Archives for March 2013

Maybe We Should Return to Calling Politics “Civics”

By Joel Anderson | 03/29/2013 | 11:04 AM

This column presents a different approach to political and public affairs involvement for the leaders of the businesses, and it is an approach which is as historic as the ancient Greeks and as authentic as today’s voter education programs.  The approach I am suggesting is to reclaim the no longer used word of “Civics”   Civics, according to my Wiki reference, “ is the study of the theoretical and practical aspects of citizenship, its rights and duties; the duties of citizens to each other as
members of a political body and to the government

I suggest this reformation because too often fear is used to motivate business owners and leaders to participate in elections, voter education and advocacy efforts.  The common phrase is “you are at the table or on the menu”, which is true as a statement if all political power consists of a tug of war between two competing, opposing interests, and it is also deeply cynical. 

The American participatory democracy is our gift to the world, and it is a participation that includes all who are willing to invest in the “duties of citizenship”. This fact says you participate because it is good for the country, good for other members of society, good for yourself and your business and good for the government.

To be granular, imagine if the only purpose of IWLA advocacy were to say, “the other guys and gals are ones you need to pursue.”  The IWLA strategy would be to outrace our competitor and not worry about the bear.  Yet, that behavior is not civics.  It is self-serving and leads to bad laws, bad regulations and mistrust, and we had better hope there never comes a day when it is just us against the bear.

The IWLA advocacy is to practice civics.  We do believe it is our responsibility to educate elected officials and their staffs on the impact to the supply chain of proposed legislation and regulations.  We don’t mind being called “a pressure group, big business, corporate mouthpieces, etc.” because our counter is we are engaging in the American duty and responsibility of civics, and civil discourse must be inclusive of the opinions of business leaders. We have subject matter experts, we care about our country and we want the enactment of laws and regulations that provide for the common good.

Business leaders should participate in civics, not out of fear, or from a defensive position; we should participate because it is our birthright as citizens and because it is our duty to this great country.

Watch the Tax Reform - A C Corp v. S/LLC fight in the works

By Joel Anderson | 03/17/2013 | 9:19 AM

The great struggle in the reform of the US Tax Code lies with the current disparate rates and treatment of C corporations as compared to the “pass through” corporations, S and LLC’s.  The recommendations divide strongly on R v D lines, and, as a result Senate versus House. 
Each party has a different means of addressing the pass through corporation and those differences will be the subject of this column.

For reference, I recommend you read the publication, “Taxing Business Through the Individual Income Tax” by the Congressional Budget Office released December 2012. This publication outlines a process that with the LLC and S corporations being taxed at the same method as C Corporations, an additional $76 Billion would be received by the U.S. Treasury.  In essence, it would extend the double taxation inherent in C corporations to partnership and S corporations.

Republican Camp, Chairman of the House Ways and Means Committee clearly sees the need to maintain the single taxation of S and LLC corporations.  His Ways and Means Committee is soliciting comments from stakeholders on two options: one that revises current rules and a second that replaces current tax rules with a new unified pass-through regime.

Camp has said “More Americans get their paycheck from small businesses than any other type of business or government. If we really want to strengthen our economy and put more money in the pockets of American workers, we must fix the Tax Code and how it treats small businesses. In
addition to all the complexity these Main Street businesses face, Washington currently taxes them at top rates nearly 10 percentage points higher than their corporate counterparts.”

Senator Baucus opened his hearing into tax reform with a written statement that included the following language: “Pass-throughs don’t pay corporate taxes; their business income is taxed at individual income tax rates. However, C-corporations get taxed on income, and then — when that
money is distributed in dividends to shareholders — it is taxed again. While a valuable tool for small businesses, we should examine if the use of pass-throughs have disrupted the level playing field for larger non-public companies and their public competitors. . . One of my main goals of tax reform
is to make the system more competitive, but also keep it fair. Our hearing this morning will examine the difference between corporate and pass-through taxation and whether current rules strike the right balance in our diverse economy.”

For IWLA members and logistics companies, please keep a close eye on tax reform.  The “pass
throughs” are the major focus. 

As a personal and political aside, much of the intensity of the fight of how to obtain more revenues occurs because of a federal government bias toward spending versus thrift.  If we could reduce the spend of government we could reform taxes, eliminate the high marginal tax rates on C corporations and fix any disparate incentives between the C and the pass throughs.      

On Service Taxes and the Logistics Industry

By Joel Anderson | 03/13/2013 | 2:22 PM

Two states (Ohio and Minnesota) have proposed extending the state sales tax to services, services which include the supply chain.  What was striking to me was the lack of historical research and analysis performed by the proponents of these taxes.  The proponent’s argument is the belief that extending the tax to services broadens the tax base, enabling increase state revenue with little taxpayer pain.  The service tax history records great pain, great failure and eventual repeal.

The history is readily available with a simple internet search: Service taxes on consumers and business to business transactions are rare in the US and for good reason.  Four states (MI, MA, FL and MD) enacted and repealed.  California repealed its service tax on for-hire transportation in 1973.  The history and yield of these taxes demonstrate they were oversold by their proponents, produced more controversy than yield and caused voters once again to speculate as to the logical process of legislators.

Economic prejudice lies at the heart of business to business and business to consumer services tax.  Private trucking would not be covered because no revenue exchanges hands (unless you separate the private trucking from the owner of the cargo).  As a result, for hire motor carriers would have a tax not imposed on the trucks of the same size, same weight, same fuel usage traveling the same highways.  Legal services provided in house are exempt.  Legal services provided by outside counsel are taxed.  Insourced logistics services: exempt; outsourced logistic services: taxed.

The competitive consequences are perverse and obvious.  Tax policy is intended to pick winners and losers in terms of enterprise composition, structure and size. As a social/tax policy, a services tax works against the creation of small, specialty business enterprises.  A service tax encourages a firm to vertically integrate every aspect of the company versus investing in its comparative economic advantage and outsource to other its non-core competencies.

All of these facts are known.  Yet, bad ideas to fund government continually resurface.  A great part of our job at IWLA is to use the facts of history and engage in education and advocacy on a continual basis.  This is a constant job, as Ohio and Minnesota demonstrate.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Joel Anderson

Joel Anderson

Joel D. Anderson is president and CEO of the International Warehouse Logistics Association (IWLA). Based in Des Plaines, Ill., IWLA is the 120-year-old association of the warehouse-based third-party logistics industry, with 500 members in the U.S. and Canada. Before joining IWLA, Anderson spent 28 years at the California Trucking Association, the last 13 as executive vice president and CEO. An economist by training and profession, Anderson was also a past board member of Cascade Sierra Solutions. He is a frequent speaker before supply chain industry groups.


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