Stop, pay your taxes!

How ObamaCare Makes the IRS Even More Powerful

by Chris Jacobs and Ryan Ellis

If you think the Internal Revenue Service is too powerful, wait another year or so and see how you like the agency then. In the coming years, the federal tax collector will have the primary responsibility for determining who is eligible for Obama-Care’s exchange subsidies, verifying whether individuals carry health insurance that fulfills the law’s individual mandate, and applying the appropriate tax penalty to those who do not have qualifying insurance. While the Department of Health and Human Services has said it would not bother verifying income this year, the law’s requirements haven’t changed. So the IRS’s powers will remain—unless, of course, the Obama administration continues to try to rewrite the law through executive fiat.

The IRS, of course, has been much in the news lately. It is the same agency that subjected non-profits with “Tea Party” and “Patriot” in the names to onerous and invasive information demands as part of its review of the groups’ applications for tax-exempt status. That was the conclusion of the Department of the Treasury’s Inspector General for Tax Administration, and it was that conclusion that led the agency itself to apologize, led the President to fire acting IRS administrator Steven Miller, and prompted a Justice Department investigation.

A few examples of how the IRS treated these nonprofits:

• Kevin Kookogey wanted to teach young students about the ideas of Alexis de Tocqueville and Cicero. The IRS said he had to hand over the names of the kids he wanted to teach and the names of any instructors he hired before it would grant his group, Linchpins of Liberty, tax-exempt status.

• Marion Bower started the group American Patriots Against Government Excess in Fremont, Ohio, in order to promote awareness about the growth and power of government. IRS gave her its own lesson when the agency demanded a synopsis of every book the group discussed at its meetings before it would grant tax-exempt status.

• Donors to the National Organization for Marriage (NOM) believe, as a matter of conscience, that marriage should not be defined as anything other than a union between one man and one woman. For those beliefs, they were harassed, assaulted, and had their property vandalized after someone illegally leaked IRS documents revealing their names to a group that supports same-sex marriage. The Justice Department then cited taxpayer privacy laws as the reason it could not provide NOM with any information on the results of its investigation of the leaks.

At least 25 Tea Party groups, many represented by the American Center for Law and Justice, are now suing the IRS. But they’re not the only ones. Thanks to a report from Courthouse News Service, we also know that an unnamed company in California is suing the IRS for allegedly seizing without warrant 60 million health records of 10 million Californians. And that brings us to the question of how much more power the IRS will have in the health care field in the coming years. Below, we present a brief summary of the ways that ObamaCare increases IRS power, followed by a listing of the “46 New ObamaCare Powers of the Internal Revenue Service.” —Editor

 

The Tax Man Becomes the ObamaCare Enforcer

 
At Least 42 New Powers

ObamaCare contains what the Treasury’s inspector general calls “the largest set of tax law changes in 20 years.” ObamaCare is so complex that auditors cannot agree on how many provisions the Internal Revenue Service is charged with implementing. The GAO wrote that the IRS “has responsibilities in the implementation of 47” provisions, while the Treasury inspector general concluded that “at least 42 provisions [of ObamaCare] add to or amend the Internal Revenue Code.” (One of the powers in the GAO’s list has since been repealed. See “46 New ObamaCare Powers of the Internal Revenue Service, page 15.)

The law’s massive changes led Nina Olson, the National Taxpayer Advocate at the IRS, to worry in 2010—well before the current scandal became public—that she was “concerned about [the IRS’s] ability to administer the new health care credits and penalty taxes in a fair and compassionate way.”

Getting Your Information

ObamaCare requires all insurance companies to report to the IRS the name, address, identification number, and type of policy purchased by every customer, along with a determination whether the insurance was government-approved for purposes of complying with ObamaCare’s individual mandate. Likewise, individuals will have to file similar forms demonstrating they held government-approved insurance with their tax returns.

Trillions in New Taxes

ObamaCare contains no fewer than 18 tax increases, including new taxes on medical devices, insurers, and pharmaceutical companies. According to the most recent estimates from the Congressional Budget Office, those tax increases will raise revenue by at least $1 trillion over the next 10 years—followed by higher sums in future decades.

