Features

Post image for Taxable Bitcoins: Property or Money?

Is Bitcoin currency or property? It depends on which parts of the federal government you ask. Last week the Internal Revenue Service (IRS) announced that bitcoins are taxable and how it would implement such taxation. While the rule could have been much worse, the manner in which the IRS went about doing so brings up many more legal questions.

In context, the fluctuating exchange rate between bitcoins and dollars does cause the cryptocurrency to behave more like property in terms of valuation. The IRS merely took its explanation on “virtual currencies” from the current definition of taxable bartering:

Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise.

This is clearer when seeing the IRS’s answer to how Bitcoin values must be calculated for tax purposes:

…A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.

This classification of Bitcoin as non-currency for tax purposes isn’t that new. Back in January 2014, Sweden’s Tax Agency moved to classify bitcoins as assets rather than currency itself. In Australia, this month, the tax authority announced Bitcoin transactions person-to-person would be subject to a “goods and services” tax, similar to the IRS classification, as well as a capital gains tax for profits made through Bitcoin. It is not unusual for bitcoins to be treated as non-currency for tax purposes.

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Post image for Why Is Obama’s Report to Congress on the Benefits and Costs of Federal Regulation Delayed?

In April 2013, the White House Office of Management and Budget (OMB) issued its Draft 2013 Report to Congress on the Benefits and Costs of Federal Regulations, which covered rules and regs issued in fiscal year 2012. The final 2013 edition never appeared; now, the Draft 2014 edition is due. I’m not holding my breath.

President Obama claimed again as recently as February 2013 that “this is the most transparent administration in history.”

But getting this important document, as well as the oft-delayed Unified Agenda of Federal Regulatory and Deregulatory Actions, is like pulling teeth. Part of the recent House-passed ALERRT Act addressed the Agenda’s tardiness; it’s naturally stuck in the Senate. (The Agenda is an obscure but important document wherein federal departments and agencies reveal their priorities along with disclosing recently completed rules.)

The 2013 Draft Report revealed that costs of major rules jumped under Obama; The 14 rules added during the fiscal year ended September 2012 imposed costs of from $14.8 billion to $19.5 billion (that’s in the 2001 dollars OMB uses, which look better than 2012 dollars).

The OMB breakdown incorporates only benefits and costs of a handful of major rules which the OMB or agencies have expressed in quantitative and monetary terms. It omits numerous categories and cost levels of rules altogether, and rules from independent agencies are entirely absent.

OK, that’s worrisome, but normally, final reports look fairly identical to draft reports, so the reluctance to release it is unclear. We presumably already have the “bad news.” In any event, normally by April OMB has issued the year’s Draft Report, as can be seen in the list below. There were two big exceptions: one during Obama’s first year, one during George W. Bush’s last.

April is upon us, and without the final 2013 report, it’s not looking likely that the Draft 2014 we need to see is imminent. Regarding final reports, they always appeared by year-end up through 2005. Since then, apart from 2010 and 2011, a given year’s report hasn’t appeared until the following year. But they have only been this late twice (in 2012 under Obama, and in 2007 under Bush). Even when final reports were delayed into the subsequent year, we usually had them by January.

It should be adequate that regulation is allowed to grow without much restraint; the lack of timely disclosure of the relative handful of rules that get scrutiny in the only formal report on regulatory costs is too much.

Here is a list of Draft and Final reports’ dates of appearance since 2002.

Date Draft Final
2014 Due Now n/a
2013 April Overdue
2012 March April 2013
2011 March June
2010 April July
2009 September January 2010
2008 September January 2009
2007 March June 2008
2006 April January 2007
2005 March December
2004 February December
2003 February September
2002 March December

Post image for Ryan FY 2015 Budget Calls for Transportation Funding Rationalization

House Budget Committee Chairman Paul Ryan, R-Wisc., released his FY 2015 budget today. In just three pages, he calls for surprisingly sensible reforms to federal transportation programs. Unlike the Obama and Camp budgets — which I earlier criticized for continuing trust fund bailouts and merely kicking the can down the road — Ryan makes an attempt to fix the Highway Trust Fund’s revenue/outlay imbalance by refocusing transportation funding on core programs, while allowing states more flexibility to experiment with self-funding and -financing mechanisms.

