The Locker Room

June 29, 2009

Continuing resolution

Posted by Becki Gray at 9:11 PM

With the clock ticking towards the end of the fiscal year, the legislature must pass a budget (which is unlikely) or a continuing resolution to keep state government going on July 1.  The House considers Senate Bill 311, "Continue Budget Authority," tonight. Appropriations Chair Mickey Michaux, D-Durham, asks that the bill be displaced for awhile. The House handles the other bills on the calendar while Michaux and others confer with Gerry Cohen and other NCGA staff.

The bill as proposed would continue state spending at 85 percent of the current rate, postpones step salary increases and other adjustments until a real budget can be passsed and increases community college tution by about $10, all in effect until July 15, giving lawmakers about two weeks to iron out the differences in the two budget proposals before the conference committee.

When the bill is re-introduced, Michaux has an amendment that changes dates for the tuition increases and 30-day notice of termination for employees technical changes. Michaux explains the community college tuition increases on accredited courses were included, so the revenue would be available to them as the new session of classes begins. Rep. Dale Folwell, R-Forsyth, expresses concern for out-of-state students being charged in-state rates. Currently there is no penalty for lying on the application. The amendment passes 109-7.

Rep. Beverly Earle, D-Mecklenburg, has an amendment that would give flexibilty to the secretary of DHHS for spending with some reporting requirements, with a six-month window on the authority.  Rep. Paul Stam says this will save considerable money and should be enacted now. The amendment passes 116 - 0.

Michaux explains that the continuing resolution is necessary to keep the state operating into the new fiscal year. The Continuing Resolution passes 95-21 on second reading and 93-23 on third reading.

It now goes over to the Senate for a final vote tomorrow. I'm expecting approval, which would keep  state government up and running in North Carolina, at least until July 15 at 11:59 p.m. when the continuing resolution expires.

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Re: Constitutional Problems with State-Based Internet Sales Tax

Posted by Becki Gray at 6:15 PM

It appears that Amazon is positioning itself to sue on the unconstitutionality of the internet tax if it is enacted in North Carolina.  At the very least they're serious about not putting up with unfair taxation.  See this letter that was sent to participants in their associates program (where one can purchase books from Amazon through another’s website):

We are writing from the Amazon Associates Program to notify you that your Associates account has been closed as of June 26, 2009. This is a direct result of the unconstitutional tax collection scheme expected to be passed any day now by the North Carolina state legislature (the General Assembly) and signed by the governor. As a result, we will no longer pay any referral fees for customers referred to or after June 26. We were forced to take this unfortunate action in anticipation of actual enactment because of uncertainties surrounding the legislation’s effective date.

Please be assured that all qualifying referral fees earned prior to June 26, 2009 will be processed and paid in full in accordance with our regular referral fee schedule. Based on your account closure date of June 26, 2009, any final payments will be paid by September 1, 2009.

In the event that North Carolina repeals this tax collection scheme, we would certainly be happy to re-open our Associates program to North Carolina residents.

The North Carolina General Assembly’s website is, and additional information may be obtained from the Performance Marketing Alliance at

We have enjoyed working with you and other North Carolina-based participants in the Amazon Associates Program, and wish you all the best in your future.

Best Regards,

The Amazon Associates Team



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Constitutional Problems with State-Based Internet Sales Tax

Posted by Daren Bakst at 5:49 PM

The Commerce Clause of the U.S. Constitution expressly gives Congress the power to regulate interstate commerce.  It then follows that states can't regulate interstate commerce.  This doctrine is referred to as the Dormant Commerce Clause.

So when a state tries to tax interstate commerce conducted over the Internet, is may be improperly violating the Dormant Commerce Clause.  The court will deem a tax to be constitutional if the tax:

1. is applied to an activity with a substantial nexus with the taxing State
2. is fairly apportioned
3. does not discriminate against interstate commerce, and
4. is fairly related to the services provided by the State."

