The MARKET CENTER is a platform for periodic observations about economic policy, philsophy, government, and the political process. Some of the commentary will relate to tax competition issues, but this site is designed to allow a wide range of topics to be analyzed. Readers are invited to submit questions, though we cannot promise public responses to every query. Readers also have an opportunity to sign up to receive postings via email.

The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively.

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The Market Center Blog

Observations and insights on the global fight
for economic freedom and prosperity

CF&P's Market Center Blog Archives
April 2004


Friday, April 30, 2004 ~ 3:55 p.m., Dan Mitchell Wrote:
A journey of a million miles begins with a small first step. Holland will have the rotating Presidency of the European Union later this year, and the Dutch Prime Minister has stated that catching the US economy will be a key goal during his nation's tenure. This will require dramatic reductions in the size and power of government in Europe, steps that seem very unlikely - at least in Old Europe. But the Prime Minister did say that he wanted less regulation, which is a tiny step in the right direction. The EU Observer reports:

    [Dutch Prime Minister] Mr Balkenende said, "We need to concentrate on the European economy because, if you compare it to the American economy, you can see that Europe is behind. We need a new strategy". In fact, Europe already has such a strategy called - in Brussels jargon - the Lisbon strategy. The goal of this strategy is to make the EU the "most competitive, knowledge-based economy in the world by 2010". But this means taking over the US and the signs are that Europe is falling further behind America, not closing the gap.... Mr Balkenende also suggested that the EU needs to cut through some of the red tape that can hold back business, saying, "we need to lighten the administrative load in Europe because the business climate could be improved".

Friday, April 30, 2004 ~ 9:45 a.m., Dan Mitchell Wrote:
Canada's assault on freedom. In a fascist mix of totalitarianism and egalitarianism, two provinces in Canada are prohibiting citizens from using their own money to purchase health care. Presumably, oppressed Canadians will still be able to get decent health care in the United States, but maybe Canada can hire former East German border guards to interrogate citizens at the border:

    Just over a month ago governments in British Columbia and Ontario implemented new legislation effectively forbidding citizens from using their own incomes to purchase health services.1 Incredibly, this ban was not targetted at peripheral services, but at core services that the government deems medically necessary. More specifically, the ban focuses on conventional medical services where citizens are on government waiting lists and where they would like to find a timely, private alternative.
    http://www.fraserinstitute.ca/admin/books/chapterfiles/Oh%20To%20Be%20 a%20Prisoner!-Jan04ffesmail.pdf

Friday, April 30, 2004 ~ 6:53 a.m., Dan Mitchell Wrote:
Tax competition promotes economic liberalization in Europe. KPMG has released a new study showing how jurisdictional competition is pushing tax rates down. The accountancy firm notes that tax rates are falling as nations try to improve their competitive position prior to enlargement:

    European Union enlargement probably will create new pressures on western European countries to reduce corporate tax rates in order to keep businesses investing, a study from KPMG LLC showed. Poland and Slovakia, two of the 10 states due to join the 15- nation union this weekend, have in the past year made the biggest cuts to their corporate tax rates out of 69 nations surveyed, the accountancy firm said. ``I don't think there's any accident their tax rates have gone down'' in the same year they enter the EU, said John Battersby, KPMG's head of strategic tax policy, in an interview. This may ``lead to increased tax competition. Practically every country in the world is aware that businesses have the option to do business somewhere else.''
    http://quote.bloomberg.com/apps/news?pid=10000085&sid=aqCTY8MHk_ T0&refer=europe

Friday, April 30, 2004 ~ 3:25 a.m., Dan Mitchell Wrote:
Three cheers for WTO ruling against US cotton subsidies. Politicians from both parties steal money from taxpayers and consumers in order to line the pockets of wealthy cotton growers. This policy also has the effect of creating more poverty and misery in less-developed nations. The World Trade Organization wants the US to get rid of these unfair subsidies, and the Wall Street Journal urges the next President to use the ruling as an excuse to do the right thing:

    Powerful Ag interests in the U.S. want no part of this and no wonder. According to Oxfam, "the largest 10% of cotton farms receive three-quarters of total [U.S. subsidy] payments." The Environmental Working Group Web site lists the top 20 recipients of cotton pork in the period 1995-2002, with total U.S. cotton subsidies topping $10 billion. Eight are in Mississippi, seven in California, and two in Arizona. Arkansas's Tyler Farms topped the list with more than $24 million in handouts. That's more than twice its next closest rival, J.G. Boswell of California, which took in subsidies of $10 million-plus. Paring back freebies of the rich and powerful isn't easy. But the WTO ruling offers a politically convenient excuse for whoever wins the election to do the right thing next year.
    http://online.wsj.com/article/0,,SB108310911552795472,00.html?mod=opini on (subscription required)

Thursday, April 29, 2004 ~ 11:00 a.m., Dan Mitchell Wrote:
UN corruption: pervasive and dangerous. The Wall Street Journal continues its ground-breaking coverage of the sleazy "oil-for-food" scandal at the United Nations. Claudia Rosett's latest article explains why high-level kick-backs, bribes, and pay-offs are both morally reprehensible but also a source of possible terrorist financing:

    In a world beset right now by terrorist threats--which depend on terrorist financing--it's time to acknowledge that the U.N.'s Oil-for-Food program was worse than simply a case of grand larceny. Given Saddam's proclivities for deceit and violence, Oil-for-Food was also a menace to security. By letting Saddam pick his own business partners and draw up his own shopping lists, by keeping the details of his contracts and accounts secret, and by then failing abjectly to supervise the process, the U.N.--through a program meant to aid the people of Iraq--enabled Saddam to line his pockets while bankrolling his pals world-wide. In return, precisely, for what? That is a question former Federal Reserve Chairman Paul Volcker might want to keep in mind as he heads up the official investigation, finally agreed to by U.N. Secretary-General Kofi Annan, into Oil-for-Food.

Thursday, April 29, 2004 ~ 9:48 a.m., Dan Mitchell Wrote:
Senator Allen fights to keep Internet free from government intervention. Revenue- hungry politicians - primarily at the state and local level - see the Internet as a potential gold mine of new tax revenue. Yet the lack of taxes and regulation is a key reason why the Internet has prospered, as Virginia Governor George Allen explains in today's Wall Street Journal:

    By giving more people access to knowledge and information, the personal computer and the Internet have empowered tens of millions of Americans as consumers and entrepreneurs, and as citizens in our free society. The content on the Internet and access to it have exploded primarily because government regulators and taxers have stayed out of the way. While governments are, by nature, drawn to take "their share" of any successful private venture, for the Internet to keep growing and for our citizens to keep benefiting from it, government must fight its instinct to meddle and to burden creativity. That's why Congress passed a law in 1998 temporarily banning taxes on Internet access. In November of 2003, the temporary moratorium on Internet-access taxes expired, and this week the Senate will face this issue once again. Once again, the answer is clear. We must keep access to the Internet tax-free.
    http://online.wsj.com/article/0,,SB108311007430995505,00.html?mod=opini on (subscription required)

Thursday, April 29, 2004 ~ 6:09 a.m., Dan Mitchell Wrote:
World Bank tries to keep Montenegro poor. International bureaucracies must hate the poor, or at least it certainly seems that way. A recent Heritage Foundation report by Ana Eiras notes that, "The Montenegrin government is trying to implement tax cuts and other reforms to create more opportunity for businesses and thus foster economic growth. However, by threatening to withhold the next three loans, the World Bank, which disagrees with the effects of the proposed reforms, is coercing Montenegrins into raising taxes..." This is hardly an unusual example. The World Bank and the International Monetary Fund are notorious for imposing statist policies on low-income nations. Ms. Eiras explains why this may be happening and suggests a new approach:

    The World Bank's dealings with Montenegro illustrate how World Bank officials use their power to advance their own interests, not those of the country that they are presumably trying to help. In fact, the mere presence of the World Bank and other international financial institutions (IFIs) severely undermines any serious domestic effort to implement reforms, often while politicians around the world use IFIs to enrich themselves at the expense of their people. The Bush Administration should end the harmful activities of IFIs and set an agenda for effectively reforming the lending practices of these institutions. Countries like Montenegro will have far better prospects of advancing reform and developing their economies without the IFIs standing in their way.