As Ryan notes:

The budget recommends sensible reforms to avert the bankruptcy of the Highway Trust Fund by aligning spending from the Trust Fund with incoming revenues collected. The budget also includes a provision to ensure any future general-fund transfers will be fully offset, while at the same time providing flexibility for a surface-transportation reauthorization that does not increase the deficit. The budget includes a reserve fund to provide for the adjustment of budget levels for consideration of surface-transportation legislation, as long as that legislation is deficit neutral.

In addition, Ryan recommends the following positive transportation policy changes:

  • Eliminate Amtrak’s billion-dollar-plus annual subsidy;
  • Reduce the Transportation Security Administration’s outlays; and
  • Eliminate the Essential Air Service.

With highway bill reauthorization around the corner, it is great to see some real positive reforms being put on the table. Many free market transportation advocates would certainly like to see more, but we need to start somewhere, and Ryan’s budget appears to be that starting point.

Post image for CEI’s Battered Business Bureau: The Week in Regulation

There was no Bureau post last week since I was out of the country. Here are the up-to-date numbers; it was very much business as usual while I was away.

On to the data:

  • Last week, 64 new final regulations were published in the Federal Register. There were 77 new final rules the previous week.
  • That’s the equivalent of a new regulation every 2 hours and 30 minutes.
  • So far in 2014, 730 final regulations have been published in the Federal Register. At that pace, there will be a total of 3,042 new regulations this year. This would be the lowest total in decades; this will likely change as the year goes on.
  • Last week, 1,938 new pages were added to the Federal Register.
  • Currently at 17,827 pages, the 2014 Federal Register is on pace for 74,280 pages, which would be the lowest total since 2009.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. 10 such rules have been published so far this year, one of them in the past week.
  • The total estimated compliance costs of 2014’s economically significant regulations currently ranges from $1.05 billion to $1.34 billion. They also affect several billion dollars of government spending.
  • Sixty-nine final rules meeting the broader definition of “significant” have been published so far this year.
  • So far in 2014, 158 new rules affect small businesses; 24 of them are classified as significant.

Highlights from selected final rules published last week:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

Post image for Why and How I’m Celebrating Human Achievement Hour

“Better to light one incandescant bulb than curse the darkness”

Tonight is Human Achievement Hour, a time to celebrate human progress and the market institutions that facilitate and protect it. It’s also a time to laugh at the regressive ideology that implores us to turn out the lights to honor the Earth. Hence the wonderful acronym for our cheerful occasion: HAH!

Our friends at CFACT nail the contrast between our event and the other team’s when they proclaim: “It’s always Earth Hour in North Korea.”

Earth Hour CFACT

HAH is an alternative and antidote to Earth Hour, the premise of which is that carbon-based energy is bad for people and the planet. That’s about as wrong-headed about the big picture as one can get.

Carbon energy supports all the technological advances that sustain and improve a world of seven billion people who on average live longer, healthier, and with greater access to information than the privileged elites of former ages.

Fossil fuels have been and remain the chief energy source of what Cato Institute scholar Indur Goklany calls a “cycle of progress” in which economic growth, technological change, human capital formation, and freer trade co-evolve and mutually reinforce each other. Progressive civilization is the very context of modern life. It is the most valuable of all public goods. Without carbon energy, humankind would be dramatically smaller, poorer, and sicker.

The fundamental contribution of carbon energy to social progress is reflected in the strong correlation between carbon dioxide (CO2) emissions, per capita GDP, and population.