As the Court in Quill v. Heitkamp explains, to meet the nexus requirement under the Commerce Clause, the seller must have some type of physical presence in the state.  In Quill, where the seller's only connection to the state was through mail catalogs, there wasn't a sufficient nexus.  

The Supreme Court in Quill made it clear that Congress could always pass legislation allowing states to tax interstate sales.  This to me makes it very unlikely that the Court would broadly interpret this bright line rule of requiring a physical presence--there would be no need to--if Congress doesn't like the rule, it can repeal it.  Granted though, some states will get cute in arguing what constitutes a physical presence.

In Quill, the Court also rejected a "slightest presence standard of constitutional nexus."  In other words, some minor physical connection won't suffice--in Quill, the seller had some diskettes that were physically present in the state.

Amazon is suing NY over its Internet sales tax, arguing that it is unconstitutional.  If North Carolina does move forward with taxing interstate Internet sales, a lawsuit almost certainly would follow.  The odds are very good that the state would lose the case.

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This won't look good on Sotomayor's resume

Posted by David N. Bass at 3:12 PM

From The Washington Post:

The Supreme Court today narrowly ruled in favor of white firefighters in New Haven, Conn., who said they were denied promotions because of their race, reversing a decision by Judge Sonia Sotomayor and others that had come to play a large role in the consideration of her nomination for the high court.

The city had thrown out the results of a promotion test because no African Americans and only two Hispanics would have qualified for promotions. It said it feared a lawsuit from minorities under federal laws that said such "disparate impacts" on test results could be used to show discrimination.

In effect, the court was deciding when avoiding potential discrimination against one group amounted to actual discrimination against another.

The court's conservative majority said in a 5 to 4 vote that is what happened in New Haven.

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Compensating victims of the N.C. government's eugenics program

Posted by Mitch Kokai at 2:30 PM

Survivors of the state government's forced-sterilization eugenics program deserve financial compensation. That's the argument Daren Bakst laid out for attendees at today's John Locke Foundation Shaftesbury Society luncheon.

Bakst offered policy prescriptions while Troy Kickler discussed the program's history.

Click play below to hear Kickler explain why some people focus on the program's impact in the 1960s, ignoring its broader implications.

Click play below to hear Bakst discuss how the eugenics program stood against the principles of a free society.

5:30 p.m. update: Watch the full 55:24 recording by clicking the play button below.

You'll find other John Locke Foundation video presentations here.

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Not even presidents can wish away reality

Posted by George Leef at 2:14 PM

That's Sheldon Richman's key point in this sharp piece on Obama's claim that his "public option" won't have any effect on people who are content with their current health insurance arrangements.

Americans have been hearing this line that only good things will happen if we pass a certain law for a long, long time. The income tax. Social Security. Medicare and Medicaid. Fuel economy standards. Politicians push these interventions with the assurance that they're all upside. Nobody will be worse off. But that's impossible. Reality isn't like that.

Is our Beloved Leader a fool or a knave?

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Affiliate tax in context

Posted by Joseph Coletti at 2:12 PM

It would take 12 years for the affiliate tax to generate as much revenue for the state as the $150 million the Department of Revenue expects from extra scrutiny of corporate tax returns will this year. But legislators are talking down the value of that one-time money.

"It's really not as big a help as everybody is trying to make it out," said Rep. Jim Crawford, D-Granville, one of the House's chief negotiators.
"That's going to help the slightest bit," added Sen. Linda Garrou, D-Forsyth, a Senate negotiator.

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Military Coup or Defense of Democracy?

Posted by Alex Pitsinos at 1:56 PM

Over at Cato-at-Liberty, Tom Palmer provides an interesting take on the confusion surrounding what has been called a "military-led coup" in Honduras.

Tom Palmer suggests that the military is acting to remove a President who has acted well outside the bounds of the Constitution. This is in line with the vote of the Honduran Congress. He likens it to our military removing a President who has rejected the authority of the Federal Election Commission, Supreme Court, and Congress.

