Saturday, January 31, 2015

The State of Madison Initiative

Recently I became acquainted with a movement that proposes to divide what is now the State of Washington and create a new state, the State of Madison.

"The goal of the State of Madison Initiative is to create a new state territory in Washington State utilizing select legislative districts turning them into a new Federal Union State called State of Madison (SM) being the 51st to join the union. This state is named after James Madison the fourth president of the United States and is known as the father of the constitution." -- madisonstate.org
The idea, which is not new, is to correct a long-standing problem in this state (one that is experienced by residents in many states): separate the more rural parts of the state from the heavily urbanized portions, which tend to dominate all state-wide and Federal elections and questions of state policy (voter initiatives). Essentially, people in the eastern "half" of this state (as defined by the Cascade mountain range), where I live, have virtually no voice in these matters unless a few of the heavily-populated counties in the western half of the state happen to agree. When we don't agree with them, they tend to win anyway, effectively denying those of us living in the eastern half of this state the right to govern ourselves. Some recent examples: new "laws" infringing on our rights to keep and bear arms; a public school funding initiative with a massive, multi-billion dollar price tag attached that will mostly benefit the western counties; In 2012 when we last selected a Governor, Jay Inslee won over Rob McKenna by roughly three percent of the vote, but he won majorities in only eight counties out of thirty-nine, all on the west side, and in many eastern counties was voted against by 2-to-1 marginsvoters here largely rejected Obama and Biden in favor of Romney and Ryan (just like we rejected the Obama ticket in 2008), but the western counties outnumbered us again and all of our state's electoral college votes went to them; we reject the reelection of our current senators, Murray and Cantwell, over and over, but the western counties send them back to Congress to "speak for us" again and again.

These divisions reflect irreconcilable cultural differences between eastern and western Washington residents, by and large, that necessitate a parting of ways. As it stands now, the majority of eastern Washington residents are effectively governed and taxed without representation by the peoples of a few of the western counties whose interests are often quite different from our own. This is an unjust state of affairs that demands a remedy, and the most equitable and peaceful method of bringing this about is a severance of our governance. 

There are many hurdles that this movement must clear on the way to realization of its goal, and historically speaking, the chances are not good. Nonetheless, this will be an interesting thing to watch and participate in, so I plan to keep on with it as things develop.

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State of Madison Initiative on Facebook: https://www.facebook.com/madisonstateinitiative

Tuesday, January 27, 2015

Chickenomics

I normally eat two chicken eggs each day for breakfast, so I mainly buy the sixty-count packs of eggs since bulk buying stuff like this gets the best price.

Or at least it did.

Recently I walked into one of the grocery stores near where I live to get one of these packs and discovered that the price had gone from $8 to nearly $12 since the last time I had purchased one.

As far as food prices go, .20 cents per egg still isn't bad, but a sudden fifty percent jump in price did give me a jolt. Then when I discovered with the help of the calculator on my cell phone that the price savings per egg of those sixty-count packs versus a one-dozen carton was only .0076 cents per egg, I foamed at the mouth a little.

I went home and put the question to my friends and acquaintances on Facebook: what happened to egg prices? Chicken Armageddon? Egg trucks crashing on icy roads? A poultry general strike?

Then I got the answer I was looking for: blame California.

"The state that consumes the most [eggs] is California, where new animal-welfare laws concerning egg production kicked in on January 1. From now on, all eggs sold in California must come from hens that live with enough space to stand up, fully extend their limbs, and turn their bodies around. That translates to at least 116 square inches of floor space per chicken, according to NPR.
The vast majority of egg-laying chickens in the U.S. do not live in conditions like that." -- Svati Kirsten Narula
The California egg market is so big that changing the law in that state drove eggs prices higher across the U.S. due to the response it necessitated on the part of commercial egg producers: make capital expenditures to give their hens more room, reduce their flock sizes to create room, or both.

I sensed opportunity!

For some time now I've been wanting to get my own hens and produce my own egg supply. I had it in mind to keep just a couple, enough to keep up with my typical egg consumption. My thinking was to keep three hens around for this. That would likely cost me more per egg than just buying them at the grocery store, but if you've ever eaten farm eggs, you know that in terms of flavor the store bought eggs just cannot compete. Add in the increased food security of having a renewable protein source right in your back yard and it's easy to justify the added cost.