Thursday, April 29, 2004 ~ 5:21 a.m., Dan Mitchell Wrote:
Competition may save Western Europe by forcing reform. The EU Observer has an excellent article highlighting the beneficial impact of competition in an expanded EU. The low-tax nations of Eastern Europe will draw jobs and capital from Western Europe. This will force welfare states like France and Germany to either reform or die a quicker death:

    ...the EU will soon inherit member states with growth rates that the sluggish EU 15 can only eye jealoulsy from the West. Growth last year in the accession countries was over four times faster than the current EU 15. Whilst economic output increased in 'old Europe' by a sluggish 0.8 percent, the new member states stormed ahead by 3.6 percent. And some new member states, especially the Baltic states, are already revelling in their reputation as "tigers", showing very fast growth. Estonia grew by 4.8 percent last year, Latvia by 7.5 percent and Lithuania by a staggering 8.9 percent. ...But aside from the impulse of higher growth from the new member states, what will the impact of enlargement be on business and the economy? The main immediate effect should be to shake up the economies of 'old Europe' as it faces up to competition from more dynamic markets to the East and South. ...Firms looking to invest in the EU will also take taxes into account. Currently, corporate tax levels in the accession countries are considerably lower than in the old EU 15. According to a study by French bank Société Générale, there is a zero percent corporate tax burden in Estonia. Taxes in Lithuania and Cyprus amount to 15 percent and 19 percent in Latvia, Slovakia and Poland. In contrast, Germany levies 38.7 percent, France 35.4 percent, Spain 35 percent, Italy 34 percent and the UK 30 percent. So old member states may find investment (and jobs) drift away from them, especially countries on the border, such as Germany. In fact, this process has already started. In April, the German industrial giant Siemens announced it was relocating from Germany to Hungary where costs were 30 percent lower. And France is looking into ways it can persuade companies to stay on French soil.

Wednesday, April 28, 2004 ~ 6:53 p.m., Dan Mitchell Wrote:
Washington Post columnist condemns Kerry tax plan, calls for tax reform. Robert Samuelson correctly notes that John Kerry's give-with-one-hand, take-away-with-the-other-hand proposal will make the tax code more complicated and hurt US competitiveness. But he does give Kerry credit for drawing attention to the corporate income tax, the most punitive part of the internal revenue code:

    What Kerry proposes is lowering the U.S. corporate tax rate from 35 percent to 33.25 percent -- and limiting the ability of U.S. multinationals to defer taxes on future foreign profits. The idea is to discourage U.S. companies from moving operations to countries with lower corporate tax rates. But the practical effect would be to put U.S. multinationals at a disadvantage against many foreign multinational firms, whose taxes would be lower. A study by the Institute for International Economics, a think tank, suggests that the Kerry proposal would inspire massive efforts at evasion or cutbacks in U.S. operations abroad -- which, if Slaughter is correct, could hurt U.S. job growth. The plan's basic defect is that it barely lowers the cost of operating in the United States; it mainly increases the cost of operating elsewhere. American companies might do less abroad without doing much more at home. But Kerry is on to something. The corporate tax is a monstrosity. It promotes widespread tax avoidance, raises a diminishing share of governmental revenue and discourages efficiency. It's an exercise in cynicism and waste that the next president ought to overhaul.

Wednesday, April 28, 2004 ~ 11:51 a.m., Dan Mitchell Wrote:
Wall Street Journal defends East European nations from tax harmonization threat. The European edition of the Wall Street Journal vigorously defends low-tax jurisdictions in Eastern Europe, arguing that their pro-growth policies should not be undermined by Western Europe's welfare states. Most interesting, the Journal points out that the low-rate corporate tax systems actually raise about the same amount of money as the high-rate systems in places like Germany

    In 2002, corporate and personal income taxes collected in Germany equaled 10.1% of GDP, according to the OECD. In Poland, the figure was 9.9%; in Hungary, 10%; and in the Czech Republic the number was 9.7% of GDP. So even if some of the so-called tax-dumpers among the accession countries have lower rates, there's not much evidence that they collect significantly less in revenue as a result. Indeed, Germany's corporate tax burden as a percentage of GDP, at 1.3%, is one of the lowest in Europe, and far lower than low-tax Ireland's 3.4%, despite Ireland's 12.5% corporate-tax rate. Maybe Germany should try lowering it's rate to 12.5%; it might collect more revenue that way. All of which is to say, this brouhaha over "tax dumping" and "excessively" low tax rates is not about the amounts collected at all, whatever Mr. Schroeder says. It is a thinly disguised attempt by the countries in Europe with the highest costs of doing business to raise their competitors' costs commensurately, and so defuse the competitive threat. Luckily for Central and Eastern Europe, tax policy remains a national issue, and the EU requires unanimity to impose measures such as minimum tax rates. The EU's new members should stick to their guns -- and their low, flat tax rates. Germans, rather than griping, should start studying their neighbors. They might learn something about taxes and economic growth.
    http://online.wsj.com/article/0,,SB108310507067895222,00.html?mod=opini on (subscription required)

Wednesday, April 28, 2004 ~ 11:34 a.m., Dan Mitchell Wrote:
The German collapse. High-tax welfare states destroy prosperity and undermine freedom, and the German economy is a good example. Writing in the Wall Street Journal Europe, a German journalists bemoans the deterioration of his nation's economy:

    Real wages have been in decline for a decade and a half. In 1998, the government promised to reduce the number of unemployed to 3.5 million. Back then, this was considered not very ambitious but now it seems unattainable. More than 4.5 million people are currently without a job and the already overstretched welfare state has to take care of them. The state has to borrow ever more money to meet its commitments. Germany has more debt, more welfare recipients and more unemployed than at any other time in its postwar history.
    http://online.wsj.com/article/0,,SB108301462308893890,00.html?mod=opini on (subscription required)

Wednesday, April 28, 2004 ~ 9:31 a.m., Andrew Quinlan Wrote
State politicians seek to undermine Constitutional protections against taxation of interstate commerce. Even though state tax and spending levels are at record highs, greedy politicians in state capitals want to impose taxes on the Internet. Yet as the Wall Street Journal points out, this is precisely why America's founders put the Commerce Clause in the Constitution:

    This is precisely why we have a Commerce Clause. It was devised to prevent state and local entities from taxing interstate commerce. The Internet's unique architecture and decentralized nature lend themselves to the very type of tax abuse that the Constitution guards against. Under Mr. Alexander's bill, not only could Internet access still be taxed, but so could all types of Internet usage. Thousands of localities nationwide would be allowed to levy fees on electronic correspondence that neither originates nor terminates in their jurisdiction -- from e-mails to Google searches to J. Crew.com purchases.
    http://online.wsj.com/article/0,,SB108302270893994195,00.html?mod=opini on (subscription required)

Tuesday, April 27, 2004 ~ 8:19 p.m., Dan Mitchell Wrote:
California State Treasurer puts his own political ambition above retirement security for state employees. The state of California manages one of the world's biggest investment funds, a pot of money that is supposed to be prudently invested to preserve and enhance the retirement income of state workers. Unfortunately, a greedy politician named Phil Angelides is diverting that money to enhance his own political ambition. By making investment choices based on politics rather than economics, Angelides is threatening the retirement security of tens of thousands of workers. Kevin Hassett of the American Enterprise Institute points out in USA Today that this also undermines the overall economy:

    The American economy has been a wonder because we have constrained capricious government intervention into private enterprise. State pension funds are messing with our formula for success. The biggest economic failures of the 20th century were the communist countries that ceded ownership of capital to the government. Others, such as Japan, suffered because their financial sectors were heavily influenced by politicians. Corrupt officials steered loans to businesses that made the highest campaign contributions rather than to those that had the best ideas. Japan is still trying to fix the mess that ensued. Socialism is bad medicine in large or small doses. Which is why the recent actions of state pension funds, especially the California Public Employees' Retirement System (CalPERS), are so troubling. ...California state Treasurer and radical CalPERS board member Phil Angelides, a Democrat with gubernatorial ambitions, ...[wants] CalPERS to invest its $166 billion in public money in a targeted way, buying up enough shares of some companies to have a significant voting block. He can then use that power to force policy changes. ...This is unacceptable in a free society.