Global Progress 1760 - 2009 smallest

A survey by the National Academy of Engineers identifies 20 engineering achievements that made the greatest improvements in the quality of human life during the 20th century. Number One is electrification. All the others presuppose electrification either for their manufacture, operation, or mass production.  Here’s the list as presented on About.Com:

  1. Electrification – the vast networks of electricity that power the developed world.
  2. Automobile – revolutionary manufacturing practices made the automobile the world’s major mode of transportation by making cars more reliable and affordable to the masses.
  3. Airplane – flying made the world accessible, spurring globalization on a grand scale.
  4. Safe and Abundant Water – preventing the spread of disease, increasing life expectancy.
  5. Electronics – vacuum tubes and, later, transistors that underlie nearly all modern life.
  6. Radio and Television – dramatically changed the way the world received information and entertainment.
  7. Agricultural Mechanization – leading to a vastly larger, safer, less costly food supply.
  8. Computers – the heart of the numerous operations and systems that impact our lives.
  9. Telephone – changing the way the world communicates personally and in business.
  10. Air Conditioning and Refrigeration – beyond convenience, it extends the shelf life of food and medicines, protects electronics, and plays an important role in health care delivery.
  11. Interstate Highways – 44,000 miles of U.S. highway allowing goods distribution and personal access.
  12. Space Exploration – going to outer space vastly expanded humanity’s horizons and introduced 60,000 new products on Earth.
  13. Internet – a global communications and information system of unparalleled access.
  14. Imaging Technologies – revolutionized medical diagnostics.
  15. Household Appliances – eliminated strenuous, laborious tasks, especially for women.
  16. Health Technologies – mass production of antibiotics and artificial implants led to vast health improvements.
  17. Petroleum and Gas Technologies – the fuels that energized the 20th century.
  18. Laser and Fiber Optics – applications are wide and varied, including almost simultaneous worldwide communications, non-invasive surgery, and point-of-sale scanners.
  19. Nuclear Technologies – from splitting the atom, we gained a new source of electric power.
  20. High Performance Materials – higher quality, lighter, stronger, and more adaptable.

Note too that those technologies are highly developed and deployed at scale only in societies with access to plentiful, reliable, affordable energy, most of which comes from fossil fuels.

Ah, but our greener friends will say, HAH, as the very name suggests, is “anthropocentric.” What about the biosphere? Shouldn’t we turn off the lights to show respect for non-human nature?

Nope. As Goklany also explains, by improving the productivity and efficiency of food production, distribution, and storage, fossil fuels not only rescued mankind from a penurious Nature but also rescued Nature from an ever-growing humanity. [click to continue…]

zhangEarly in the week I wrote about a major breakthrough toward the peaceful use of nuclear fusion. While that type of energy could drastically change human life on earth by providing bountiful clean and safe energy, it is, unfortunately, likely decades away from being commercially viable. Fear not because there are armies of researchers working around the world to find other affordable alternatives to fossil fuels that will help humanity cruise into the future. In this past year, one group of scientists have discovered a way to extract large amounts of hydrogen from plants—a process that would provide plentiful, cheap, and “green” energy, that could hit the market as a way to power vehicles in as little as three years.

For seven years a team of researchers at Virginia Tech have been searching for a non-traditional way to produce large amounts of hydrogen at low cost. They believe they have found that solution by using xylose, a simple sugar first discovered in wood, but found in most edible plants, including bamboo (a popular plastic alternative on the eco-friendly home goods market). The scientists created a custom “enzyme cocktail,” and by mixing it with the xylose and polyphosphate they can produce about three times as much hydrogen than other methods have been able to achieve. Y.H. Percival Zhang, one of the researchers on the project believes that hydrogen power can replace less sustainable modes of energy production and that his technology will have an impact on energy markets in the very near future.

“The potential for profit and environmental benefits are why so many automobile, oil, and energy companies are working on hydrogen fuel cell vehicles as the transportation of the future,” Zhang said. “Many people believe we will enter the hydrogen economy soon, with a market capacity of at least $1 trillion in the United States alone.”

The real breakthrough in Zhang’s research is that he has found a way to create large quantities of hydrogen by using a renewable and abundant resource.

Zhang is using the second most prevalent sugar in plants to produce this hydrogen… This amounts to a significant additional benefit to hydrogen production and it reduces the overall cost of producing hydrogen from biomass.