It has been my intention to "pasture" my chickens, to let them have open ground to forage on in order to reap the benefits of giving the birds a varied diet, improve soil quality on my land, keep insect and weed pests somewhat in check, etc. Various sources I've read on keeping chickens in this manner inform me that weekly access to at least ten square feet of open ground per bird in paddocks that you rotate them through is plenty to keep the chickens, the soil, and the available vegetation all healthy and happy. For three birds, I could accomplish this with just four 5x6' enclosures, totaling one hundred-twenty square feet.

But here's the thing: I have over twenty-six thousand square feet of land at my disposal, almost two-thirds of which is pasture, and right now I'm not doing anything with it (except for mowing in the summer - ugh). Three hens set up as described above would require just .0075% of that land area. What a waste of space!

I began to think that perhaps in addition to feeding myself, chickens could become a small side business. Curious about this possibility, I surfed over to Craigslist to see what farm eggs go for in my area. At present, the most common asking price is $3/dozen.

From there, I looked up the regulations in Washington state on selling eggs, and I found that small producers (with flocks under three thousand birds) selling direct to consumers are basically exempt from regulation (and the business fees that go with that). A quick check of county codes revealed that Walla Walla county is pretty much only concerned with licensing of dogs and not allowing livestock to run wild.

This began to look more like a gainful possibility!

I started looking up going rates for the breed I'm interested in, Rhode Island Reds, feed costs, and packaging (egg cartons), with the aim of establishing an approximate weekly cost to operate this little business. I had it in mind to acquire fourteen hens, enough to supply me with my two daily eggs and a further dozen per day to sell (roughly, because chickens won't lay eggs every single day of the year). I looked at an online seller, eFowl.com, and discovered that I could save a significant amount on my order by buying just one more hen for a total of fifteen. Thus, I arrived at the following numbers:

Cost of hens: $4.76 per bird for fifteen sexed chicks, including shipping. Since laying hens typically are most productive during their first two years and are frequently replaced at that point, that works out to .05 cents per bird per week during their peak productive years, for a total of .75 cents per week for the flock.

Cost of feed: On average laying breed chickens will take six months to mature. Their food needs change during their different life stages, both in composition and quantity, and the needed amount of provided food is variable depending on the time of the year (due to availability of forage). Price of feed changes, too, of course, so I've gone with a high-end assumption of 1.5 pounds of feed per bird per week, at rounded up local feed prices of $12 for a fifty-pound bag. Rounded up, that is twenty-three pounds of feed per week for the flock at a cost of approximately $5.52. I decided not to bother averaging in the cost of feed per week during their maturation phase since I'm also not attempting to discount their reduced feed requirements during the summer when forage is available.

Packaging: Reusing egg cartons when selling eggs to consumers is frowned on, but fortunately they're not very expensive. I also found these at eFowl.com for fifty cents each in packs of ten. If my hens were to produce an egg per day each, after consuming my two eggs daily I would have ninety-one eggs per week, requiring seven egg cartons. Since that would leave some eggs left over, it's easier to extrapolate this cost over two weeks of production, which would get closer to an even fifteen one-dozen cartons required, for a total of $7.50, or $3.25 per week averaged.

Thus, I have a total estimated weekly operating cost of $9.52. I haven't included the capital cost of building the chicken coop and the paddocks because a) I don't have the information handy and b) these will last many years and can theoretically be amortized down to almost nothing if the operation carries on long enough. Typically, the breed of chicken I am considering will produce two-hundred fifty eggs per bird per year,  so roughly sixteen weeks out of each year they will not produce. This lowers packing costs by $52 per year, or one dollar per week, bringing their approximate weekly operating cost down to $8.52.

During the roughly thirty-six productive weeks each year the birds will have, at current local farm egg prices the flock could bring in revenues of $21 each week, for an annual total of $756.

Therefore, $8.52 x 52 = $443.04 annual operating cost; $756 in revenues - $443.04 = $312.96 profit; $312.96 / $443.04 = 70.64% net profit margin!

But, it's actually better than this, because the part I left out is the two eggs per day that I would eat. At twenty-five cents each, I would get fifty cents of eggs per day, or $3.50 worth per week, for approximately thirty-six weeks, for a total of $126 per year. With current grocery store prices costing me roughly $144 per year for eggs, and since I don't have to buy eggs from myself, my actual cost of feeding myself two eggs per day all year long could drop to around $48 (since I might have to buy eggs for four months out of each year, at the current cost of $12 for a sixty-pack purchased each month). I would thus recapture the difference, adding $96 per year to my overall cash flow, putting the annual total profit at $409.

