar in 2014.  In 2012, the Chamber released an International IP Index, a comprehensive review of the intellectual property environment in 11 key markets based on existing international standards and best practices.  The United States, the United Kingdom, and Australia all perform well in the Index…  Mexico and Canada, however, rank closer to the likes of Russia, Malaysia, and China.

In Mexico, however, we continue to see progress… and the business community has been working productively with the Mexican government.  In contrast, Canada’s relative low score is a result of wide-ranging IP problems including:  enforcement, weak on membership and poor ratification of international treaties, and significant problems with patent and copyright laws.  Canada is the largest trading partner for the United States… [making] it all the more bewildering to the business community at how substandard Canada’s IP system is.”

When NAFTA was signed, it was an idea ahead of its time.  And as former Clinton Administration Chief of Staff Thomas “Mack” McLarty noted a recent Wall Street Journal commentary, the results have been spectacular:

U.S. trade with Mexico and Canada has tripled to more than $1 trillion a year, supporting millions of American jobs.  The U.S. exported more last year to Mexico than to Brazil, Russia, India and China combined; and more to Canada, with 35 million people, than to the European Union, with 500 million…  NAFTA also opened the door for free trade agreements across Latin America, a catalyst for economic and political reforms.  Mexico was transformed from one of the most closed economies in the world to one of the most open, and it subsequently threw off decades of one-party rule.   Today, U.S. products make up 40% of the contents of goods imported here from Mexico (compared with 4% in goods imported from China).  An integrated market boosts exports and imports, and helps keep good jobs at home.”

Today, we face a perfect opportunity to improve upon NAFTA’s good thing.   As Mr. Elliot testified:

2014 will present many opportunities for the United States, Canada, and Mexico to further improve their IP environments…  In particular, all three countries are participants in the Trans Pacific Partnership (TPP) Agreement negotiations.  The TPP is being negotiated between 12 different countries, and it is essential that it include robust standards for IP protection, using the Korea-U.S. free trade agreement as a model and providing 12 years of regulatory data protection for biologic products.  We encourage the U.S., Canadian, Mexican, and all TPP negotiators to uphold their positions and protect IP from the efforts to weaken existing laws and norms.  The TPP provides the U.S., Canada, and Mexico the opportunity to stand shoulder-to-shoulder in support of strong IP protections, innovation, and access to the creations and inventions of the 21st century.  A TPP agreement that includes a high-standard IP chapter is good for jobs and good for international trade.  The TPP will also allow Canada to raise its IP standards, promote innovation, and bolster its growing economy.  2014 should be the year when the North American neighbors work together to improve each other’s IP environments and the IP environments of countries around the world.”

Free trade and strong IP rights are critical components of economic freedom, which the latest Index of Economic Freedom shows is causally related to a nation’s prosperity.  America, Canada, Mexico and the other negotiating nations face an important opportunity in 2014 to improve upon both, which will boost our prosperity at a time when we desperately need it.