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Archive for the ‘Taxes’ Category

To get past those cute but misleading TV ads, and arrive at a better understanding of just how the insurance industry really works, you need to understand first, that insurance companies are in the business to make money for their stockholders.

That’s it. There is no second. The policyholder is never taken into consideration when there is a claim. The mindset for the insurance company, no matter what name or logo is on its letterhead, is driven by one overriding question: How can we get out of this obligation with the least cost to shareholders?

It matters not one whit whether it is life, property & casualty, auto, or health insurance. The company’s very purpose for existing is not to see that policyholders are made whole but how the payout on claims may be minimized so as to inflict the least monetary damage to the company’s bottom line.

Do you think that life insurance claim that was slow paying off was simply to investigate whether or not the beneficiary had a part in the insured’s death? While that may be a part of it, particularly in cases of suspicious circumstances (such as falling off a cliff during a hike in Bryce Canyon), there may well be other factors involved, such as delaying payment as long as possible in order to accrue as much return on the investment of premiums as possible.

You didn’t really think the companies just leave that money lying around waiting for the insured to die, did you? No, it’s invested heavily in all sorts of things in order to earn money for the company.  https://www.paxforpeace.nl/stay-informed/news/insurers-invest-nearly-7-billion-in-controversial-arms-trade

And it’s your money they do it with.

Did you ever wonder why your auto insurance company would suggest a particular body shop for repairs to your car after an accident? Why not the body shop of the dealer from whom the car was purchased? It could be—and often is—because the recommended body shop uses what is called “after-market” parts for repairs. That means the parts are generally inferior to those of the dealership’s original parts and can diminish the resale value of your vehicle. Did you ever notice that after repairs at some of those shops, the quarter panel replacement no longer fits flush with the original undamaged part of your car? Or you have air leaks (or worse, water leaks) around the replacement door that weren’t there before? That would be the likely result of after-market parts. http://www.repairerdrivennews.com/2015/02/12/anderson-cooper-360-piece-attacks-insurers-for-steering-parts-video/

You’re not happy, but your insurance company is ecstatic. https://louisianavoice.com/2014/05/08/insurers-auto-repair-tactics-only-part-of-problem-jindal-old-firm-mckinsey-co-coached-katrina-on-claims-delays-denials/

And who hasn’t experienced battles with health insurance companies that refused to cover a certain type of treatment because it’s considered “experimental.” Now, because of changes in the Office of Group Benefits instituted by the Jindal administration, state retirees who move out of state may find themselves no longer covered because their physicians are “out of network,” meaning they are non-participants in OGB’s coverage plan. Sorry, we don’t have any doctors in Arkansas or Mississippi who are part of the plan. https://louisianavoice.com/2014/08/25/louisianavoice-learns-of-jindal-plan-to-force-state-retirees-out-of-ogb-by-raising-members-premiums-cutting-benefits/

But by far, the most subtle method of claim manipulation is in the property & casualty field, namely your homeowners and flood insurance programs.

As we wrote in April, insurers will prepare repair estimates at two costs, depending on whether the damage to a home was caused by wind or flood. Repair estimates generally run much less on wind damage claims than for floods—even though the same material is used on each claim.

That is because the companies themselves are on the hook for any wind damage while flood damage, if covered at all, is the responsibility of the National Flood Insurance Program (NFIP), claims for which are paid by the federal government, i.e. taxpayers.

But that’s not to say Allstate is averse to handling flood claims. Quite the contrary. Allstate, in fact, has had an arrangement with NFIP under which NFIP Allstate is paid for handling flood claims.

Accordingly, if Allstate found itself on the hook for wind damages, it would use a lower formula for paying claimants but if it determined the damages were caused by flooding, a second, more expensive separate formula would be employed.

In one example we found, damage was determined to be from wind and Allstate paid 83 cents per square foot for removal and replacement of drywall (sheetrock). In another claim from the same storm and in the same part of the state, it was determined to be flood damage and that same dry wall removal and replacement—paid for by American taxpayers—was $1.53 per square foot, a difference of 70 cents per square foot. Painting that drywall cost Allstate 35 cents per square foot for the wind-damage claim but cost NFIP (taxpayers) 58 cents per square foot for the flood damage claim.

That was not an anomaly. In comparing two 2011 claims from Tropical Storm Lee in southwest Louisiana, LouisianaVoice found that damage to one home was determined to be from wind. The cost of removing and replacing drywall (sheetrock) was estimated at $1.75 per square foot and painting of the drywall was estimated at 55 cents per square foot. That, of course was the cost to the insurance company, in this case, Colonial.