Dr. Zhang is also the man behind a few other, related human achievements this past year including creating a sugar-powered battery that could power modern gadgets and a process that creates massive amounts of starch from wood, which could reduce food insecurity around the world, saving millions of lives. His work exemplifies one of the main messages of Human Achievement Hour: global challenges will not be solved through conservation or sitting in the dark, but rather through technology advancement, which the efforts of the environmentalist movement are slowing down.

About Human Achievement Hour (HAH): Human Achievement Hour is about paying tribute to the human innovations that allow people around the globe to live better, fuller lives, while also defending the basic human right to use energy to improve the quality of life of all people. Human Achievement Hour is the counter argument to Earth Hour, and promotes looking to technology and innovation to help solve environmental problems instead of reverting to the “dark ages,” by symbolically refusing to use electricity for an hour.

Post image for Human Achievement of the Day: Bionic Eyes

You won’t see the glory of human achievement if you abide by the World Wide Fund for Nature’s recommendation that you spend an hour in the dark this Saturday night to allegedly “show your commitment to a better future.” Rather than take that anti-technology approach, why not leave the lights on and celebrate human achievement, including a new invention that will help even blind people see?

Once only imagined in the 1970s TV series The Six Million Dollar Man or the 1990s Star Trek: The Next Generation, 2013 saw the introduction of real bionic eyes! Created by Second Sight Medical Products Inc., of Sylmar, Calif., the Argus II Retinal Implant involves placing an implant in a person’s eye that connects wirelessly to eye glasses equipped with a tiny camera, which transmits images through the optic nerve to the brain.

The device helps those individuals affected with an eye disorder called retinitis pigmentosa, which strikes first as night blindness and then can degenerate photoreceptor cells eventually causing total blindness. It is not yet designed to help those with glaucoma and some other forms of blindness.

The Food and Drug Administration approved the device in February 2013 for use in the United States, and the first FDA-approved implants began this year. Those in the experimental program testified at FDA pre-approval hearings, expressing great joy about what the device had done for them. One exclaimed: “I don’t mind telling you how much — I mean, how happy that made me, not only to see the silhouette of my son, but to hear that voice coming and saying, ‘Yeah, it’s me, Dad. I’m here and I love you.’”

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Post image for Human Achievement of the Day: 3D Printing Cups, Cars, Houses, and Faces

3D printing is a relatively recent technological development that has already begun to revolutionize model-building, structural and other medical procedures, and construction of items from toys to houses.

Also called additive manufacturing (as contrasted with subtractive processes, that is, machining), 3D printing uses digital instructions produced through computer-aided design (CAD) software to create an item by “printing” it in layers using a variety of materials – powders, plastic, ceramics, etc. With ink-jet-type print heads, the materials are extruded layer by layer according to the design.

In its early applications, 3D printing was principally used for creating prototypes or models of larger objects. With 3D printing, those prototypes could be built with greater precision and speed and allow for quick modifications in the design. Rapid prototyping developed during the 1980s and early 1990s.

In the past decade, 3D printing applications have found fertile ground in the medical field. Almost daily, a medical breakthrough made possible through 3D printing is announced. Today, researchers announced that they had created heart muscle that beats when it is implanted in animals. Yesterday, news stories reported that 3D printing had saved a baby’s life by printing a splint that fit over his windpipe and kept it open so he could breathe.  Researchers are using 3D printing to produce scaffolding that they then grow tissue on to rebuild human skeletal parts that have been heavily damaged by injuries or diseases.

For example, structural 3D printing has been used to rebuild a young man’s facial structure after an accident shattered his face. A cancer sufferer had a new pelvis “printed” using that technology. Doctors are more often simulating difficult and lengthy operations by using 3D printed models of the organs or parts of the skeleton on which they will be operating. Using those models can drastically reduce the operating time involved and lead to safer and more efficient surgery – thus reducing the risk to the patients.