Moreover, 12 of the 20 tax increases will affect middle-class families, directly violating President Barack Obama’s “firm pledge” that he would not raise taxes on families making under $250,000 per year.

A Gusher of Spending and Bureaucrats

To implement all of ObamaCare’s tax increases, the IRS has needed additional infusions of taxpayer funds. The Government Accountability Office estimates that the IRS will spend $881 million implementing the law from 2010 through 2013 and that, of that amount, the IRS would spend more than half a billion dollars from an ObamaCare implementation “slush fund.”

Treasury Secretary Jack Lew recently told Congress that the IRS had approximately 700 full-time equivalent staff working on ObamaCare implementation. However, in its budget request this spring, the IRS assumed that a force nearly three times that size—1,954 full-time equivalent employees—will work on the law’s implementation in the coming fiscal year.


Mr. Jacobs is Senior Policy Analyst in the Center for Health Policy Studies at The Heritage Foundation. This article is an adapted version of an article originally published May 16, 2013, by The Heritage Foundation.

 

46 New ObamaCare Powers of the Internal Revenue Service

Collecting Taxes

1. Charitable hospital tax: Imposes additional reporting requirements for charitable hospitals to qualify as tax-exempt under Internal Revenue Code 501(c)(3) and requires hospitals to conduct a community health needs assessment at least once every three years and to adopt a financial assistance policy and policy relating to emergency medical care.

2. Codification of the “economic substance doctrine”: Clarifies and enhances the applications of the economic substance doctrine and imposes penalties for underpayments attributable to transactions lacking economic substance.

3. “Black liquor” tax hike: Amends the cellulosic biofuel producer credit (nonrefundable tax credit of about $1.01 for each gallon of qualified fuel production of the producer) to exclude fuels with significant water, sediment, or ash content (such as black liquor).

4. Tax on innovator drug companies: Imposes a fee on each covered entity engaged in the business of manufacturing or importing branded prescription drugs.

5. Blue Cross/Blue Shield tax hike: Limits eligibility for deductions under section 833 (treatment of Blue Cross and Blue Shield) unless the organizations meet a medical-loss ratio standard of at least 85 percent for the taxable year.

6. Tax on indoor tanning services: Imposes a tax on any indoor tanning service equal to 10 percent of amount paid for service.

7. Medicine cabinet tax: Repeals the tax exclusion for over-the-counter medicines under a health flexible spending arrangement (FSA), health reimbursement arrangement (HRA), health savings account (HSA), or Archer medical savings account (MSA), unless the medicine is prescribed by a physician.

8. Health savings account withdrawal tax hike: Increases tax on distributions from HSAs and Archer MSAs not used for medical expenses.

9. Employer reporting of insurance on W-2: Requires employers to disclose the value of the employee’s health insurance coverage sponsored by the employer on the annual Form W-2.

10. Surtax on investment income: Imposes an unearned income Medicare contribution tax of 3.8 percent on individuals, estates, and trusts on the lesser of net investment income or the excess of modified adjusted gross income (AGI + foreign earned income) over a threshold of $200,000 (individual) or $250,000 (joint).

11. Hike in Medicare payroll tax: Imposes an additional Hospital Insurance (Medicare) tax of 0.9 percent on wages over $200,000 for individuals and over $250,000 for couples filing jointly.

12. Tax on medical device manufacturers: Imposes a tax of 2.3 percent on the sale price of any taxable medical device on the manufacturer, producer, or importer.

13. High medical bills tax: Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent of adjusted gross assets (unless the taxpayer turns 65 during 2013–2016 and then the threshold remains at 7.5 percent).

14. Flexible spending account cap: Limits health FSAs under cafeteria plans to a maximum of $2,500 adjusted for inflation.

15. Retiree prescription drug coverage tax hike: Allows the deduction for retiree prescription drug expenses only after the deduction amount is reduced by the amount of the excludable subsidy payments received.

16. Compensation limit: Denies the business expenses deductions for wage payments made to individuals for services performed for certain health insurance providers if the payment exceeds $500,000.

17. Patient-Center Outcomes Research Institute fee: Imposes a fee through 2019 on specified health insurance policies and applicable self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund to be used for comparative effectiveness research.

18. Individual mandate tax: Requires all U.S. citizens and legal residents and their dependents to maintain minimum essential insurance coverage unless exempted starting in 2014 and imposes a fine on those failing to maintain such coverage.