A second claim only a few miles away, also the result of Lee, was also for a home covered by Colonial. In this case, the damaged was determined to be the result of flooding, so the claim now belonged to NFIP. The estimate to remove and repair drywall for this home was $2.47 per square foot and the cost of painting that same drywall was estimated at 87 cents per square foot.

Assuming an area of 1000 square feet, you’re looking at a cost differential of $720 for removal and replacement of the drywall and a difference of $320 for painting, or an overall cost increase of $1,040 for repairs to a flood-damaged home compared to the wind-damaged structure.

By the time, other costs are factored in—costs for such things as replacing and painting molding, baseboards, doors and door frames, replacing electrical outlets and door hardware, removing and replacing windows and window trim, painting window frames, replacement of carpeting and/or wood flooring, the difference between a wind and a flood claim can be enormous.

And that doesn’t even include one other factor that goes into all estimates—overhead and profit (O&P) for the contractor. There has to be a profit for the contractor. That’s understandable; no one would expect him to repair your house for nothing.

But like the repairs themselves, the percentage of overhead and profit has a wide variance, depending on whether or not the damage is determined to be from wind or flooding.

LouisianaVoice has obtained three boxes of claims documents that not only reflect damning evidence of NFIP gouging on the costs of specific repairs, but in the allowance for contractor O&P, as well.

Built-in allowances for O&P for wind claims paid by the individual companies range around 20-29 percent. But for flood claims, paid by the American taxpayer through the NFIP, that O&P can range from 48 to 51 percent, according to documents in our possession.

For example, going back to 2005, O&P for one wind-damage claim was estimated at 28 percent for a Mississippi wind claim from 2005’s Hurricane Katrina. But flood damage from the same hurricane resulted in contractor O&P of 51 percent. Both estimates were done by Allstate.

Wind damage from Hurricane Ida in Texas in 2009 resulted in a claim in which contractor O&P was 29 percent, according to Allstate damage estimates. But when damage from that same storm was determined to be from flooding, the contractor O&P shot up quickly, to 49 percent, Allstate documents show.

But Allstate and Colonial were not the only practitioners of such claim manipulation—not by a long shot. Here’s a story about how the game was played in the same manner by STATE FARM.

Project these tactics over a large, densely-populated area like that destroyed by Hurricane Katrina in Louisiana and the Mississippi Gulf Coast, and at least one estimate of the increased cost from “padding” both specific damages and contractor overhead and profit has taxpayers in the two states being ripped off to the tune of approximately $10 billion.

And while strict insurance fraud laws are on the books that could result in a prison sentence if you so much as included a non-existent flat screen television on your claim, there apparently is no one minding the store to guard against raping the taxpayer-funded NFIP.

And as long as the insurance companies continue to pour money into the campaign coffers of members of Congress, state legislators and regulators, you can be sure there will never be.

Perfect.

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There was a popular game about 40 years ago called “Whack-a-mole.” (For all I know, it may well still be around.) Anyway, the object of the game was for a player to “whack” a rodent with a rubber mallet each time it appeared out of one of five holes. The problem was each time a mole was “whacked”, it invariably popped up again from one of the remaining four holes.

So it is with certain news stories that just when you think you’ve written about all there is to say on the subject, up pops another angle to pursue.

This time though, two separate—and seemingly unrelated—stories that have been covered extensively in the past by LouisianaVoice have now converged to warrant a fresh look at old news.

Before I go any further, I should acknowledge the ever-sharp eyes of my bronchitis-infected friend and Ruston High School classmate John Sachs (Class of ’61). It is he, after all, that brought an otherwise routine local news story in the Farmerville Gazette to my attention. (I guess I’m going to have acquiesce and give him that honorary Deputy Ace Reporter badge he’s been clamoring for.)

Eagle-Eye John called me about efforts to hire a private prison management company to take over management of the 380-bed Union Parish Detention Center. You may recall that LouisianaVoice had a couple of stories about the facility last year, on MAY 10 and MAY 31 about a convicted rapist who was allowed out of his cell to rape a female prisoner. Twice.

That incident, deplorable as it certainly was, is not what this is about, however.

The Gazette story recounted the reason for the decision by LaSalle Corrections to decline Union Parish’s offer. Those reasons dealt with the potential shortage of prisoners if Gov. John Bel Edwards is successful in reducing the number of state inmates and the financial impact of such a move.

Another factor, said LaSalle Chief of Operations Johnny Creed, was the size of four other facilities in north Louisiana managed by LaSalle: Richwood Correctional Center (1,129 inmates), Jackson Parish Correctional Center (1,285), LaSalle Correctional Center (785) and Catahoula Correctional Center (835).