Tuesday, April 27, 2004 ~ 6:42 p.m., Dan Mitchell Wrote:
The high cost of "free" health care. Syndicated columnist Tom Sowell brilliantly dissects Hillary Clinton's latest call for government-run health care. The left has largely destroyed the free market in health care already by having government pay for nearly half of all health care costs and by using the tax code to create a system where insurance picks up the tab for almost everything else. The result is a system where consumers have very little incentive to monitor costs and exercise choice. Not surprisingly, the left uses government failure as a reason to seek even more government:

    Senator Clinton parades the usual litany of reasons why the government should run the medical system, beginning with "soaring health costs and millions of uninsured." But, not only does she offer nothing that will actually reduce those costs, she declares that "our mental health delivery system is underfinanced." In other words, she wants to spend more money on shrinks. Can you imagine what will happen to costs if unverifiable diseases and unverifiable cures provide blank checks to be paid by the taxpayers?...What the lovely phrase "universal health care" boils down to is politicians and bureaucrats forcing people to get their medical treatment and pharmaceutical drugs the way the politicians and bureaucrats decide. Somehow, the notion seems to be insinuated that the government can do it cheaper and better. But name three things that the government does cheaper and better than private individuals and organizations. It would be no trick at all to name dozens of things that the government does worse and at higher costs.

Tuesday, April 27, 2004 ~ 5:15 p.m., Dan Mitchell Wrote:
President of Czech Republic blasts EU. In a strongly worded stated, Vaclav Klaus condemns the bureaucratic, pro-harmonization mindset of the European Union. Klaus certainly captures the attitude of the Franco-German bureaucracy in Brussels, though there is still a chance that the EU can be salvaged if the Constitution is rejected and tax competition forces governments to liberalize. The EU Observer reports on Klaus's comments:

    Czech President Vaclav Klaus, an avowed eurosceptic, has launched a scathing attack on the European Union just days before his country joins the club. Writing in today's Handelsblatt, Mr Klaus says, "The EU does not consist of freedom and openness but rather of bureaucracy, regulation and harmonisation". His comments follow others he made last week when he claimed that his country would "cease to exist" as an independent entity once it joined the EU.

Tuesday, April 27, 2004 ~ 2:06 p.m., Andrew Quinlan Wrote:
House leadership blasts Clinton-O'Neill IRS regulation. The Bureau of National Affairs reports on the strongly-worded letter from members of the House leadership to Treasury Secretary Snow. The various leaders vigorously condemned the IRS's illegal interest-reporting regulation and asked for its immediate withdrawal:

    Four members of the House Republican leadership wrote April 22 to Treasury Secretary John Snow, asking that he intervene to cancel a proposed Internal Revenue Service regulation (REG-133254-02) that would require U.S. financial institutions to report interest paid to nonresident aliens to the IRS. House Majority Leader Tom DeLay (Texas), Majority Whip Roy Blunt (Mo.), Republican Conference Chairwoman Deborah Pryce (Ohio), and Chief Deputy Majority Whip Eric Cantor (Va.) called the regulation "burdensome and unnecessary" and said it was "potentially harmful to the current economic recovery and future efforts at tax reform." The letter, released by the Center for Freedom and Prosperity, which has been orchestrating publicity for widespread opposition to the proposal, called it a "misguided Clinton-era regulation," and an accompanying news release said that Bush supporters in Congress want it cancelled. ...The rules have been widely criticized by private sector groups, and more than 40 lawmakers have asked Treasury to withdraw or review the regulations. Currently, nonresident alien bank deposit interest is not taxed and no statute calls for the reporting of such interest.
    http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8m4q6k8 (subscription required)

Tuesday, April 27, 2004 ~ 12:11 p.m., Dan Mitchell Wrote:
Even biased studies confirm that Europe is falling farther behind the United States. The World Economic Forum has a report on EU competitiveness showing the EU far behind the US. These results are especially interesting since the study uses two criteria - "social inclusion" and "sustainable development" - that penalize nations for market-oriented policies. The Financial Times reports:

    The US remains significantly more competitive than the majority of European Union member states, despite attempts by European leaders to turn the EU into the world's most competitive and dynamic region by 2010. ...The study seeks to track Europe's progress towards the so-called Lisbon goals, a string of economic targets agreed upon by EU leaders in March 2000. The goal was to challenge US economic hegemony by making Europe "the most competitive and dynamic knowledge-based economy in the world by 2010". However, the European Commission itself conceded earlier this year that the EU was falling further behind the US in some crucial areas. Economic growth and productivity growth, in particular, have been lagging behind US rates, leading many analysts to conclude that Europe stands little chance of overtaking the US within the next six years.
    http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullSt ory&c=StoryFT&cid=1079420630795&p=1012571727166 (subscription required)

Tuesday, April 27, 2004 ~ 8:41 a.m., Dan Mitchell Wrote:
Vote for the EU Constitution....or else! British voters are being subjected to more threats and sour-grapes brinksmanship from Brussels. In a stunning display of disloyalty to his own country, the British Commissioner is the one threatening voters if they don't approve the new Constitution giving massive new powers to the bureaucrats:

    The UK would have to leave the EU if it voted no in a referendum on the Constitution, according to British Commissioner Chris Patten.

Tuesday, April 27, 2004 ~ 4:03 a.m., Dan Mitchell Wrote:
More success for Russia's flat tax. International bureaucrats opposed Russia's flat tax when it was first proposed by in 2000. They claimed that it would deprive the Russian government of needed tax revenues and have no measurable effect on the economy. One wonders what they are saying now? We have three years of evidence, and it is increasingly clear that the flat tax is a big success. As Alvin Rabushka of Russiaeconomy.org explains, the flat tax is boosting growth and encouraging greater compliance:

Monday, April 26, 2004 ~ 8:59 p.m., Dan Mitchell Wrote:
Higher tax rates lead to more tax evasion and less revenue. Bruce Bartlett's blog (www.trendmacro.com/a/talkingpoints/default.asp) is a must-read for policy experts, particularly since Bruce relentlessly culls through academic literature to find articles that are relevant to the policy process. His latest discovery is a National Bureau of Economic Research paper that recently was published by the Journal of Political Economy. The authors find that higher tax rates mean less tax revenue, just as predicted by the famous Laffer Curve. Unfortunately, the political hacks at the OECD and EU are oblivious to economic theory and real-world evidence:

    Tax evasion, by its very nature, is difficult to observe. In this paper, we present a case study of tax evasion in China. The novel feature of our approach is that at a very disaggregated level of individual products, we can measure evasion relatively precisely, by comparing the values that China reports as imports from Hong Kong, with what Hong Kong reports as exports to China. We can match up this evasion gap' with the tariff (and VAT tax) schedule at the product level. The result is striking: using the data in 1998, we find that on average, a 1 percent increase in the tax rate results in a 3 percent increase in evasion; these results hold using data from 1998. The result is similar when a first-difference specification is used with data in 1997 and 1998. This relationship is nonlinear: the evasion elasticity is larger at high tax levels. Furthermore, the evasion gap is negatively correlated with the tax rates on closely related products, suggesting that part of the evasion takes place by mis-reporting the type of imports, in addition to under-reporting the value of imports. This effect is even more pronounced when the evasion gap is measured using quantities rather than values.

Monday, April 26, 2004 ~ 3:26 p.m., Dan Mitchell Wrote:
More evidence of Sweden's collapse. Richard Rahn, former Chief Economist for the US Chamber of Commerce, writes in the Washington Times about the deterioration of the Swedish economy. The rapid growth of government has turned one of the world's wealthiest economies into a sclerotic welfare state. Using figures from a paper by a Swedish economist, the article notes:

    The extent of the failure of the Swedish model are both shocking and little known. For example, no new net jobs have been produced in the Swedish private sector since 1950. (By contrast, the U.S. created more than 60 million new private-sector jobs during the same period, from 52 million in 1950 to about 115 million in 2002.) "None of top 50 companies on the Stockholm stock exchange has been started since 1970."

