So did you feel it?  Did your wallet suddenly get lighter?  On July 1st at 12:01 am, the federal government quietly slipped their hand into your pocket, extracted a large amount of cash, and very few people seem to be aware of the move.  The top income tax bracket went from 35% to 39.6%, the top income payroll tax went from 37.4% to

52.2%, Capitol Gains went from 15% to 28%, the dividend tax went from 15% to 39.6%, and the estate tax went from 0% to 55%.

All of these taxes were passed under the Affordable Care Act, otherwise known as ObamaCare.  Suddenly, free health care is starting to get expensive.  And it should be remembered that this is just the opening volley.  As costs go up, so will these taxes. 

All of these taxes have targeted the “rich” since it was felt they could easily afford it.  Unfortunately, the government’s definition of “rich” seems to mean anyone who has worked hard for a living.  Most of you, and most small business owners who employ millions of Americans and make up the majority of the economy, fall into this category.  Many retirees aren’t even in the upper tax brackets anymore but rely on dividends and Capital Gains for their income.  This income was derived from long-term retirement investment planning to ensure a comfortable life in their twilight years.  Now that income has been compromised.

For those that are cheering the fact that corporations will now be required to pay higher taxes, remember that all costs of doing business are ultimately passed on to the consumer.  Everything from gas, to food, to building materials, and everything in between, will increase in price… at least those manufactured in the U.S.  The movement to “Buy American” in order to keep jobs from going overseas will take a hit.  Since foreign companies aren’t subject to these new taxes, their goods and services will now become cheaper by comparison.  Lower cost imports = jobs lost.

It’s no secret that companies will move part or all of their operations across state lines take advantage of lower tax rates.  We’re located in Reno, and right outside the city is one of the largest industrial complexes in the country.  Companies like Wal-Mart, Pennies, Tire Rack, Apple, Microsoft, Amazon, Tesla, Toys R Us, and others all have part of their operations here, and all for the simple reason that California got a little too greedy with their tax structure. 

Will companies take it a step further and move their headquarters or part of their operation overseas?  It’s already happening.  The Washington Post recently reported that numerous companies, from Fruit of the Loom to several oil and investment companies have made the jump, with probably more to follow.  It’s a global market, and while raising U.S. corporate taxes may look like a way to raise money, it puts domestic companies at a competitive disadvantage, which will ultimately cost American jobs.

Perhaps one of the most obscene taxes that keeps rearing its ugly head from time to time is the estate tax.  As one politician in favor of the estate tax stated, “What easier way to raise money than to tax rich dead people?”  Yes, it is an easy way to raise money, but that doesn’t make it right, and not everyone that leaves an estate to their children is rich.  Mike Fitzpatrick put it succinctly when he said, “The estate tax punishes years of hard work and robs families of part of their heritage by imposing a huge penalty on inheritance after death… a tax on money that has already been taxed.”

So the iconic Norman Rockwell-ian scene of a father putting his arm on the shoulder of his son as they look over the family farm (or roofing business) and saying, “Someday this will all be yours” will now be a thing of the past.  This touching moment will have to be amended to, “Since you’ll have to pay 55% of the value of our family business to the government, you’ll either have to look for a new line of work or visit the bank to take out a loan to pay for everything I’ve already worked my entire life to achieve and has already been taxed.”

The idea that the government can simply take what is not theirs without a constitutional or justifiable reason simply to line the coffers just seems to defy every principle on which our country was based.  Taxes are a necessary evil, but when it gets to the point that the taxes deter people from working hard and make it easier not to go that extra mile, not to earn that extra buck, not to expand your business, or not to hire an extra employee, they become a stumbling block to economic growth.

Marc Dodson

editor

As I write this, gas at my local station hovering closing in on $4.50 a gallon, and there doesn’t seem to be much hope of it coming down soon.  At this rate, gas will soon cost more than bottled water, or at least that was the consensus of the people standing in line at Starbucks to get their café mocha latte espresso frappuccino grande at $7 a cup.

Right now you’re looking at the extra cost of fuel to keep your trucks running, the supplies delivered, and your crews working, but this is minor compared to what the roofing material manufacturer is facing.  With a major portion of roofing materials being asphalt-based, a manufacturer has to make delivery of goods at an agreed upon price.  The problem is, that price was agreed upon when crude oil was considerably lower than it is today.  And even after it’s manufactured at a high cost, it must then be transported at a cost that was calculated when fuel prices were lower.