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And then Creed said the thing that caught Sach’s eye, prompting him to call me with his croaking voice and rattling cough: “As small as (Union Parish Detention Center) is, we would need to bring our work release inmate that work for Foster Farms from our Richwood facility.”

Wait. What?

Foster Farms has 100 work release inmates working at its cotton-pickin’ chicken-pluckin’ plant in Farmerville?

Isn’t this the same plant that Bobby Jindal, with the support of State Sen. Mike Walsworth (R-West Monroe), gave $50 million to in order to get Foster Farms to take over the plant from Pilgrim’s Pride back in 2009?

Wasn’t Foster Farms supposed to provide up to 1,100 jobs with that $50 million?

Does Foster Farms get a $2,400 tax credit for each inmate it employs in the work release program?

And aren’t work release programs something of a cash cow for sheriffs and private prisons farming out prisoners to work for just a smidgen more than minimum wage?

Yes,

Uh-huh.

Yep.

Hell, yes.

You mean to tell me Foster Farms gets a $240,000 tax credit (that’s credit, not a deduction, meaning that’s $240,000 income on which Foster Farm pays no taxes) for hiring 100 prisoners at $7.75 per hour (about 60 percent of which goes to the local sheriff), jobs that should be going to local folks?

Very perceptive, Grasshopper.

This, folks, is yet another lingering smell that hits our olfactory like a pair of dirty socks but which we affectionately call the Jindal Legacy.

The work release program is such a golden egg that sheriffs all over the state, reading the tea leaves shaped like dollar signs, rushed to build their own programs, complete with barracks and vans for workers. And to make sure the beds stayed filled, which is the only way they can get the maximum state dollars, the accommodating Louisiana Sheriffs’ Association lobbied (read parties, booze, women and campaign contributions) Louisiana’s law and order legislators to be more law and order-oriented and pass stiffer penalties for even the most insignificant crimes.

To see just how lucrative this could be for a small parish like Union, let’s run the numbers.

State law allows the sheriff or operator of the private prison to take up to 62 percent of a prisoner’s earnings. One hundred prisoners working 40 hours per week for 50 weeks per year at $7.75 per hour. That comes to $1.55 million earned by the prisoner.

The Union Parish Detention Center is unique in that it is the only such facility in the state in which neither the sheriff nor a private company has operational controls. It is operated by committee comprised of a member of the Union Parish Police Jury, the district attorney and parish police chiefs. Lincoln Parish at one time was run in the same manner but it is now run by the sheriff.

If the parish takes “just” 60 percent, that’s $930,000 per year for the sheriff/operator. And that’s over and above the rate the state pays the sheriff/operator to house the prisoners. More than six years ago, LOUISIANA VOICE published a story that examined some of the housing contracts between the state and several Louisiana parishes.

Despite the money generated by the work release program, the Union Parish Detention Center has continued to lose money. That is the reason for the unsuccessful attempt to lure LaSalle into managing the center.

We followed our December 2010 post with a story in AUGUST 2015 that illustrated the abuses that can occur when someone with the right connections can use that advantage to manipulate a system like work release for his own monetary gain.

Jail operators, be they sheriffs or private corporations, love the money the work release program brings in to augment that paid by the state for housing the prisoners.

And businesses like Foster Farms love being able to hire 100 prisoners at near-minimum wage and receive a $240,000 tax credit in the process.

It’s a win-win for everyone but the taxpayers.

So, bottom line: Thar’s gold in them thar jails.

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Good Jobs First, a Washington, D.C.-based national policy resource center, has released an extensive study entitled Megadeals: The Largest Economic Development Subsidy Packages Ever Awarded by State and Local Governments in the United States.

Louisiana, with giveaways totaling $3,169,600,328, ranked sixth behind New York, Michigan, Oregon, New Mexico and Washington in the total dollar amount of so-called megadeals, the report shows, $65 million more than much-larger Texas, which had $3,104,800,000.

Louisiana, with 11, tied with Tennessee for fifth place in the number of such budget-busting deals behind Michigan’s 29, New York’s 23 and 12 each for Texas and Ohio.

The report, authored by Philip Mattera and Kasia Tarczynska, is somewhat dated in that it was published in 2013 but it still offers some valuable insights into how states, Louisiana in particular, was more than willing to give subsidies worth millions upon millions of dollars to corporations in the name of new jobs that rarely, if ever, materialized.

The subsidies included in the report, it should be noted, do not include tax incentives, which is another type of inducement. Accordingly, Wal-Mart, which has received more than $1.2 billion in total taxpayer assistance, is not included because its deals were worth less than $75 million each. Good Jobs First has documented giveaways to Wal-Mart in a separate report.