    Again, contrast this with the U.S. where many of our biggest companies had not been born or known of in 1970, such as Microsoft, Intel, Wal-Mart, Home Depot, Cisco, etc., Mr. Karlson's litany of failures of the Swedish model include: "Sweden has dropped from fourth to 14th place in 2002 among the OECD countries (i.e., affluent industrialized countries) in terms of GDP per capita since 1970." ...As the welfare state undermines the ability to engage in productive activity to support oneself, and individual liberty and responsibility, there will be a corresponding loss in dignity. This loss of dignity debilitates both the individual and society.

Monday, April 26, 2004 ~ 2:21 p.m., Dan Mitchell Wrote:
German Chancellor seeks EU "lebensraum." By opting against a referendum, Gerhard Schroeder has shown that he doesn't trust German voters. He also doesn't trust voters in other nations, so he has proposed some sort of mechanism for imposing the EU Constitution even if it doesn't receive the necessary support from all nations. The EU Observer reports on Schroeder's disdain for democracy:

    The EU needs to find a way of introducing the Constitution even if it is not ratified by all member states, said German Chancellor Gerhard Schröder over the weekend. In an interview with Focus magazine, Mr Schröder said, "we ought to find an arrangement by which the Constitution can still come into force if the process of ratification in a country has not yet been brought to a conclusion". ...As it stands, the Constitutional Treaty needs to be ratified by all member states before it can come into force.

Monday, April 26, 2004 ~ 9:39 a.m., Dan Mitchell Wrote:
Mexican case shows dangers of government-to-government information sharing. Revenue bureaucrats from place like France, Germany, and even the United States - motivated by a desire to enforce bad tax laws and prop up oppressive welfare states - think it is a good idea for governments to collect and share information on cross-border investments. Yet this is a very risky policy, one that paves the way not only for fiscal abuse, but also human rights abuse, ethnic persecution, religious attacks, and criminal behavior. Sharing information with nations like France and Greece can even undermine the fight against terrorism. But too often, as this Associated Press story illustrates, the US government only shuts the barn door after the horse has escaped

    The U.S. Treasury Department, angry about the leaking of confidential information, has stopped sharing information with Mexico on everything from money laundering to terrorism financing, a blow to cross-border crime fighting. ...The U.S. Embassy in Mexico City said Friday that the Treasury Department had suspended cooperation a day earlier, pending "guarantees that all delicate information will be protected." In Washington, officials said they wanted to make sure information they shared with Mexico was kept secret. "The breech of confidential information is a serious matter that the Treasury Department and the U.S. government will not take lightly," said spokeswoman Molly Millerwise. "It is critical that we have the utmost confidence in our information-sharing relationship with all foreign governments."
    http://www.lasvegassun.com/sunbin/stories/w-sa/2004/apr/24/042403800.ht ml

Sunday, April 25, 2004 ~ 12:30 p.m., Dan Mitchell Wrote:
Politicians uber alles in Germany. Not surprisingly, Socialistchell Chancellor Schroeder has rejected a referendum on the new constitution in his country. Voters, after all, might not make the right decision:

    German Chancellor Gerhard Schrder has said that a referendum is not necessary. He said he saw no difference between whether the Constitution is legitimised through parliament or by referendum.

Sunday, April 25, 2004 ~ 11:27 a.m., Andrew Quinlan Wrote:
A long way to go in California. Governor Schwarzenegger has made some progress in "New France," but California is still burdened by crazy left-wing laws. Tom Sowell writes in Townhall.com about a farmer who is charged with murder for accidental deaths:

    In a state where hardened criminals are coddled, and sometimes lionized, a California dairy farmer named Patrick Faria and his herdsman were charged with murder in the accidental death of two dairy employees who fell into a sewage pit and drowned while Mr. Faria was away. The rationale is that the farm was not in compliance with the innumerable safety rules that bureaucrats can dream up, even if nobody can keep track of all these rules.

Saturday, April 24, 2004 ~ 3:15 p.m., Dan Mitchell Wrote:
The hidden cost of government-run health care. The US health care system has been severely harmed by excessive government intervention, and some politicians think the solution is even more government. Advocates of nationalization cite the Canadian system, but this would make the problem even worse by creating rationing. Such a system also would have a discriminatory impact, as Pierre Lemieux explains in an article in the Wall Street Journal:

    Canadian public health insurance is not only compulsory, it is also monopolistic. The system is administered by provincial governments under strict guidelines imposed by federal law and federal subsidies. Private insurance covering publicly insured services is illegal. Physicians are forbidden to accept private payments above the fees billed to the government. ...what now exists is a three-tier system. The very rich (like Robert Bourassa, the late Premier of Québec) go to the U.S. for rapid, personalized, high-tech treatments. The second tier is made of "the well informed and aggressive, who can push their way to the front of the treatment line." The poor and those with no connections get stuck in the queue.
    http://online.wsj.com/article/0,,SB108267290367391256,00.html?mod=opini on (subscription required)

Saturday, April 24, 2004 ~ 1:19 p.m., Dan Mitchell Wrote:
Why not copy Ireland? The EU Observer has an article stating that it will take decades for East European nations to catch up with existing EU members. This article contains some good points - particularly the acknowledgment that EU subsidies may undermine reform. But the article failed to note that it is possible for a nation to make giant strides in a short period of time, which is exactly what happened when Ireland slashed tax rates and enjoyed an economic boom that turned the "sick man of Europe" into the EU's second richest country:

    In an interview with the Financial Times Deutschland, Willem Buiten [Chief Economist of the European Bank for Reconstruction and Development] said, "Poland will need 40 years to catch up with the EU average". The others will need between 15 and 30 years, according to Mr Buiten. Moreover, another representative of the top bank expressed the concern that the new member states might become too dependent on EU handouts rather than implementing necessary economic reform. "There is a danger that the accession countries will leave the reforms of their economies to one side and rely on payment transfers from the EU", said EBRD Vice-President Hanna Gronkiewicz-Waltz. "We saw something similar after the entry of Spain, Greece and Portugal", she added.

Friday, April 23, 2004 ~ 5:07 p.m., Dan Mitchell Wrote:
Treasury officials have difficult task - teaching Europeans that lower tax rates are good for growth. The Bureau of National Affairs reports that US government officials want to convince European politicians to lower tax rates in order to spur growth, but this may be an impossible task. German and French policy makers probably understand the relationship between taxes and growth, but they feel that the political benefits of class warfare politics are more important. Indeed, this is why Europe's welfare states advocate tax harmonization. But this also is why the EU economy will never catch up with the US economy. American politicians may be short-sighted and greedy, but they seem like Adam Smith clones compared with the kleptocrats that govern places like France and Germany:

    Treasury Department officials intend to showcase how changes to U.S. tax policy have helped fuel the economic recovery as they work to convince the financial ministers of the world's other major economic powers to take similar actions, Treasury Under Secretary for International Affairs John Taylor told reporters April 22. Taylor called tax policy and job creation the two key themes to be discussed with the financial ministers at the April 23-25 meetings of the Group of Seven richest nations because of the potential impact that cutting marginal tax rates can have on long-term economic growth. Earlier in the week, Treasury Secretary John Snow specifically criticized the tax policies of Germany and France, which are lagging the other major world economies in growth.
    http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8k6m1j4 (subscription required)

Friday, April 23, 2004 ~ 3:49 p.m., Andrew Quinlan Wrote:
The hidden cost of high tax rates. Senator John Kerry thinks that higher tax rates will result in a windfall of new tax revenue, but this ignores the fact that people will change their behavior when government increases the cost of productive behavior. Alan Reynolds of the Cato Institute uses a personal story to explain why Kerry's class warfare tax plan will backfire:

    I have discovered a fool-proof strategy for beating the income tax, the Social Security tax and the Medicare tax: Lower your income. Lowering your income is much easier than increasing your income. And it helps you avoid the nasty traps Congress sets to catch those foolish enough to earn too much money...