But of course that’s not the end of it.  When fuel prices rise, the costs of all goods and services rise.  Everything that we purchase, from food to stereos to automobiles, was transported or used a manufacturing process that in someway consumed oil.  The lights and computers in your office right now are running on electricity that was probably generated by an oil-burning electrical plant.

It always bothers me when I watch the news and they interview a person pumping gas.  What do you think of the higher gas prices?  “Well,” he says, “I guess we’ll just have make fewer trips the store to use less gas.”  Of course, what this person doesn’t realize is that everything he purchases at the store will also go up in price.  The merchandise has to get to the store somehow, and when the cost of delivery goes up, so do the costs of goods and services.  The cost of doing business is always passed on to the consumer.  If it wasn’t, companies couldn’t stay in business and our capitalist economy would collapse.

So, is this the end to life on this planet, as we know it?  (I’ve always wanted to say that.)  Hardly.  Economists are already predicting that while the price of oil will continue to rise, it will do so at a much slower rate.  The poor economy of the last few years hasn’t helped matters and has made the rising price of gas seem more out of line than it actually is.  The fact remains; over the last couple of decades, with a few exceptions, oil prices have pretty much followed inflation. 

It’s the law of supply and demand that’s driving up the price of oil, as well as other commodities in a world market.  A decade ago, the lame-stream media was attributing the then outrageous $2 a gallon gas prices on the party occupying the white house.  They even went so far as to point to oil holdings of administration officials.  Now that the price of gas has doubled, the media tune has changed and it’s no longer an issue.  Funny how that works.  To say that our esteemed media, our “watchdog of society,” is merely reporting the facts is naïve.  To say they selectively report the facts is closer to the truth.  To say they editorialize their reporting to suit their purposes is probably pretty accurate.

Economists have added that, yes, people who bought oil futures a year ago are now raking in the money.  But they also caution that those just now getting into the oil futures market are buying at inflated prices may not do as well over the long haul.  This is a telling prediction indeed.  If they’re correct, then oil prices should level out, the skies will be blue, birds will be singing, and unicorns will be dancing in the streets.  Once again, all will be right with the world.

Marc Dodson

editor

It’s been said that if a government wants to encourage an activity, they subsidize it, and if they want to discourage that activity, they tax it.  Nobody can deny the photovoltaic (PV) solar industry has received more than its fair share of tax incentives.  For the past several decades, rightly or wrongly, solar panels have enjoyed tax incentives from federal, state, and/or city sources.  The goal, of course, was to encourage PV use and help reduce our dependence on foreign oil… and it worked.  Over the years solar panels have become more efficient, easier to install, cheaper to buy and maintain, and more popular… and in Arizona, perhaps too popular.

In their infinite wisdom, Arizona legislators took a look at this free source of energy that their citizenry was soaking up from “their” sun and decided that it was time Arizona got its pound of flesh.  Yes, Arizona has set a dubious precedent and become the first state to tax the sun.

Hey, I’m not making this up.  Nobody but a legislator could think of stuff like this.  I can see it now:  over-staffed, over-stuffed, taxpayer-supported state congressmen siting around a table eating an expensive catered lunch, trying to figure out how they can squeeze some more money from their constituency.  To be fair, this was first suggested by the state’s largest utility, Arizona Public Service (APS), who claimed they were steadily loosing money to the solar panel industry.  But isn’t that like newspapers claiming they’re loosing money to Internet based news services?  Should taxpayer funds now support newspapers?  Technology changes, deal with it.  You can’t force taxpayers to support the buggy whip industry just because people have elected to use automobiles.

At the heart of the debate was the long-standing ruling that allows solar panel owners to sell excess power back to the utility companies, called net metering, thus reducing the utility company’s dependence on foreign oil (see paragraph 1).

As was reported in a story by Reuters News Service, The Arizona Corporation Commission approved a monthly fee of 70¢ per kilowatt, which will be imposed on homeowners who have solar panels installed after January 1, 2014.  This translates to about $5 per month for new solar panel users.  According to the article, this was a compromise between the APS and the state solar panel industry, with both sides claiming a victory of sorts.