An op-ed in today's Wall Street Journal argues the military was acting to defend its democracy, not to undermine it. Other world figures opposed to the "coup" include Hugo Chávez and Fidel Castro.

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Implication of cap and trade

Posted by Dr. Roy Cordato at 11:53 AM

Cap and trade = government control of all uses of energy = government control of all production = government control of consumption = government control of our lives. The Waxman-Markey bill is about state central, nothing less.

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Calculate Your Cap-and-Trade Burden

Posted by Alex Pitsinos at 09:58 AM

The Tax Foundation has developed an online calculator that estimates the cost of Cap-and-Trade to your household. It's frightening.

John Locke Foundation analyst Daren Bakst has been warning about the costs of Cap-and-Trade for some time. The Tax Foundation's calculator sheds light on the impact to consumers.

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Making things worse

Posted by George Leef at 09:45 AM

Peter Schiff writes in this article that the Obama agenda of increasing politicization of the economy can only make things worse. While the Obamacrats are babbling away about the supposed need to increase consumer spending, make health care more fair, and to save the planet from carbon, Schiff counters that the most important thing is to make the most efficient use of our resources. That's something that the free market automatically does, but which government greatly impedes. The US of the future must become a poorer and more politicized country.

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John Edwards. Sex Tape.

Posted by Jeff A. Taylor at 09:30 AM

The New York Daily News reports that the book former Edwards aide Andrew Young is shopping around includes a claim that Young found a sex tape featuring the former Senator and his mistress Rielle Hunter.

The Daily News adds:

While he was unpacking, Young discovered a videocassette, according to the book pitch. Hunter had been hired by the Edwards campaign to videotape the candidate’s movements, but this one is said to have shown him taking positions that weren’t on his official platform.

The purported sex tape confirmed to Hunter that Edwards was even more reckless than he thought.

According to our source, Hunter confided to Young that she and Edwards talked about getting married should the candidate’s cancer-stricken wife, Elizabeth, pass away, even discussing what music they’d play at their wedding.

Stay classy, John Edwards. Stay classy.

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Amazon's affiliates hurt by tax

Posted by Joseph Coletti at 09:22 AM

Jeff Taylor asked why more people aren't upset about the damage done to affiliates in North Carolina - small businesses that made their living through the online mall.

What's most disturbing about the tax is that the state risks killing a sector of the economy in its infancy for such a small amount of money - $13 million a year. The House budget included $784 million in higher taxes. The Senate has a plan that is up to $900 million in higher taxes.

The state has written into law hundreds of millions of dollars in tax breaks for Google, Dell, and Apple, but not for

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Old news for readers of The Locker Room

Posted by Dr. Terry Stoops at 07:51 AM

"Cap on charters might cost N.C."

Charlotte Observer
June 29, 2009
"Arne Duncan on charter school caps"
The Locker Room
June 9, 2009

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How many kids like Brandon Hawkins are out there?

Posted by Dr. Terry Stoops at 07:28 AM

The Charlotte Observer unknowingly makes a strong case for the kind of special needs tax credits that the General Assembly ditched last week.

A few short passages from the article follow, but I encourage you to read the entire thing.

Since he was a kindergartner at David Cox Elementary, parents Wendy and Chris Hawkins have been fighting CMS over his right to special education. They eventually put him in private school, then moved to Concord.

But they kept an ever-thickening folder documenting CMS delays, errors and obstacles. They won a series of rulings against the school district.


Loftis says his agency, which represented Brandon in court, hears from lots of families denied services by CMS. Many, he says, simply give up. Most others agree to “a gag order” if that's what it takes to get help.
Fortunately for Brandon, the Hawkinses could afford a private school for their son, but most parents cannot. Instead, public school system force most families to "put up or shut up."