Friday, April 23, 2004 ~ 1:00 p.m., Andrew Quinlan Wrote:
The EU needs less government, not another "high-level group." The European Commission has announced that a dozen "wise men" will be part of a committee to decide what Europe must do to become the world's most competitive economy. Needless to say, this goal is a fantasy because the politicians keep increasing the burden of government. Even labor union bosses, who certainly are part of the problem, recognize that this new group is a farce:

    The make-up of a "high-level group" to discuss ways of helping the EU economy catch up with the US was unveiled today in Brussels. Chaired by former Dutch prime minister Wim Kok, the group will investigate ways to advance the so-called Lisbon Strategy, which is the EU's goal to become "the most dynamic, knowledge-based economy in the world by 2010". This strategy is widely seen as a failure with little or no progress made towards achieving the aims. ...When the group was announced in March, the Secretary-General of the European Trades Union Confederation, John Monks, said, "we are frankly sceptical about a high-level group. One thing we have not lacked in Europe is high level groups".

Friday, April 23, 2004 ~ 12:29 p.m., Dan Mitchell Wrote:
Three cheers for free speech. Neil Boortz has a great column defending "shock jock" Howard Stern. Government's proper role is to protect life, liberty, and property, not to regulate people's private lives. Boortz is particularly on target when disputing the notion that the government should own the airwaves:

    Howard Stern has been doing what he has been doing, vulgar as it can be, for 20 years. I've searched to the ends of the Internet and as many of Nebraska's best weekly's as I could, and I have yet to turn up one story about one single human being anywhere in this vast country of ours who was in any way harmed by anything they heard from a radio dialed to Stern. Not once have I heard even whispers of a situation where a Howard Stern broadcast violated any individual's right to life, liberty or property. ...It is not the role of the government to determine what we can or cannot listen to on the radio. For adults, it's a matter of choice. For children, it's a matter left up to parents. Every modern radio I have ever seen has a minimum of two knobs. Votes for or against programming can be cast with a simple twist of either one. ...Americans have bought into the ridiculous concept of "public ownership of the airwaves," an idea created by politicians for no purpose other than to legitimize government control.

Friday, April 23, 2004 ~ 11:44 a.m., Dan Mitchell Wrote:
French politicians backtrack on referendum promise. Now that Tony Blair has promised to let British voters decide whether to approve a new EU constitution, this has increased pressure for democracy in other European nations. Not surprisingly, the French are resistant, regardless of campaign promises:

    Alain Juppé, Mr Chirac's closest political advisor, said "When it comes to choosing [between putting it through parliament and putting it to a public poll] we would like to take a concerted approach with our partners and in particular with Germany". ...Last year, during his re-election campaign, Mr Chirac pledged to have a referendum.

Friday, April 23, 2004 ~ 5:19 a.m., Andrew Quinlan Wrote:
AEI expert and former Polish Minister says tax competition could save Old Europe. Radek Sikorski of the American Enterprise Institute comments on the impact of EU expansion. Most notably, he shares Dan Mitchell's hypothesis (www.techcentralstation.com/022704E.html) that market-oriented East European nations may rescue welfare states from self-destruction by forcing much-needed economic reforms:

    ...economic ideas are likely to flow from east to west in the next few years. Several of the new members have adopted the flat tax and have experimented with bold welfare reforms as well; Poland, for instance, has privatized its pension system with Chilean-style personal retirement accounts, a policy that Western Europe will one day have to adopt in order to stave off budgetary collapse. If the East is allowed to compete, it will not only work itself out of poverty but may prove the salvation of moribund Western economies. Enlargement may do for them what the dustmen's strike did for Britain in 1979-spur long-delayed reforms that liberate labor markets, adjust welfare policies, and lead to long-term dynamism.

Friday, April 23, 2004 ~ 1:16 a.m., Dan Mitchell Wrote:
The Economist slams European constitution. In a hard-hitting essay, the Economist criticizes the proposed new European constitution. The magazine also argued in favor of letting voters decide the issue. As this passage indicates, the Economist specifically endorses the unanimity requirement for tax matters:

    This is not just a matter of delivering Mr Blair's "red lines", such as preserving national vetoes on tax, social security, foreign policy and defence, even though these remain crucial. Just as important, encroachment into areas of criminal and civil law ought to be curtailed, and made subject to unanimous vote; and the idea of a European public prosecutor should be dropped. It would be desirable, too, to junk the verbose Charter of Fundamental Rights...

Thursday, April 22, 2004 ~ 6:15 p.m., Dan Mitchell Wrote:
Treasury Department official praises tax competition, call for reform of outmoded US tax rules. Greg Jenner, the Acting Assistant Secretary for Tax Policy, recently spoke about the importance of tax competition. He noted that America's policy of worldwide taxation is anti-competitive, and highlighted the need to modernize tax policy so that US-based companies could more effectively compete in the global economy:

    Reducing the tax on capital matters in the international arena because businesses today compete for capital on a global playing field. ...Global competition. That's what it's all about. Viewed from the vantage point of today's global marketplace, our tax rules appear outmoded, at best, and punitive of U.S. economic interests, at worst. ...What does that mean for our international tax rules? Again, let's review where we are. The subpart F rules date to 1962. At forty-something those rules are showing their age - and for those of us in the same situation, it seems that each year is a little less kind. We also made fairly significant changes to the international tax rules in 1986. That makes those rules teenagers and like most teenagers, they are hard to understand, messy, inconsistent, and display little regard for the real world. Things have changed dramatically in the global marketplace, but our tax rules have not. At this point, we wear them like a coat that is several sizes too small.

Thursday, April 22, 2004 ~ 4:25 p.m., Dan Mitchell Wrote:
German politicians have no clue. The so-called German tax amnesty is a bust. Politicians hoped to get 5 billion additional Euros to spend, but only a tiny fraction of that money is expected to materialize because greedy German lawmakers still don't understand that taxpayers are unlikely to be swayed by a one-time amnesty if their future income will still be subject to confiscatory tax rates. Tax-news.com reports:

    The German authorities are hoping that the amnesty on income from secretly held foreign accounts will reap some EUR5 billion in tax payments this year. However, German daily Handelsblatt has reported that only EUR76.9 million had been collected as a result of the initiative in the first quarter of 2004. ...Whilst the tax will only apply on a portion of the declared income, critics of the scheme have argued that the tax rate has been set too high, and will thus deter many Germans from taking part.

Thursday, April 22, 2004 ~ 2:43 p.m., Dan Mitchell Wrote:
Australia needs real tax reform. Compared to Europe, Australia has a low tax burden and greater economic freedom. But that is damning with faint praise. Tax rates are too high - especially when compared to Asian competitors. Tax-news.com reports that the business community is agitating for tax rate reductions, albeit very modest reforms:

    The ACCI is urging the government to eliminate bracket creep as part of a five point plan of income tax reform, which also calls for a reduction in the number of income tax brackets, an increase in the top income tax threshold to $75,000, and a reduction in the top rate of tax to 40% from the current 42%. ...Australias income tax regime is too punitive by international standards and reduces the incentive to work and accumulate capital, stated the ACCI.

Thursday, April 22, 2004 ~ 11:32 a.m., Dan Mitchell Wrote:
Will Europeans voluntarily become serfs? A commentary in today's EU Observer explains why bureaucrats in Brussels are so instinctively hostile to democracy. Simply stated, voters are increasingly reluctant to approve the loss of freedom and sovereignty to a socialist super-state:

    The main problem with a referendum is that, faced with one, relatively simple question, the people may not vote as expected and, recently, referendums to do with the "European project" have not gone well from the federalists' point of view. ...In the last ten years or so there has been a gradually growing perception that the EU is not popular with the people in Europe, who have gone along with it without realising its implications and not really seeing any alternative. The infamous democratic deficit will become even greater with a no vote in any member state, and particularly in Britain. There is something to the theory that European integration has to keep moving to stay upright: every time it wobbles, its ability to reach the final destination becomes more doubtful.