In my opinion, it’s anything but a victory for the solar industry.  APS was the real winner.  They now have a tax in place, and a new tax at that.  Sure, it’s 70¢ per kilowatt now, but taxes increase, they never go down.  When the personal income tax was implemented, it was never to exceed 3%.  Social Security tax was never supposed to exceed 1%.  The monthly federal excise tax that you see on your phone bill was put it place during World War II to pay for the war effort.  If you haven’t figured it out by now, I’ll be blunt:  taxes don’t ever go down, and they don’t ever go away.

Reuters stated that prior to the hearing, APS pulled out all the stops and spent $3.7 million on lobbying and advertising.  Throughout the proceedings, APS argued that net metering allows solar customers to avoid paying their fair share of the cost to maintain the electric grid, thereby passing $18 million in annual costs onto non-solar customers.  Of course, this issue could have been addressed separately, charging a usage fee for the grid.

With PV costs dropping and utility costs increasing there has been dramatic growth in rooftop solar over the past year.  Systems are being added to APS’ service territory at a rate of about 500 a month, said APS.  Arizona was the nation's No. 2 state for solar installations in the second quarter of this year.

According to Reuters, Rhone Resch, the head of the U.S. solar trade group, the Solar Energy Industries Association, said in a statement following the vote that he was, “deeply troubled by today's precedent-setting action,” while at the same time applauding the decision to allow customers to continue selling unused solar power back to the utility.  At least Resch has the foresight to realize how this action can have far-reaching implications, and I would hope that the Solar Energy Industries Association throws its weight behind every effort to get this action overturned.

Marc Dodson

editor

Just when you thought you had seen it all, something really strange arrives in the mail.  Maybe I should back up.  A few months ago, Northern California experienced a series of brush and forest fires, the worst of which was the Yosemite fire.  Since Reno is located in a valley and about 100 miles north of Yosemite, the prevailing winds carried the smoke from that fire our direction.  While the majority of the ash had dissipated, our normally clear skies were subjected to smoke and haze for several weeks.  The fire diminished in size, the winds changed, but for a couple of weeks it wasn’t pleasant.  These things happen.  It’s part of life.

While the Yosemite fire was finally contained toward the end of October, that wasn’t the end of the story.  A few days later, I receive a very slick form letter from an attorney.  The letter explained how this smoke could have adversely affected the life and performance of my roof.  The letter went on to explain how microscopic particles from the smoke had attached themselves to my roofing material, and over time, will shorten the life of the roof and its ability to repel water.  Additionally, the letter detailed how these particles could be a health hazard as well.  The missive included stock microscopic photos of smoke soot and ash, enlarged 10,000 times… pretty scary looking stuff.

So what can I possibly do to protect our home and quality of life from this microscopic menace?  Luckily, this attorney was ready and willing to help (are you surprised?).  It seems this firm is an expert at extorting, excuse me, I meant to say negotiating, settlements of this type.  Their track record was also presented:  over 2,000 claims of legalized blackmail, excuse me again, I meant settlements, ranging from $21,000 to $53,000.  Their target is the homeowner’s insurance company.

Of course there were no out-of-pocket expenses and no fees unless the case is settled.  I’m assuming almost all of these cases are settled out of court, since the insurance company, while probably not liable, figures that’s the cheapest way out.

This action only encourages future frivolous lawsuits, and most contractors have had too much experience on the receiving end of this equation.  This approach was new to me, and if nothing else, you have to admire the creative thinking on the part of this law firm.

There’s also another side to this story.  In a discussion with Sam Abdulaziz about frivolous lawsuits, he reminded me that for every frivolous lawsuit, there’s an upstanding attorney defending the contractor (or insurance company) on the other side.  Sam Abdulaziz, of the law firm Abdulaziz, Grossbart & Rudman, had been writing a regular “Construction Law” column for this publication since its inception, as well as for our sister publication, Architectural West.  He was also the voice on the other end of the line when you called the WSRCA’s Legal Hotline, as well as the unsung force behind many construction-related rules and regulations that are now benefiting contractors in the West.

Sam recently passed away at the age of 74.  Besides being a litigate friend of the contractor, Sam was a kind, gentle, compassionate man.  His passing is a great loss to the construction industry, him firm, and of course, his family.  There’s more about Sam in the “People in the News” section of this issue.  We will miss him.