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CEI General Counsel Sam Kazman about to take a spin in the Google car. (Photo by Marc Scribner)

CEI General Counsel Sam Kazman about to take a spin in a Google self-driving car in May 2012. (Photo by Marc Scribner)

As we prepare for another Human Achievement Hour (this Saturday, March 29, 8:30 pm – 9:30 pm), we at CEI are examining some of the latest, greatest innovations that will make the future even freer and more prosperous. One massively transformative technology currently in development is the autonomous vehicle, known more widely as “driverless” or “self-driving” cars. Google’s prototype has been covered extensively by the media, traditional automotive companies such as Bosch and Volkswagen are working hard on their prototypes, and new estimates put the potential societal benefits of autonomous vehicles at $3 trillion per year.

As I’ve noted in the past, we should be “thrilled that a technology that can greatly improve traffic safety, offer disabled people an unprecedented level of personal mobility and fundamentally change the way we travel is so close.” Soon, if you imbibe too much on a night on the town, your car or a rideshare provider’s car will be able to take you home. And thanks to reduced congestion due to optimized driving behavior, we will also enjoy improved local air quality. Whatever your political leanings, you should be excited about our driverless future — unless you’re reflexively and ideologically anti-technology.

In the last 10 years, the technology has progressed a great deal — to the point where it is quite possible that first generation highly automated vehicles will be available to consumers before the decade closes. To understand how we got to the stage of the Google self-driving car, it is instructive to see how far we’ve come. What follows is a brief history of autonomous vehicles that covers the technologies’ developments up until about 10 years ago.

Personal mobility has traditionally required active human monitoring and direction, from walking to riding horseback to bicycling. The physical and cognitive demands of travel have long been recognized, as has the capacity for and costs of human error in transportation. In the late fifteenth century, Leonardo da Vinci sketched out a design for a self-propelled cart with programmable steering, which was later compiled in the Atlantic Codex.

Engineering interest in vehicle automation stretches back to the 1920s, when auto ownership first became within reach of middle-class households. Inventor Francis P. Houdina demonstrated a radio-controlled car on the streets of Manhattan in 1925. Houdina’s invention was never treated as anything more than a novelty – although his company’s prominence led to a physical altercation with famed escape artist Harry Houdini, who thought Houdina was capitalizing on their similar names, which resulted in a disorderly conduct charge against Houdini – but the challenge of developing automated vehicles became recognized in research communities.

At the 1939-1940 New York World’s Fair, General Motors’ interactive Futurama exhibit predicted high-speed automated roadways in 20 years. While GM’s prediction of a driverless world proved premature, its prediction of individual automobile ownership becoming widespread rather than a luxury for the wealthy and upper-middle class — which sounded incredibly bizarre during the Great Depression – proved accurate.

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sun-epaShocking as it might seem, some of us at CEI agree with environmentalists that reducing personal waste is a good idea. Voluntarily reducing our individual energy consumption and waste material can have a number of benefits, including saving your household money!

However, we also believe that the solutions to global environmental issues will not come from taxes or limitations on consumption, but rather from scientific advancement—whether it’s finding new ways to feed the world, methods of providing unlimited clean water, or by creating an energy source that is cheap, safe, unlimited, and “green.”

Researchers in California made a great leap toward creating a source of virtually unlimited energy this past year as they strive to harness the power of nuclear fusion—the same process that powers stars like our sun.

Scientists at the National Ignition Facility (NIF) at the Lawrence Livermore National Laboratory (LLNL) announced that in the last year “for the first time the energy released through the fusion reaction exceeded the amount of energy being absorbed by the fuel.” This is a significant step toward an energy source that would be plentiful and environmentally friendly.

Currently, nuclear energy is produced through fission, where the nucleus of an atom is split apart, releasing enormous amounts of energy. In nuclear fusion, the nuclei of atoms fuse together and create massive amounts of energy. While scientists can create fusion; for example, a hydrogen bomb which is also known as a fusion bomb uses the power of nuclear fission—so, a nuclear bomb—in order to achieve fusion. The holy grail in nuclear fusion research is to find a method of causing fusion that takes less energy than the fusion reaction creates, which they call “ignition.” Perhaps unsurprisingly, attempting to replicate the condition inside of a star has been no easy task for scientists.

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