Thursday, April 22, 2004 ~ 11:12 a.m., Dan Mitchell Wrote:
Politicians steal private property. The Wall Street Journal opines today on the growing abuse of "eminent domain" by local governments. The power of government to seize property is troubling even when it is for a genuinely public purpose. But when it occurs to line the pockets of local political hacks, it is best characterized as corruption. The Journal identifies the key issue:

    Whereas years ago the "public use" provision of the Fifth Amendment meant invoking eminent domain for, say, a highway or school, expansive court rulings now allow local politicians to seize private property from Citizen A and hand it over to a Citizen B they believe will prove a better class of taxpayer. The slippery slope here is obvious. Because businesses will always pay governments more than homeowners (and large businesses will yield more than small), it's no coincidence that governments tend to invoke eminent domain powers on behalf of the rich and politically well-connected at the expense of the mom-and-pop shop or the family that simply wants to keep the home it's lived in for generations.
    http://online.wsj.com/article/0,,SB108259009061490047,00.html?mod=opini on

Thursday, April 22, 2004 ~ 10:13 a.m., Andrew Quinlan Wrote:
EU Commissioner calls for cost-benefit regulatory analysis. There are thousands of bureaucrats in Brussels that seem to think that the world will end if they don't impose new regulations. This, of course, is one of the reasons why the EU economy is stagnant. One small but positive step would be to require cost-benefit analysis before new regulatory burdens could be imposed, and Tax-news.com reports that one EU commission is interested in this modest reform:

    Speaking at the Irish Business and Employers Confederation's EU Presidency Conference on Monday, European Commissioner for Enterprise and the Information Society, Erkki Liikanen discussed the need for the European authorities to regulate with an eye to competitiveness and growth. ..."Is enough attention being paid to the trade offs between the protection of public interests such as the environment and the burdens of regulations on our businesses? Also, the cumulative effect of rules on the capacity of our businesses to enhance their competitive performance is an important element."

Thursday, April 22, 2004 ~ 9:27 a.m., Dan Mitchell Wrote:
The Soviet mentality still lives in Russia. Tax-news.com has a disturbing story on a speech by the Russian Finance Minister. Alexei Kudrin asserted that the first responsibility of a business is to pay taxes. Utter rubbish. The first responsibility of a business is to earn a profit for shareholders. Kudrin would have been on stronger ground if he emphasized instead that tax evasion is less justifiable as tax rates are reduced:

Thursday, April 22, 2004 ~ 8:51 a.m., Dan Mitchell Wrote:
Europe's protectionism robs from the poor to subsidize the rich. Oxfam is far from a market-oriented organization. Indeed, the Center's first publication (http://www.freedomandprosperity.org/Papers/oxfam/oxfam.shtml) was a strongly-worded critique of the British-based charity's deeply flawed attack on low-tax jurisdictions. But that doesn't mean that Oxfam is always wrong, as can be seen by reviewing their recent study condemning the European Union's protectionist sugar subsidies. The new report estimates the special interest transfers to wealthy sugar producers and the economic damage to poorer nations:

    Behind the statistical fog emanating from Brussels, Europe is the world's most prolific subsidy-user and biggest dumper. Currently, the EU is spending EUR3.30 in subsidies to export sugar worth EUR1. In addition to the 1.3bn in export subsidies recorded annually in its budgets, the EU provides hidden support amounting to around EUR833m on nominally unsubsidised sugar exports. ...Developing countries figure prominently in the ranks of losers from CAP-sponsored sugar dumping. Translated into foreign-exchange losses, world-market distortions associated with EU sugar policies cost Brazil $494m, Thailand $151m, and South Africa and India around $60m each in 2002. These are large losses for countries with significant populations living in poverty, acute balance-of-payments pressures, and limited budget resources.
    http://www.oxfam.org.uk/what_we_do/issues/trade/bp61_sugar_dumping.ht m

Thursday, April 22, 2004 ~ 7:36 a.m., Dan Mitchell Wrote:
Treasury Secretary Snow makes the right point. Testifying before Congress, Treasury Secretary John Snow correctly stated that companies have an obligation to protect the interests of shareholders. This is a welcome development, particularly since the White House had tried to muzzle the Chairman of the Council of Economic Advisers for defending outsourcing several months ago. But Senator Shelby of Alabama was also correct to note that policy makers should fix the bad features of the tax system - such as the high corporate rate - that make US companies less competitive. BNA reports:

    Treasury Secretary John Snow dismissed lawmakers' calls for the Bush administration to take a policy stance against firms that outsource workers overseas during an April 20 Senate hearing. "The management of American companies have a fiduciary duty to pursue the best interests of their owners. And that means pursuing the best ways to stay profitable and competitive and, in fact, they're required by law to serve the interests of their investors," Snow told the Senate Appropriations Treasury Subcommittee. ...Shelby said the Bush administration should be more concerned about fixing tax policies that encourage companies to send work overseas.
    http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8k3h3a9 (subscription required)

Thursday, April 22, 2004 ~ 7:25 a.m., Veronique de Rugy Wrote:
Treasury Secretary Snow makes the wrong point. Alechemists used to believe that there was a magic formula that could turn cheap metals into gold. More recently, quacks have tried to invent a perpetual motion machine that generates more energy than it uses. Even more silly, some people think that more IRS agents will "pay for themselves" by squeezing more money out of taxpayers. Unfortunately, Treasury Secretary Snow defended this absurd version of black magic. Yet as the Bureau of National Affairs notes, Snow had to admit that there is no evidence for this odd assertion:

    Snow told a Senate Appropriations Treasury Subcommittee that the Bush administration is seeking an additional $300 million for IRS enforcement, which would be used mainly to increase the amount of scrutiny on the tax filings of wealthy individuals and corporations. "There is an impression that big companies and the wealthy are not paying their fair share of taxes and we want to make sure we are adequately enforcing the tax code," Snow told the Subcommittee on Transportation, Treasury and General Government. However, under pressure from Sen. Robert Bennett (R-Utah) to provide evidence that such an increase in the enforcement budget would yield an increase in federal revenues, Snow said he is unaware of any studies that could make his case.
    http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8k3y9x7 (subscription required)

Thursday, April 22, 2004 ~ 5:31 a.m., Dan Mitchell Wrote:
Another international bureaucracy promotes additional government intervention. There must be some sort of secret initiation ritual for people who work at international bureaucracies, a ceremony where they pledge to interfere with markets and promote higher taxes. Well, maybe that is a bit of an exaggeration, but it sure seems as if people who get tax-free salaries inevitably think that the solution to every problem - real or imagined - is higher taxes and more government control. The Financial Times reports on a new World Health Organization scheme to tax unhealthy food:

Wednesday, April 21, 2004 ~ 10:38 p.m., Andrew Quinlan Wrote:
More evidence of UN corruption. ABC News (http://abcnews.go.com/sections/
) is reporting on rampant malfeasance and venality at the United Nations. The network reports that, "At least three senior United Nations officials are suspected of taking multimillion-dollar bribes from the Saddam Hussein regime, U.S. and European intelligence sources tell ABCNEWS. One year after his fall, U.S. officials say they have evidence, some in cash, that Saddam diverted to his personal bank accounts approximately $5 billion from the United Nations Oil-for-Food program." Regardless of how one views the issue of Iraq, the breaking story confirms that international bureaucracies have a dismal record of corruption. The Wall Street Journal's daily webupdate connects the dots:

    The report also includes a list of other politically connected individuals, companies, and institutions who received Iraqi oil contracts--including four Frenchmen, two of them ex-government officials. Did France and Russia, which threatened to use their Security Council veto in hope of discouraging the coalition to liberate Iraq, back Saddam in order to keep the money rolling in? As for the U.N., how in the world can anyone claim with a straight face that this cesspool of corruption, tyranny and anti-Semitism is qualified to convey "legitimacy" to the new Iraqi government or anyone else?