Marc Dodson

editor

We’ve painted ourselves into a corner.  For decades, parents and teachers have been pounding the idea into young, impressionable minds that everyone has to go to college, that everyone needs a college education in today’s world.  This is simply not true.  Less than a third of the jobs in the U.S. require some form of higher education.  Instead of inspiring more kids to pursue college, we’ve succeeded in creating a generation of young people who are ashamed to take a job where they work with their hands.  We’ve managed to create a situation where jobs have to be outsourced to countries halfway across the world because no one is willing to do the work in our own country.  What we’ve succeeded in doing is creating a shortage of workers in the construction, restaurant, and hotel industry, among others.  Since these jobs can’t be outsourced, the workers come across our boarders, legally or illegally, to do the hands-on work that we’ve conditioned our sons and daughters to avoid like the plague.  And we wonder why we have an immigration problem.  It’s our own doing.

I’m not the first person to make this observation.  This rising problem has been talked about for years.  Attracting workers into the construction industry has nothing to do with wages.  Construction industry jobs are some of the highest paying hourly jobs in the country.  Even the local McDonalds has an almost-perpetual sign in the window, seeking employees with a starting pay several dollars higher than the minimum wage.  Not bad pay for being able to mumble, “You want fries with that?”

It’s not the lack of pay that’s turning young people away from the construction industry, rather it’s the shame our educational system has conditioned them to feel for performing physical labor.  You think I’m exaggerating?  In recent years, many high schools have cut back or eliminated funding for shop and auto mechanic classes.  Many say it’s to save money but most are openly honest and say it was not the right message they want to send to our youth.  The message they want to send is to study hard and go to college.  Apparently getting dirt under your fingernails is no longer considered a noble profession.

This trend needs to be reversed.  Educators have to look at the real world and admit to themselves that many students aren’t going to college and about two-thirds of all jobs available don’t require a college education.  They should be addressing the needs of all their students, not just the ones they deem fit for college.

Unfortunately, our education system continues to convey the message that not going to college implies failure.  The only long-term solution to both this labor and immigration problem may be to change the way educators think; and I wouldn’t hold your breath waiting for it to happen.

So, high school graduates look upon any job that doesn’t include a desk, secretary, and expense account in distain while labor-intensive jobs go unfulfilled.  At the same time, legal and illegal immigrants march across our borders and happily fill these same manual labor positions for higher hourly wages than many of them used to earn in a day.  Do we have an immigration problem?  Yes, but on a larger, long-term scale we have an education problem spawned by our school system that is out of touch with reality.

Marc Dodson

editor

I believe OSHA made a slight miscalculation and it will cost you money.  According to a report released by the Construction Industry Safety Coalition (CISC), they found that the OSHA proposed silica standards for U.S. construction industry would cost the industry $5 billion per year.  This is roughly $4.5 billion per year more than OSHA's estimates.

OSHA's proposed rule, intended to drastically reduce the permissible exposure limit (PEL) of crystalline silica for the construction industry, has been vastly underestimated.  The new estimates released by CISC estimate that the costs to the industry will actually be approximately ten times the OSHA estimate, costing nearly $5 billion a year.

What are the odds that OSHA, a federal government agency that obviously knows what’s best for us, could have possibly been so far off in their cost estimate?  After all, I’m sure it looked good on paper.  The problem, as always, is that bureaucrats don’t have any real world experience.  They have never heard of a cost/benefit analysis, bringing in a project on time and under budget, earning a customer’s trust, making a profit, or meeting a payroll… yet they know what’s best for us.

It seems many federal agencies don’t realize that small businesses are the backbone of the U.S. economy.  According to the Small Business Administration (SBA) small businesses, those with fewer than 500 employees, make up more than 99.7% of all employers.  They employ about half of the workers in the U.S. and create about 75% of the new jobs in our country.

But this lack of respect for the small business goes further than government agencies.  When responding to how a proposed government healthcare program could bankrupt many small businesses, one current Presidential hopeful stated, “I can’t be responsible for every under-capitalized small business in America.”  I won’t say which Presidential candidate said this, but her initials are Hillary Clinton (May 5, 1994).  Doesn’t this just ooze a feeling of helpfulness and empathy?