19. Employer mandate tax: Imposes a penalty on large employers who (1) do not offer coverage for all of their full-time employees, offer unaffordable minimum essential coverage, or offer plans with high out-of-pocket costs and (2) have at least one full-time employee certified as having purchased health insurance through a state exchange and was eligible for a tax credit or subsidy.

20. Tax on health insurers: Imposes an annual fee on any entity that provides health insurance for any U.S. health risk with net premiums written during the calendar year that exceed $25 million.

21. Excise tax on health insurance: Imposes a 40 percent excise tax on high cost employer-sponsored health insurance coverage on the aggregate value of certain benefits that exceeds the threshold amount.

Distributing Subsidies

22. Early retiree subsidy: Establishes a temporary reinsurance program to provide reimbursement for a portion of the cost of providing health insurance coverage to early retirees.

23. Nonprofit tax exemption: Provides tax exemption for nonprofit health insurance companies receiving federal start-up grants or loans to provide insurance to individuals and small groups.

24. Reinsurance tax exemption: Provides tax exemption for entities providing reinsurance for individual policies during first three years of state exchanges.

25. State exchange tax credit: Provides premium assistance refundable tax credits for applicable taxpayers who purchase insurance through a state exchange, paid directly to the insurance plans monthly, or to individuals who pay out-of-pocket at the end of the taxable year.

26. Cost-sharing subsidy: Provides a cost-sharing subsidy for applicable taxpayers to reduce annual out-of-pocket deductibles.

27. Small business tax credit: Provides nonrefundable tax credits for qualified small employers (no more than 25 full-time equivalent employees with annual wages averaging no more than $50,000) for contributions made on behalf of its employees for premiums for qualified health plans.

28. Small business tax exclusion: Offers tax exclusion for reimbursement of premiums for small-group exchange participating health plans offered by small employers to all full-time employees as part of a cafeteria plan.

29. Indian tribe tax exclusion: Allows an exclusion from gross income for the value of specified Indian tribe health care benefits.

30. Therapeutic discovery tax credit: Establishes a 50 percent nonrefundable investment tax credit for qualified therapeutic discovery projects.

31. Adoption tax credit: Increases the maximum adoption tax credit and the maximum exclusion for employer-provided adoption assistance for 2010 and 2011 to $13,170 per eligible child.

32. Tax exclusion for dependent coverage: Extends the exclusion from gross income for reimbursements for medical expenses under an employer-provided accident or health plan to employees’ children under age 27.

33. Advance tax credit and cost-sharing reductions: Allows advance determinations and payment of premium tax credits and cost-sharing reductions.

34. Health care services loan tax exemption: Excludes from gross income amounts received by a taxpayer under any state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health care services in underserved or health professional shortage areas.

Collecting Information

35. State exchange information reporting: Requires state exchanges to send to Treasury a list of the individuals exempt from having minimum essential coverage, those eligible for the premium assistance tax credit, and those who notified the exchange of change in employer or who ceased coverage of a qualified health plan.

36. Exchange participation requirement: Outlines the procedures for determining eligibility for exchange participation, premium tax credits and reduced cost-sharing, and individual responsibility exemptions.

37. Taxpayer information disclosure: Authorizes IRS to disclose certain taxpayer information to the Department of Health and Human Services for purposes of determining eligibility for premium tax credit, cost-sharing subsidy, or state programs including Medicaid, including taxpayer identity; the filing status of such taxpayer; the modified adjusted gross income of taxpayer, spouse, or dependents; and tax year of information.

38. Insurance provider information reporting: Requires every person who provides minimum essential coverage to file an information return with the insured individuals and with IRS.

39. Large employer information reporting: Requires information reporting of health insurance coverage information by large employers and certain other employers.

40. Medicare beneficiary information disclosure: Authorizes IRS to disclose certain taxpayer information to the Social Security Administration regarding reduction in the subsidy for Medicare Part D for high-income beneficiaries.

Enforcing Compliance

41. Health plan penalty: Imposes a penalty on health plans identified in an annual HHS penalty fee report, which is to be collected by the Financial Management Service after notice by the Department of the Treasury.