Wednesday, April 21, 2004 ~ 4:30 p.m., Dan Mitchell Wrote:
The Swedish nightmare. In a devastating article, a Florida economist reports on the complete destruction of the Swedish economy caused by bloated government and confiscatory taxes. This Orlando Sentinel article is a must-read. It shows how left-wing "compassion" destroys the social capital of a nation:

    Here in the nation that has always considered itself a paradise amid the snowflakes, the economic and social costs of its mentality are coming due. Alcoholics can retire on government pensions. The average worker calls in sick one day a week. ...Although the country has an official unemployment rate of 6 percent, 12 percent of the work force is on disability. Another 4 percent is paid by the government for jobs that require no work. In effect, this creates a society in which 22 percent of the potential work force is not productive. ...In Sweden, 75 percent of small businesses have no employees. The reason is the heavy cost of taking on the responsibility of employing another person. ...Employers pay 32.7 percent of their employees' salary in payroll taxes -- four times the U.S. rate. Insurance requirements and hourly-wage scales are much higher than in the United States. Municipal income-tax rates on individuals run 32.7 percent; the state gets 20 percent to 25 percent, depending on location; and the federal government takes up to 56 percent of what income is left. Swedish law limits overall taxation to 85 percent of salary. In addition, there is a "value-added" tax on purchases that runs from 12 percent to 25 percent, depending on the item. ...60 percent of Swedes in a public-opinion poll said it was acceptable to call in sick without being ill. Regardless of whether employees are ill or not, it is illegal for an employer to take any recourse. Sick days are doubly expensive for employers who often hire a substitute worker. ...The sick-pay cycle is made worse when "ill" employees work a "black job," one that is unreported for tax purposes, while receiving sick pay. Such workers can more than double their incomes. Young Swedes are particularly involved in such work. While visiting Uppsala University, Sweden's top college, I talked with 40 students and only two said they have not held a "black job." ...The state not only encourages disability for alcoholics but makes it easier than working for a living. In fact, there is almost no financial advantage to working a low-wage job in Sweden compared with collecting welfare or disability benefits. The state pays people to stay home and remain drunk. Treatment is optional. ...Because the tax on hard liquor is 87 percent of the retail cost, registered alcoholics who use their welfare funds to purchase booze are in effect largely reimbursing the government with their purchases.
    http://www.orlandosentinel.com/news/opinion/orl-inssweden18041804apr18, 1,2481320.story   (registration required)

Wednesday, April 21, 2004 ~ 3:00 p.m., Dan Mitchell Wrote:
Insight on race, profiling, and discrimination. Walter Williams of George Mason University has two superb articles on discrimination. The first article, a Townhall.com column, explains why profiling is a logical way of reducing information costs. He notes that differences in crime rates lead to discrimination against blacks - oftentimes by other blacks, because people want to minimize risks. This should make people angry, Prof. Williams writes, but they should target their anger at the thugs who commit crimes and thus create an incentive for discrimination:

    Needless to say, the law-abiding black person who's refused a taxi ride or pizza delivery or pulled over by the police is justifiably annoyed and offended. The rightful recipients of his anger should be those blacks who have made black synonymous with high crime and not the taxi driver or pizza deliverer who might fear for his life or the policeman trying to do his job.

Williams' second article is a thorough (but very readable) treatise in the Cornell Journal of Law and Public Policy. The article explains that discrimination is the exercise of free will. Sometimes decisions to discriminate are benign - such as the choice of what to have for dinner. Other times, discrimination is morally repugnant - as occurs when a bunch of rednecks don't want blacks in their favorite bar. Williams explains, however, that a free society respects individual rights and allows people to make their own choices of how to use their own time and their own property:

    If people are free to discriminate in favor of, or against, a particular university or wine, what argument can be made against people having that same right with respect to choosing any other object of desire, including the race or sexual characteristics of their mates, employees, tenants, or club members? If one shares the value of freedom of association, why should some associations by choice be permitted and others denied? If a man is not permitted to bring a court action against a woman who, for any arbitrary reason she chooses, refuses to have a dating relationship or establish a marital contract with him, what is the case for bringing court action for other similarly arbitrary refusals to deal with another, such as in the contexts of employment, renting or selling a house, or club membership?
    http://www.gmu.edu/departments/economics/wew/articles/recent/discriminatio n.pdf

Wednesday, April 21, 2004 ~ 2:09 p.m., Andrew Quinlan Wrote:
Fannie Mae uses threats to protect its ability to loot taxpayers. Fannie Mae is a nominally private company, but it has a special government charter and it receives huge subsidies from the federal treasury. To protect this privileged status, the Wall Street Journal reports that an astounding one-third of Fannie's employees exist to help the "company" keeps its snout buried in the public trough. Interestingly, Fannie does not want to divulge the salaries of its senior officials - especially the high-priced lobbyists that dominate the payroll:

    Fannie's political intimidation only raises questions about what, exactly, is going on inside the black box that are its business operations. Perhaps Fannie's most highly compensated include not financial risk managers but, instead, political risk managers. This is a company of 4,700 employees, of whom fully one-third are in the persuasion business, either as legal, lobbying or public relations minions who try to influence politicians. And just where does this money for the highly compensated come from? Well, a nice chunk comes from the implicit subsidy that Fannie enjoys as a government-sponsored enterprise. According to a recent study by the Federal Reserve Board (which joins a long list of studies with similar conclusions), the perception that the federal government stands behind Fannie gives it a 40-basis-point funding advantage over private competitors.
    http://online.wsj.com/article/0,,SB108250656038288779,00.html?mod=opini on (subscription required)

Wednesday, April 21, 2004 ~ 1:10 p.m., Dan Mitchell Wrote:
The slow death of the EU savings tax directive. Great news from Switzerland, where leaders have refused to capitulate to the EU's bait-and-switch assault on financial privacy. As the Financial Times acknowledges, the EU wants to use the Schengen convention to eviscerate Swiss bank secrecy laws - even though the EU wants Switzerland to acquiesce to a savings tax directive scheme that ostensibly protects the right to financial privacy. Thankfully, the Swiss are not stupid and are refusing to make huge concessions when they know that the bureaucrats in Brussels have no intention of complying with their side of the deal:

    The EU savings tax directive is supposed to take full effect next January, but Joseph Deiss, Switzerland's president, said his country could not co-operate without a separate agreement on border controls. The European Commission is pressing Switzerland to sign an agreement on the directive by the end of June, but Bern wants eight further deals with the EU on matters such as agriculture and the environment. Most of those additional deals are completed, but Switzerland is seeking important concessions on the Schengen convention on border controls. ...Bern is seeking concessions to ensure its authorities do not have to exchange information on tax evasion, which is not a criminal offence in Switzerland. Switzerland is also resisting pressure from fellow members of the Organisation for Economic Co-operation and Development, the club of rich nations, over its crackdown on tax evasion. Last year Switzerland blocked agreement on proposals for exchange of banking information between OECD countries from 2006 in order to verify people's tax liabilities. Austria, Belgium and Luxembourg also refused to support the 2006 deadline because of their banking secrecy systems.
    http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullSt ory&c=StoryFT&cid=1079420448193 (subscription required)

Wednesday, April 21, 2004 ~ 12:44 p.m., Dan Mitchell Wrote:
Blair poses false choice on EU constitution. To his credit, Prime Minister Tony Blair is allowing voters to decide whether the United Kingdom should become a colony of Brussels by approving massive new powers for the EU bureaucracy. But he errs by claiming that Britain will lose all influence unless voters approve the EU constitution. By definition, nation-states will lose a great deal of their sovereignty if the new constitution is approved. As we say in America, "Having a seat at the table is not desirable if you are a turkey and it's Thanksgiving." The EU Observer quotes Blair's silly assertion

    "It is time to resolve once and for all whether this country, Britain, wants to be at the centre and heart of European decision-making or not; time to decide whether our destiny lies as a leading partner and ally of Europe or on its margins".