Linkable Entry

Private schools ... we're watching you

Posted by Mitch Kokai at 07:01 AM

Terry Stoops is releasing a first-of-its-kind assessment of North Carolina's private schools this morning.

Click play below to learn some highlights.

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In case you missed him …

Posted by Mitch Kokai at 06:39 AM

Joe Coletti discussed basic elements of his tax hike-free Can-Do Budget during an appearance this weekend on News 14 Carolina’s Political Connections.

Linkable Entry

TIME pumps more air into FDR myths

Posted by Mitch Kokai at 06:38 AM

The good news about TIME’s latest issue-long ode to Franklin Roosevelt is that Amity Shlaes makes good use of her opportunity to deflate myths about the benefits of FDR’s economic policies:
As it turned out, F.D.R.'s tenacity did not suffice to get the economy back to where it had been before the Great Depression began, in 1929. Today we know that actions Roosevelt took to resolve the crisis may actually have perpetuated it. Especially during the period from 1935 to about 1939, Roosevelt's moves kept recovery at bay.

The bad news is that no other writer tackling the topic seems to understand or care that FDR’s policies did not help the nation get out of the Great Depression. As managing editor Richard Stengel explains, Shlaes’ article is included among the six (!) feature-length pieces on FDR solely “to get a free-marketeer’s dissenting take.”

Historian David M. Kennedy apparently agrees with Shlaes’ basic assessment, but dismisses it by saying:

It's old news that F.D.R.'s New Deal did not end the Depression. On that score, there was little difference between Roosevelt and Herbert Hoover. But unlike Hoover, F.D.R. seized the occasion to shape a legacy of durable reforms.

If the “durable reforms” didn’t solve the problem, why is that legacy laudable? While you’re trying to answer that question, consider how FDR’s misguided economic policy prescriptions “laid the foundation for the greatest run of peace and prosperity in history,” in the words of history-challenged Peter Beinart.

But leave it to our 42nd president to miss the boat completely:

Besides having a deep personal connection to ordinary citizens, Roosevelt got the big things right. When he came into office during the Depression, he saw that the ills of the country could not be addressed without more aggressive involvement by the government. He ran for President as a fiscal conservative, promising to balance the budget. But unlike his predecessor, he quickly realized that, with prices collapsing and unemployment exploding, only the Federal Government could step into the breach and restart the economy.

Perhaps President Clinton needs to re-read the “old news.”

Linkable Entry

If you’ve read Thomas Woods’ latest book …

Posted by Mitch Kokai at 06:36 AM

… about the causes of the financial meltdown, these headlines in the latest Business Week might give you pause:

The Fed’s Tricky Balancing Act (with the article under a different headline here)

The Fed’s Big Hand In the Bond Market (with an alternate headline here)

Given the problems attributable to the Fed, it’s easy to worry about its “big hand” throwing other financial actors off “balance.”

Linkable Entry

So much for effective leadership?

Posted by Mitch Kokai at 06:35 AM

Two months after assigning the president an A grade for leadership, Jack and Suzy Welch don’t sound so sure about that assessment now:

Look, every leader wants to galvanize change; that's what leaders are supposed to do. And in times of crisis, the change imperative is even more heightened. People are scared; many are angry. They want problems fixed fast.

But change—especially massive, frame-breaking change along the lines the President is pushing—can't just be about getting things done. It has to be about getting the right outcomes, and right outcomes rarely get sorted out in a rush. They emerge from vigorous debate, from grappling with ideas and wallowing in the details of options and their consequences, intended and not.

Who needs vigorous debate, though, when it’s clear that some animals are more equal than others?

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Today's Carolina Journal Online features

Posted by Mitch Kokai at 06:29 AM

The week's first Carolina Journal Online exclusive features David Bass' latest information on former N.C. House Speaker Jim Black's unusual efforts to pay a $500,000 corruption-related fine.

 John Hood's Daily Journal explores the early drop in popularity for Gov. Beverly Perdue.

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