42. New group plan penalty: Subjects new group health plans to certain Public Health Service Act requirements and imposes the excise tax on plans that fail to meet those requirements.

43. Group plan compensation discrimination prohibition: Prohibits group health plans from discriminating in favor of highly compensated individuals.

44. Nonprofit indicator system: Requires the independent institute partnering with the National Academy of Sciences to implement a key national indicator system to be a nonprofit entity under section 501(c)(3).

45. Small business exemption for cafeteria plans: Allows small businesses to offer simple cafeteria plans—plans that increase employees’ health benefit options without the nondiscrimination requirements of regular cafeteria plans.

46. Corporate tax advance: Increases the required payment of corporate estimated tax due in the third quarter of 2014 by 15.75 percent for corporations with more than $1 billion in assets, and reduces the next payment due by the same amount.


Compiled by Ryan Ellis, Tax Policy Director at Americans for Tax Reform. This compilation was originally published by the Galen Institute at Galen.org, and is based on the Government Accountability Office report “Patient Protection and Affordable Care Act: IRS Should Expand Its Strategic Approach to Implementation,” June 2011. 

 

Thatcher-Feulner

Onward! A Talk with Ed Feulner on the Future of Conservative Think Tanks

by The Insider

WHEN HE BECAME PRESIDENT of The Heritage Foundation in 1977, Edwin J. Feulner Jr. decided that the think tank’s research would accomplish more than just chopping down trees and employing librarians. Under Feulner, Heritage pioneered the publishing of research that was relevant to the work of legislators and policymakers, written so concisely and clearly that it could be absorbed in one sitting by non-specialists, and delivered in time to make a difference in the policy process. This “briefcase test” wasn’t Feulner’s only innovation: He made it a priority to market the Foundation’s research aggressively, to run the think tank like a business, and to build a donor base broad enough to ensure it had independence on policy positions. These ideas helped The Heritage Foundation grow from a 26-person research shop in 1977 to the permanent voice for conservative policies that it is today.

Feulner first learned about the work of think tanks in 1964 when, as a graduate fellow at the London School of Economics, he did part-time work for the granddaddy of all free market think tanks, the Institute of Economic Affairs. He has also worked for the Center for Strategic and International Studies, the Hoover Institution, the Department of Defense, and the United States Congress. In short, Feulner has been at the nexus of ideas and policy for over four decades. As he switches roles—moving from Heritage Foundation President to Chairman of The Heritage Foundation’s Asian Studies Center—we thought it would be a good time to get his thoughts on the role that think tanks will play in the conservative movement in the 21st century.

The Insider: When Sir Antony Fisher created the Institute of Economic Affairs in 1955, he was following Friedrich Hayek’s advice that the way to change the direction of government policy was to reach the intellectuals, the second-hand dealers in ideas who shape the climate of opinion that in turn constrains the choices of politicians. Does that model of policy change—reach the intellectuals—still make for good guidance for think tanks today?

Ed Feulner: Hayek’s advice about reaching the second-hand dealers of ideas—the intellectuals—to change the range of policy options available to the politicians is still central to the role of think tanks. The role of a think tank, at least in the American context, is not to promote a “party line position,” but rather to promote an understanding of the ideas that undergird alternative options in the policy arena. Yes, ideas do have consequences, particularly when they are put forth in a straightforward, concise, coherent, and relevant way, so that policymakers understand immediately why these ideas are central to their day-to-day activities.

TI: In the past five years or so, the number of channels by which think tanks can engage audiences—YouTube, blogging, Facebook, Twitter, to name a few—has exploded. Does seizing that opportunity risk changing the core focus of the think tank—from thinking big and long term to thinking about how to be relevant to the instantaneous news cycle?

EF: New ways of reaching interested audiences should always be viewed favorably by think tank analysts. If our ideas can stand up to scrutiny, it is more important than ever to get them out in both a timely and a timeless way—timely because they have to relate to real life challenges; timeless because they should be grounded by the principles that the author and his organization share.

It is never enough for think tank analysts or leaders to be content with thinking good thoughts and sitting on the sidelines while policymakers “do their own thing.”

TI: Have think tanks become, as some contend, too politicized in recent years? What is the role of the think tank in the 21st century?