The single biggest example of corporate socialism contained in the report is the 30-year discounted-electricity deal worth an estimated $5.6 billion given by the New York Power Authority to Alcoa. In all, 16 of the Fortune 50 corporations (excluding Wal-Mart) were included as recipients of the report’s megadeals.

The biggest single deal for Louisiana—and the fifth-biggest overall—was the $1.69 billion subsidy in 2010 for Cheniere Energy in the form of property tax abatements and other subsidies for the Sabine Pass natural gas liquefaction plant. That project, the report said, created 225 new jobs—a cost to the state of more than $7,500 per job, the largest single cost-per-job project contained in the report.

Shintech, received a 2012 deal worth $187.2 million in subsidies to the company. That project was said to have created 50 new Louisiana jobs at a cost of $3,744 per job.

One of the biggest recipients of governmental largesse since the year 2000 has been General Motors with more than $529 in subsidies nationwide. Yet, it was General Motors who pulled up stakes pulled up stakes in 2012, leaving upwards of 3,000 former employees without jobs.

The megadeals cited by Good Jobs First in its report were dwarfed, however, by the seemingly insane subsidies given to banks and investment firms since 2000.

Of the top 21 recipients of bailouts by the federal government, the smallest was that of a company most probably never heard of: Norinchukin Bank, a Japanese cooperative bank serving more than 5,600 agricultural, fishing and forestry cooperatives from its headquarters in Tokyo—and it received $105 billion (with a “B”).

That’s nothing when compared with the heavy hitters. In all, 12 foreign corporations received loans, loan guarantees or bailout assistance from a generous federal U.S. government, led by the $942.7 billion received by the United Kingdom’s Barclays.

But Barclays ranked only fifth in terms of subsidies received in the form of federal bailouts:

Consider, if you will, the top four:

  • Bank of America $3.5 trillion;
  • Citigroup $2.6 trillion;
  • Morgan Stanley $2.1 trillion;
  • JPMorgan Chase $1.3 trillion.

All of this, of course, was the direct result of deregulation pushed by a congress whose members were supported by generous campaign contributions from CEOs, officers and stockholders of those very firms.

And yet we have elected officials—and citizens—who dare to rail against so-called welfare cheats, the costs of illegal immigrants, and the costs of health care for the poor.

These are the same people who wring their hands at the cost of social programs yet justify the expenditure of billions of dollars per day in military contracts to campaign contributors to support wars with no apparent objective (other than political payback) and with no end in sight.

These are the same ones who look us in the eye and tell us they support free market capitalism.

But pure capitalism doesn’t give away the public bank in order to entice some company that was probably coming to your state anyway. After all, if Louisiana truly has all these rich oil and gas deposits (and it does), does anyone really believe the oil and gas companies are going to locate their refining plants and pipelines in Idaho in order to mine for Louisiana’s resources?

You can check that box “no.”

What is the logic behind subsidies to lure an industry just so it can exploit cheap labor? Wouldn’t it be smarter to invest in public education and higher education so that our citizens might be capable of demanding higher wages for their knowledge and skills? Why would we opt to perpetuate the cycle of poverty by sacrificing taxpayer dollars to the advantage of some faceless corporation who cares not one whit for our citizens?

Free market capitalism doesn’t reward corporations with these kinds of subsidies while the recipients are simultaneously sending job oversees, depriving Americans of job opportunities.

Pure capitalism would dictate that each and every business in America succeed or fail on its own merit, without having to depend on governmental handouts.

Anything else has to be considered as something akin to (gasp) ….socialism.

But insisting on capitalism for the poor and socialism for corporations and the wealthy is a formula for disaster if ever such formula existed. The two philosophies are simply not compatible

And you will never get that lesson from the disciples of Ayn Rand.

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Less than three months ago, on June 24, Gov. John Bel Edwards signed an executive order in which he mandated more scrutiny over how significant industrial property tax breaks are doled out to manufacturers. http://www.nola.com/business/index.ssf/2016/06/john_bel_edwards_signs_executi.html

Theoretically, the order gave local governments that would lose out on property taxes a say in approving exemptions for heavy industry, and companies applying for five-year renewals of five-year tax breaks totaling $11 billion would be required to prove the breaks would create and/or retain jobs.

But the Commerce and Industry Board may be trying an end run around Edwards’ order.

The board waited until late Friday afternoon (one of Bobby Jindal’s favorite tactics of making announcements as the week’s news cycle winds down) to give public notice of a Monday board meeting during which it is scheduled to vote on redirecting millions in local property tax revenue from disaster-affected parishes to corporate tax exemptions, without any input from the local bodies losing that revenue.