There are lots of variables here, things that can't be predicted, costs that I've deliberately estimated on the high-end, etc. However, given the margins here I can be reasonably sure that I would have to work very hard at making this venture unprofitable to flip these numbers into the red. Looking at it in terms of my original plan to just keep enough hens to feed myself, the operating costs of keeping the birds plus buying eggs to make up for their unproductive weeks ends up costing about eleven percent more per year than just buying eggs from the store. Since I want to keep chickens anyway, I might as well put a little more effort into them and make a profit while I'm at it.

Therefore...


Sunday, January 25, 2015

This Taxpayer Is No More!

I think I finally figured out how to stop paying taxes legally.

Just tell the IRS that you're dead. Once they've got it in mind that you are, apparently no amount of evidence will convince them otherwise:

"Siegfried Meinstein discovered that he was dead in April. He seems to be handling the news well.
“It isn’t really a problem in my daily life,” he said, sitting at a table in his Upper Arlington assisted-living facility. “Everybody accepts my money.” 
This probably requires a little more explanation, so here it is: The Internal Revenue Service thinks 94-year-old Meinstein bought the farm, bit the big one, took a permanent vacation. 
And despite his family’s best efforts, the IRS hasn’t changed its mind." -- Lori Kurtzman

Saturday, January 24, 2015

The 529 Is The IRA Political Coal Mine Canary

If you haven't heard of a 529 plan, chances are you're not alone. 529 plans are tax-advantaged savings accounts meant to pay the college expenses of a designated beneficiary. Contribution limits on these accounts are quite high, growth in these accounts is sheltered from taxes, and at present withdrawals are tax-free if used for allowed education expenses. Despite this, not very many people in the U.S. use them

The same is true of IRA accounts. In terms of assets, these accounts hold a tremendous amount in U.S. dollar terms. But in terms of ownership, the number of people who have them is quite small.

This is a very important point: the value of the assets don't matter; the number of people in those pools is what matters.

Why?

Because when it comes to sacrificing one person to another, a politician must always choose a minority to go after in order to gain the support of an immoral majority to whom he or she promises some of the loot.


As the above-linked article points out, this is a proposal going nowhere in the face of the new Congress, which has come to be dominated by the GOP. It also mentions the not unimportant detail that this proposal would apply to gains on new contributions to 529 plans, not on existing balances and their resulting gains.

But that's a "for now." In the future there will be a different Congress, and they may be put there by people who think they're being screwed over because this Congress won't give them the goodies that Obama and his ilk promised. Same with the promised limits of the application of the proposal: it may start with just part of these accounts, but when the free lunch offered in exchange for attacking one part of what the minority has never materializes, they'll come back for the rest. 

This is why individual retirement accounts are becoming a very risky investment for individuals, as telegraphed by this move: not because of fluctuating account values and the possibility of poor investment performance, but because of political risk. There are rules in place about how these accounts are supposed to be treated and promises made that go along with them. It has been the same for 529 plans. But now that president openly talks about changing the rules and breaking those promises, because he and others like him know that the  number of people they are attacking is quite small and the lost votes won't matter to them. The same is true of IRA accounts, and the coming attack is not new, but at this stage not as loud and in the open in part because IRA owners are greater in numbers than 529 owners. All the same, being an IRA owner puts you in a numerical minority, which politically is difficult and costly for any given political party to defend. Consequently, they won't, or if they do then they won't be around for long. It's only a matter of time.

What can you do to defend yourself? Don't make yourself a target, for one: just don't open and fund this kind of account. If you already have one, at the very least stop further funding of it, and possibly consider shutting it down and take the tax hit (which is where I find myself right now - I stopped funding my IRA accounts years ago, but as of yet have not emptied them; procrastination could cost me!). When considering alternatives, keep this in mind: it is harder for .gov to steal what is tangible and privately held. That could be everything from buying and personally holding precious metals, to investing in rental property, or even creating and running a small business. Basically, keep your wealth in stuff that .gov will have to send people with guns to take rather than stuff they can get from you with the flip of a switch.

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