EF: It is never enough for think tank analysts or leaders to be content with thinking good thoughts and sitting on the sidelines while policymakers “do their own thing.” Policymakers can’t do their own thing without outside influences, and the right outside influences from think tanks are good ideas. No, think tanks have not become too politicized. I have long maintained that the role of the think tank is to be involved in policy politics (not in electoral politics!) and that policy politics is what should absorb the attention of elected officials throughout their tenure in office.

TI: In your own “three (I)s” description of the public policy process you talk about the importance of institutions in helping individuals amplify ideas. As technology continues to lower the cost barrier to getting involved in public policy, does the role of think tanks change? To put the question another way: What is the value that a think tank brand will provide to the Robert Rectors and the Hans von Spakovskys of tomorrow?

EF: Those of us who are involved in the policy business and the business of politics should beware lest the phrase “think tank” is used too freely by pressure groups and lobbyists. There is a difference. Yes, I have maintained for a long time that we need ideas, individuals, and institutions. Institutions are more than a paycheck for brilliant analysts or a marketing mechanism for a good policy option. The institution provides continuity and validity to long-term research projects. I have had colleagues at Heritage who have started their professional careers looking at a specific subject—e.g., missile defense or welfare reform—only to be ready for retirement while their issue has still not been resolved. The institution is critical because successor generations can build on the work of their predecessors and can continue to fight the perennial battles to expand liberty.

TI: A few decades ago, Milton Friedman wrote: “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.” But the nation had an enormous economic crisis a few years ago, and policy-wise conservatives lost. Government got bigger. Did conservatives fail to have convincing alternatives? Or was Milton Friedman too optimistic about the prospects that sound policies can come out of a crisis?

EF: Thanks for reminding us of this great Friedman quote which I have cited in the past. Both good and bad policy ideas can come out of a crisis. One of my first research projects concerned the nationalization of the British railroads after a real crisis—World War II. It turned out that the Labour Party would have nationalized the British railroads no matter how persuasive the ideas of the opposition (the Conservative Party) were. On the other hand, there have been occasions where crises have led to new and sound policies being implemented both here and overseas. The specific circumstances that surround a crisis—who has the political majority, what is the timing of the public perception of the moment of crisis, etcetera.—always affect this process.

The fact remains if our ideas are not lying around, no politician of any stripe will be able to seriously consider them. If they’re not even being considered, clearly they won’t be implemented.

We need institutions that deal with problems at a level as close to the individual as possible.

TI: Some conservatives—though not the ones at The Heritage Foundation!—seem content to keep growth in government below growth in the private sector. Wouldn’t a strong push to cut government—cut it in real terms—during normal times make it easier for conservatives to make the free-market/less-government case in a crisis?

EF: Yes, I agree that cutting the real size of government is something conservatives should work toward. However, it seems to be more critical in our constitutional system to return to a principle of subsidiarity or federalism. That is, we need institutions that deal with problems at a level as close to the individual as possible. Meanwhile, any law that is passed should have an automatic sunset provision in it. Every opposition party should automatically have oversight responsibilities and vigorously pursue them over specific programs. All of this is easy to say and hard to do, but it’s what we should be advocating all the time.

TI: Part of the problem with our current politics is that many people have confused crony capitalism with capitalism. How do we correct that confusion?

EF: Alas, crony capitalism is always with us and always dangerous. (Think Teapot Dome scandal of almost 100 years ago, not just Solyndra of recent days.) The operation of the market and the rule of law can prevent crony capitalism from being the norm. As principled conservatives, we have to insist on all parties (including unelected bureaucrats) being bound by the rule of law.

TI: Many state-based think tanks in the United States are in a peculiarly challenging situation. They appear to be on the front lines of many of the major policy fights. But on a number of these issues—Medicaid in particular—state lawmakers are simply responding to the inducements of federal policy. Do you have any thoughts on what free market think tanks at the state level can do to change the incentives driving growth in government?

EF: If we are going to return to a real and active federal system, clearly our sister organizations at the state and local level will be more important than ever. At the same time, they should appreciate that any source of “new federal funds” brings with it the corresponding new federal controls. If, for example, Richmond is going to get $90 million in additional federal money for an existing government program for an investment of only $10 million, then members of the state legislature and the governor must be aware that the marginal 10 percent is still coming out of the pockets of state taxpayers, so it isn’t really free money. Ultimately, none of the money is free anyway, since all state taxpayers are federal taxpayers, too. Secondly, the control that goes with those additional expenditures will weigh on the state level bureaucracy long after the inducement of additional dollars is gone.