It used to be your biggest problem was your competition, now it’s government agencies.  This is not a good sign.  As a roofing contractor, you are the quasi-essential small businessperson, but you’re not alone in this ongoing battle.  There are places where people like you can get together, discuss and solve problems, and find out what’s coming next with regard to regulations, materials, and methods.  They’re called conventions; and there’s one specifically designed for the West, and it’s right around the corner.

June 14-17 in Las Vegas, Nevada, the WSRCA will stage its annual Western Roofing Expo.  In addition to legislative updates by Craig Brightup, seminars will include subjects ranging from getting more sales to understanding leak detection.  One seminar, A Preview of the Results from the WSRCA’s Synthetic Underlayment Research and Testing Project is sure to draw more attendees than William Shatner has toupees.

This issue of Western Roofing is dedicated to the Western Roofing Expo with schedules of events, complete list of seminars, the origin of the Davis Memorial Foundation, key speakers, and The Roofing Games.  Also in this issue is an interview with Mike Tory.  Tory, born and raised in Hawaii, will become the next WSRCA President.  With his election, this should finally put to rest the rumors of the existence of a super-top-secret WSRCA Presidential breeding farm in central Nevada near Area 51 (which you'll find if you take Hwy 95 north of Las Vegas for about 65 miles, turn east on the Mercury exit, then keep going for another three miles until you see the “WSRCA Presidential Breeding Facility” flashing neon sign).  If you still can’t find it, talk to me at the Western Roofing Expo.  I’ll be there.

Marc Dodson

editor

Have you every listened to a politician and come to the conclusion that they were talking out of both sides of their mouth?  Let me rephrase that.  Have you ever listened to a politician?  Same thing.

Congress and the President both profess that they want full employment.  They work toward this goal by implementing programs and allotting funding (your money) that will encourage more jobs in the market.  At the same time, this same group, in conjunction with state and federal agencies, are working to increase funding (your money) to the chronically unemployed.  As the money increases, so do the roles of the chronically unemployed.  Funny how that works.

At the recent Western States Roofing Contractors Association (WSRCA) Western Roofing Expo, this seemed to be a common refrain among roofing contractors.  They had plenty of jobs, and many stated that they had more work than they could handle.  The only limiting factor was finding enough people willing to work.  Not enough “boots on the roof.”  If you subscribe to the logic that the construction industry is the engine that drives the U.S. economy, then not enough workers in the industry will ultimately stall the economic recovery.

Sure, people can make more money working on the roof that sitting at home, but when you can do nothing and still enjoy free cell phones, a roof over your head, food on the table, and enough left over for a car and a big flat screen, what’s the point?  And these benefits just keep increasing.  These “incentive not to work” programs also have a darker side.  The old adage of, “idle hands are the devil’s playground” holds true.  Many people will find something to fill their days, and since it can’t be a real job, as that would involve reported income, people may turn to illegal activities.

Hawaii tops the list of money dolled out for assistance programs.  If you are a resident of our 50th state, then welfare, unemployment, and other federal and state assistance programs will net you payments the equivalent of $29.13 per hour, or $60,590.40 annually, most of it tax-free.  This is probably more than a journeyman roof worker would make.  In 35 states, welfare, housing assistance, and other benefits pay more than a minimum wage job, according to a new study by the Cato Institute.  The study also found that in eight states, the payout exceeded $20 per hour and in 13 states, the payout is more than $15 per hour.  (source: http://downtrend.com/robertgehl/welfare-payouts-top-20-per-hour-in-eight-states)

So what is the solution?  Japan also has the unemployed and the homeless, but they have a different approach.  If you don’t work in Japan, you don’t get any money, but that doesn’t mean they’re heartless.  Instead, they have barracks for those without a place to sleep, and this could include whole families.  Besides a place to stay, good nutritious meals are served.  If you are able to work and can’t find a job, the government will find a volunteer position for you, either in road maintenance, landscaping, or housekeeping.  Their assistance program is not meant to be a lifestyle, it’s meant to only be a safety net, and it seems to work.  Japan has one of the lowest unemployment rates of any industrialized nation at 3.2%.

The work ethic on which our country was founded is disappearing from the landscape of our country.  Gone are the ideals of a pioneer spirit and the notion that you must work hard to succeed.  These are principles on which this country was built.  For many, the safety net of government assistance programs has become a living space.

Marc Dodson

editor