One of the exemptions to be voted on Monday would “renew” an exemption for Georgia Pacific, a Koch brothers company, costing East Baton Rouge $1.9 million in property taxes.

Exemptions are costing $16.7 billion in lost property tax revenues to local governments, schools and law enforcement, according to the nonprofit Together Louisiana, which will hold a press conference to oppose the proposed exemptions Monday at 9:15 a.m. prior to the 10 a.m. board meeting. http://togetherbr.nationbuilder.com/about

The board meeting will be held in the LaSalle Building at 617 North Third Street in Baton Rouge. The Together Baton Rouge press conference will be held in front of the LaSalle Building.

The exemptions being voted on at Monday’s meeting are being considered in direct violation of Governor John Bel Edwards’ Executive Order issued, and “effective immediately,” on June 24th, 2016, which stated that no future industrial tax exemptions would be approved without the consent of the local governmental bodies — school boards, sheriffs, municipalities and parish governing authorities — whose tax revenue was at stake.

No public hearings, public deliberations or local votes have taken place on any of these proposals, despite the clear requirement of the Edwards executive order. Here is the full agenda for Monday’s board meeting: http://www.opportunitylouisiana.com/docs/default-source/boards-reports/MeetingCategory/louisiana-board-of-commerce-and-industry/9-12-16-c-amp-i-board-agenda.pdf?sfvrsn=0

 

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Regular readers of this site know our disdain for the undue influence of lobbyists and special interests over lawmakers to the exclusion of the very voters who elected those same lawmakers to represent them and their best interests.

Our opposition to political decisions made with priority given to campaign contributions over what is best for the state is well-known—and uncompromising. Money should have no place—repeat, no place—in political decisions.

Unfortunately, we know that is not the case. Politicians for the most part, are basically prostitutes for campaign funds and those who choose to remain chaste usually find themselves at a serious disadvantage come election time.

To that end, you can probably look for State Rep. Jay Morris (R-Monroe) to attract strong opposition when he comes up for re-election in 2019. And that opposition, whoever it might be, is likely to have a campaign well-lubricated by the Louisiana Association of Business and Industry (LABI), the Louisiana Chemical Association, and the oil and gas industry.

At the risk of belaboring the obvious, we have gone on record on numerous occasions as saying the voters are merely pawns to be moved about at will by big business in general and the banks, pharmaceutical companies, Wall Street and oil companies in particular. It is their money that inundates us with mind-numbing political ads that invade our living rooms every election year telling us why Candidate A is superior to Candidate B because B voted this way or that way and besides, good old Candidate A has always had the welfare of voters uppermost in mind.

The presence of that influence was never more clearly illustrated than in Tyler Bridges’ insightful story in Friday’s Baton Rouge Advocate. http://theadvocate.com/news/15225624-78/la-legislative-staffers-sort-out-changes-added-at-the-last-minute

In the very first paragraph of his story, Bridges wrote that a secret deal between Senate President John Alario (R-Westwego), House Speaker Taylor Barras (R-New Iberia) and lobbyists for LABI and the Louisiana Chemical Association.

We won’t bother to re-hash the details of that meeting and the agreement finally reached just before the closing minutes of the recent special session. You can read the details in the link to the Bridges story that we provided above.

But suffice it to say had it not been for Morris digging his heels in and threatening to kill his own bill when he learned of a manufacturing tax break that had been added to his bill, HB 61 that aimed at eliminating exemptions and exclusions on numerous sales tax breaks. Though a Republican, Morris feels that big business isn’t paying its fair share of taxes.

“I was not aware of the deal,” Bridges quoted Morris as saying. “I was not invited.”

Neither, apparently, were any spokespersons for consumers, organized labor, teachers, or the citizens of Louisiana.

Oh, but you can bet LABI President Steve Waguespack was invited to a meeting in Alario’s office earlier in the day, as was Louisiana Chemical Association chief lobbyist Greg Bowser.

Given that, we would like to ask Sen. Alario and Rep Barras why no one representing the people were invited to that little conclave. And don’t try to tell us that the Senate President and House Speaker were representing the people. You were not. You were representing the vested interests of the chemical industry and big business. Period.

Sen. Alario, Rep. Barras: the people of Louisiana are far more deserving of a place at the table in some furtive backroom meeting than LABI and the chemical association.

Either all factions are invited in or no one is. The playing field should be level.

By not excluding lobbyists or by not inviting those on whose shoulders are placed the greatest burden, the ones who placed you in office, you have not just failed at your job; you have failed miserably.

Our late friend C.B. Forgotston would have said of the meeting which produced that secret deal: “You can’t make this stuff up.”

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