Right now, with ObamaCare, the new Dodd-Frank regulations on the financial sector, and higher marginal tax rates, the trend line is not up.

TI: Is the nation freer, about the same, or less free today than it was 40 years ago when you first came to Washington, D.C.?

EF: I believe we are more free today than we were 40 years ago. Forty years ago with a Republican in the White House, we had wage and price controls, higher tax rates, and a less vibrant economy than now. We are probably less free today than we were 30 years ago when Reagan’s tax cuts were taking effect and the economy was advancing at a great rate. So, making time comparisons is difficult. The question is: Which way is the trend line going? Right now, with ObamaCare, the new Dodd-Frank regulations on the financial sector, and higher marginal tax rates, the trend line is not up. That’s the primary reason why we conservatives need to sharpen our arguments and expand our activities.

TI: You have often advised conservatives in the idea business to not let the urgent crowd out the important. So, could you share with us what you think are the four most important policy goals that conservatives should set for themselves in the next decade?

EF: The four most important policy goals for conservatives over the next decade should be: 1. Reduce the size of government. Conservatives are right: We have a spending problem, not a revenue problem. 2. Rethink our defense capability. The primary function of the federal government is the defense of the nation. The new era will require adequate resources and new thinking for the challenges we face. 3. Reduce tax rates so that the individual controls more of the fruits of his own labor. 4. Restore traditional values so that the nation’s adherence to what is best in our system is more readily achieved by the typical citizen, and is again the norm for everyone.

In short, all three legs of the conservative policy stool—economic freedom, national security, and traditional values—will continue to demand the attention of our citizens.

The challenges will remain great.

Meadow and pine trees

Ecology or Economics? Which Has Done More for Our Environmental Future?

by Matt Ridley

EXTRAPOLATE GLOBAL GROSS DOMESTIC PRODUCT per capita into the future and you see a rapid rise to the end of this century, when the average person on the planet would have an income at least twice as high as the typical American has today. If this were to happen, an economist would likely say that it’s a good thing, while an ecologist would likely say that it’s a bad thing because growth means using more resources. Therein lies a gap to be bridged between the two disciplines.

Good News Is No News

The environmental movement has always based its message on pessimism. Population growth was unstoppable; oil was running out; pesticides were causing a cancer epidemic; deserts were expanding; rainforests were shrinking; acid rain was killing trees; sperm counts were falling; and species extinction was rampant. For the green movement, generally, good news is no news. Many environmentalists are embarrassed even to admit that some trends are going in the right direction.

Pessimism should no longer be a prerequisite for being an environmentalist. It can be counterproductive because it is a counsel of despair. People do not respond well to being told disaster is unavoidable. Instead, the environmental movement should try optimism.

Why? The underlying assumption is that pessimism is what drives change. But great innovators from Archimedes to Steve Jobs generally lived in the richest parts of the world in their day. Driven by ambition, not desperation, they changed the world for optimistic reasons.

Pessimism should no longer be a prerequisite for being an environmentalist. It can be counterproductive because it is a counsel of despair. People do not respond well to being told disaster is unavoidable. Instead, the environmental movement should try optimism.

There is a wonderful chance that the current century is going to be a golden age for nature. Not everything is going to go right, but it is possible that by the end of the century we will have more forests, more wildlife, and cleaner air.

Life Is Looking Up

Growing up in Northern England in the 1970s, I assumed nature was in retreat. Otters had vanished, salmon were gone from the River Tyne because of pollution, and hawks and falcons had disappeared due to DDT. Conserving nature meant protecting what was left. It never occurred to me that it might mean making things better.

Now, otters are thriving, salmon are back, and seabirds on the nearby Farne Islands have doubled in numbers. Seals have tripled, ospreys are starting to breed, and cranes are returning. Today, I expect nature to improve every year.

It is the same for Spitsbergen, an Arctic island I visited four times in the 1970s and 1980s: Barnacle geese, ringed seals, white whales, walrus, and polar bears have all dramatically increased since then.

Britain has three times as much forest as it did 100 years ago. Could the rest of the world experience that growth too? I don’t see why not. In fact, it is almost inevitable. The “forest transition”—the point at which a country stops losing forest and starts regaining it—is happening all over the world: Forest cover is increasing in Bangladesh, China, Costa Rica, Cuba, Denmark, Dominican Republic, El Salvador, France, Gambia, Hungary, Ireland, Morocco, New Zealand, Portugal, Puerto Rico, Rwanda, Scotland, South Korea, Switzerland, the United States, and Vietnam.

What is really making a positive dent in the environmental arena is the unintended effects of technology. If we tried to support today’s population using the methods of the 1950s, we would need to farm 82 percent of all land, instead of the 38 percent we do now.

It is not too late for rare wildlife, either. As climate change specialist Willis Eschenbach has shown, according to official records kept by the Committee on Recently Extinct Organisms, if you consider Australia an island rather than a continent, then just three continental mammals and six continental bird species have gone extinct since records began several hundred years ago—far short of predictions based on theories about habitat loss. (Islands are a different matter. There have been hundreds of extinctions caused mostly by invasive species, not habitat loss.)

More from Less

Why are environmental trends mainly positive? In short, the gains are due to “land sparing,” in which technological innovation allows humans to produce more from less land, leaving more land for forests and wildlife. The list of land sparing technologies is long: Tractors, unlike mules and horses, do not need to feed on hay. Advances in fertilizers and irrigation, as well as better storage, transport, and pest control, help boost yields. New genetic varieties of crops and livestock allow people to get more from less. Chickens now grow three times as fast in they did in the 1950s. The yield boosts from genetically modified crops is now saving from the plow an area equivalent to 24 percent of Brazil’s arable land.

What is really making a positive dent in the environmental arena is the unintended effects of technology rather than nature reserves or exhortations to love nature. Policy analyst Indur Goklany calculates that if we tried to support today’s population using the methods of the 1950s, we would need to farm 82 percent of all land, instead of the 38 percent we do now. The economist Julian Simon once pointed out that with cheap light, an urban, multi-story hydroponic warehouse the size of Delaware could feed the world, leaving the rest for wilderness.

The story is not just about food. In fiber and fuel too, we replace natural sources with synthetic, reducing the ecological footprint. Construction uses less and lighter materials. Even CO2 emissions enrich crop yields.

What Could Go Wrong?

All the economic models agree that the fastest economic growth will produce the smallest population, the most frugal use of resources, and the most land sparing. So what could go wrong?

The Jevons Paradox argues that we compensate for greater efficiency by using more of a resource because it is cheaper. But this is no longer true of land: There is a steady release of land from farming going on in countries like the United States. Of course, we might see a reversal of the demographic transition and a rise in birth rates. Yet all the evidence suggests that such a reversal would be far more likely to happen if the world remains or grows poor than if it becomes rich.

Catastrophic climate change might undo us. Yet moderate climate change will only help with land sparing. Moreover, the empirical data increasingly support the probability that climate change will be mild and slow for many decades. One should be more concerned about the effects of climate change policies, which are horribly land-hungry and harsh toward nature. Biofuels, wind power, and hydroelectric power all yield fewer kilowatts per acre than carbon-based energy. Meanwhile, limits on fossil fuels encourage the rural poor to continue cutting down trees for fuel. In other words, when it comes to climate change, the cure might be worse than the disease.

Organic farming is another example of ecologically good intentions that would pave the road to environmental hell. Organic farming is nice enough as a local fad, but if it were pursued on a global scale it would require a doubling of the amount of land devoted to agriculture, because organic yields are necessarily much lower than those using synthetic fertilizer. In effect, organic farmers have to grow their own fertilizer as “green manure” or dung from livestock, which takes up far more land than making fertilizer in a factory. If the world were to go organic, it would require a renewed and massive assault on forests, wetlands, and nature reserves to feed the global population.

Paradoxically, economics has done more for nature than ecology has. Yet, as discussed at a recent forum hosted by PERC—The Property and Environment Research Center—there is still much that both fields can learn from the other. Economics could learn something from Charles Darwin and ecology could evolve from revisiting Adam Smith. Indeed, Charles Darwin read Smith, so there is an ancestral connection between the two fields: they both stress the emergence of phenomena rather than their direction from above. And, there is much activity in evolutionary biology and ecology that is parallel to what is occurring in economics and vice versa. Nobel laureate F. A. Hayek went across to evolution to pinch ideas, so there is fruitful dialogue between ecology and economics and plenty of room for more.


Mr. Ridley is a scientist, journalist, businessman, and the author of The Rational Optimist. This article is reprinted from PERC Reports, Winter/Spring 2013, published by PERC—The Property and Environment Research Center.

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Use Stories to Build Relationships with Donors

by Steve Kiel

DO YOUR DONORS KNOW YOUR organization’s history? Do they understand the impact of your work? Do they feel their donations are being used effectively?

Communicating with stories is the best way to make sure your donors answer yes to these questions. Human beings are hardwired to better remember and comprehend facts when they are presented in a story format. From prehistoric man passing oral histories from one generation to the next to today’s politicians telling personal narratives on the campaign trail, stories activate parts of our brain unaffected by statistics and data.

Take a look at your organization’s proposals, mailings, reports, and newsletters. Are you incorporating narratives into your presentations? What about in donor meetings?

Annette Simmons describes six kinds of stories in her book, Whoever Tells the Best Story Wins: How to Use Your Own Stories to Communicate with Power and Impact. Below are descriptions of those story types, adapted to apply to nonprofits:

Who I Am: Stories are an excellent way to build trust and credibility with your donors. Think about the identity of your organization. What makes your organization special and what earned your organization the right to influence others? Do you have a compelling story about your organization’s history, founders, or a major donor? Weave these stories into a persuasive narrative to show the uniqueness of your organization.

Tell your donors what the world will look like in the future if your work is successful.

Why I’m Here: Fundraising is about relationships. You represent the organization. Donors need to trust and identify with you before they’ll listen to what you have to say about the organization you represent. Why did you get involved in the free-market movement? What compelled you to work for this organization? Only after discussing that will you have the credibility to explain why you’re meeting with prospective donors, or why you’re asking them for support. Tell donors what their gift will accomplish, who it will help, or how it will promote positive change. Frame the challenge, and explain how your organization will overcome it.

Vision: What is the vision of your organization? Tell your donors what the world will look like in the future if your work is successful. Don’t use numbers. Use imagery. A vision story should be metaphorical and create an emotional response. And remember, make sure you can deliver what you promise.

Values in Action: Look at accomplishments that demonstrated your organization’s values. For example, if you hosted an intern, profile her in a story to your donors and highlight the value she received from your organization. Then, profile her again in five or ten years to show how your organization influenced her life and career. Don’t be limited by your own stories. If one of your core values is self-sufficiency, tell a story about one of your donors who has a “Horatio Alger” background.

Teaching: Stories are the best way to teach lessons. There is a reason that Jesus taught using parables. If a donor is considering increasing his support but is somewhat hesitant, tell him a story about another donor who went through the same decision making process and ultimately decided to give more. What did that increased support mean to the other donor? Did he feel closer to the organization? Did he feel like he was making a bigger difference? Teaching stories are a non-confrontational way to show, rather than tell, donors why they should increase their support.

I Know What You Are Thinking: Donors have objections, but they may not tell you what they are. Give voice to those secret objections by confronting them through a story. “I know what you are thinking” stories are designed to validate the objection, and then address it. If you suspect a donor is concerned about the long-term viability of your organization, for example, you can bring up the objection and explain why it isn’t true. Did your organization recently introduce a planned giving program? Does your organization have a sizeable endowment? Is a major donor or the members of the board particularly committed to the organization? These types of stories effectively demonstrate the strength of your organization.

Annette Simmons’ book will help you with the mechanics of storytelling. You can apply those mechanics to grant writing as well. For that, consult Storytelling for Grantseekers: The Guide to Creative Nonprofit Fundraising by Cheryl A. Clark.


Mr. Kiel is a senior consultant at A.C. Fitzgerald and Associates. This article is reprinted from their monthly newsletter, The Nonprofit Partner. For more fundraising ideas for nonprofits, visit ACFfitzgerald.com.

 
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