Wednesday, April 21, 2004 ~ 11:49 a.m., Dan Mitchell Wrote:
The Brussels power-grab. The Wall Street Journal Europe needs only one paragraph to summarize why the new EU constitution should be tossed in the trash bin. Instead of a simple document that restricts the power of government in clear language, the new documents is a 264 page (with more probably on the way) monstrosity that is deliberately indecipherable to most citizens:

    In theory, the project started out promisingly enough; a constitution for Europe was supposed to simplify and rationalize the EU's structure and legal status. What we got in the end, however, was neither simple nor rational. If Europe must have a constitution, it should be written in the best traditions of the form -- it should be short enough to be read and understood by the average citizen; it should clearly delimit the powers of the union and the rights of citizens vis-à-vis the state; and, it should explain the interaction of the various bodies that constitute the union's apparatus.
    http://online.wsj.com/article/0,,SB108249905612888492,00.html?mod=opini on (subscription required)

Wednesday, April 21, 2004 ~ 11:15 a.m., Dan Mitchell Wrote:
Decentralization could be the key for Iraq's future. This website has favorably commented on proposals to create a Swiss-style federal system for Iraq. This approach would help quell ethnic and religious conflict. But maybe that doesn't go far enough. Techcentralstation.com has a proposal to alllow dozens of Iraqi regions to regain sovereignty (some faster than others) and then choose whether they want to politically affiliate with each other. Politicians instinctively seem to object to this approach - perhaps because they don't want their own people to exercise similar rights. But shouldn't peace and stability rank above political self interest? According to the article:

    There will be more than three zones, there will be at least 25, maybe as many as 100. Each zone will evolve towards civil government at its own rate. Some zones will need to be overseen using the rules of outright military occupation of a hostile nation. Other zones will be able to quickly establish full home rule, complete civil government in all matters except foreign policy and military affairs. Over six months, let's see how many zones can produce a local government that can rule without slaughtering a significant percentage of its own population, or stoning women for committing adultery, or burning the foreign nationals providing electricity and water. Zones demonstrating the ability to live peacefully will be migrated towards full home rule. When enough provinces reach complete home rule, they will have important decisions to make. If enough zones decided to band together, they can form a state of their own. (There will have to be a few basic rules about a minimum number of provinces, or a minimum total population, and/or territorial contiguousness required to form a state.) They are free to welcome into their state other provinces that reach full home rule at a future time. Multi-province successor states may even reserve the right to join with other multi-province successor states. Under this plan, the Iraqi people ultimately decide the shape of post-Hussein Iraq.

Wednesday, April 21, 2004 ~ 10:07 a.m., Dan Mitchell Wrote:
More German whining about tax competition. German politicians from both parties have spent the last 40 years creating a bloated welfare state. Now their economy is stagnant. But rather than make long-overdue reforms, the politicians are seeking scapegoats (the Germans have an unfortunate history in this regard). Even politicians from the supposedly "right-wing" Christian Social Union are endorsing tax harmonization according to Tax-news.com. The socialist Prime Minister Schroeder already has a dismal track record of opposing competition, and he recently reiterated his misguided views:

    "Germany as the biggest net payer of the EU has to finance unfair tax competition against itself." The Chancellor's message to the accession states was supported by leader of the opposition CSU party, Edmund Stoiber, who expressed unity with the government on this issue by announcing that: "What we do not accept is furthering the relocation of jobs mainly financed by German tax measures."

Tuesday, April 20, 2004 ~ 4:05 p.m., Dan Mitchell Wrote:
More take-it-or-leave-it brinksmanship on the EU constitution. Advocates of a Brussels super-state are increasingly anxious that voters may reject the likely new constitution that will be unveiled in the near future. But rather than draft a new constitution - one that protects the rights of individuals rather than giving new power to government, the left in Europe want to give voters an all-or-nothing vote that forces them to accept the constitution if they want to remain part of the EU. The EU Observer has the story:

    It is thus vital to learn from this past experience, and to give the voters a real choice which they will not be asked to re-vote upon, and which does not allow one country to stop the show. The choice should be either Membership of the new EU with Constitution, or immediate secession from the EU.

Tuesday, April 20, 2004 ~ 2:07 p.m., Andrew Quinlan Wrote:
Treasury Secretary endorses flat tax. Fundamental tax reform gained a powerful ally when the US Treasury Secretary John Snow endorsed the flat tax in a recent speech. Such a proposal would eliminate all double-taxation and make America a giant tax haven for the world. Tax-news.com reports:

    United States Treasury Secretary John Snow last Thursday mooted the idea of introducing a flat tax as a way of simplifying the tax code for the US taxpayer. ...The Treasury Secretary added that a new proposal aimed at simplifying the tax code may be on the government's agenda should President George W. Bush win a second term in office. He also stated a desire to roll back the growing tentacles of the Alternative Minimum Tax.

Tuesday, April 20, 2004 ~ 1:02 p.m., Dan Mitchell Wrote:
EU sides against German exit tax. The bureaucrats in Brussels are not always on the wrong side. The European Commission is threatening legal action against Germany because of a discriminatory exit tax on unrealized capital gains. The Germans have a wretched track record on this issue, having originally imposed exit taxes in the 1930s as part of their anti-semitic crusade. As this Bureau of National Affairs story indicates, the Germans may be forced to have more respect for human rights:

    Germany must abolish a so-called exit tax on unrealized capital gains imposed on foreigners when they leave the country or face a legal challenge in the European Court of Justice, the European Commission said April 19. The EU executive body said the exit tax is unfair because German citizens only have to pay tax on capital gains if they are realized.
    http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8j5x7y4 (subscription required)

Tuesday, April 20, 2004 ~ 11:32 a.m., Dan Mitchell Wrote:
More evidence that tax competition is working. The Bureau of National Affairs has a thorough story explaining how tax competition is creating opportunities for workers and businesses to escape fiscal oppression. This upsets politicians from places like Germany and Sweden, but it may be the salvation of Europe. As more evidence accumulates, even left-wing governments may realize that free market tax policies are the best way to promote prosperity:

    Swedish Prime Minister Goran Persson told reporters in Berlin March 30 that income taxes imposed on individuals in accession countries are too low, repeating remarks he made Feb. 9 in Helsinki. Excessively low taxes in accession countries mean those countries will not be able to pay for domestic needs, including those imposed by EU membership, Persson spokesman Jan Larsson told BNA April 2 from Stockholm. ...revenue from corporate tax has actually increased because investors are now distributing profits. Finance Ministry data show income from corporate income tax increased more than 100 percent between 1995 and 2003. ... Companies already residing in the EU are studying whether to shift functions to take advantage of lower tax rates in the accession region. Manufacturing, warehousing, and selling operations are particularly suited for the move, Stawowska said. The Bratislava branch of Amsterdam-based management and financial consultants TMF Group even developed a presentation for existing and potential clients about the advantages of locating in Slovakia. ...By locating in Slovakia, companies have access to the EU's single market and owners could distribute profits tax-free, he said. Top managers, meanwhile, could see their personal income tax rates slashed by 50 percent or more, he said.
    http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8j4x2t6 (subscription required)

Tuesday, April 20, 2004 ~ 10:44 a.m., Dan Mitchell Wrote:
Class warfare tax provision hits the middle class. The alternative minimum tax (AMT) was created to ensure that a tiny handful of taxpayers (less than 200 "wealthy" people were on the original list) paid something even if they were otherwise eligible for enough special preferences to cancel their tax bill. But rather than ensure fairness the right way - by eliminating deductions and reducing the tax rate, politicians created a bizarre alternate tax system. And now, the system that was designed to hit the "rich" is soon expected to adversely impact about 20 percent of all taxpayers. The Bureau of National Affairs reports:

    The original purpose of the AMT, created more than 30 years ago, was to ensure that those with the highest incomes who would otherwise owe little or no income taxes due to tax code's credits, deductions, and exemptions would pay at least some tax, the CBO report noted. The AMT requires those affected by it to recalculate their tax burden using alternative rules that do not allow the same deductions and exemptions. They pay the difference between the tax they would owe under the standard rules and the tax they would owe under the AMT calculation. Before 2000, the AMT never affected more than 1 percent of all taxpayers, the report said. However, because the AMT was never indexed for inflation, "its impact is expected to grow rapidly in coming years and affect about one-fifth of all taxpayers in 2010" if no action it taken to change the AMT, the report said.
    http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8j4v8y0 (subscription required)

Tuesday, April 20, 2004 ~ 5:06 a.m., Dan Mitchell Wrote:
Tax haven policy gives England a competitive edge. Like the United States, the United Kingdom is a tax haven - at least for non-citizens. The US provides special tax treatment for the portfolio investments of foreigners (assuming they live outside the US). The UK has an even better system, allowing wealthy foreigners to live in the UK and only pay tax on their UK income. The Singapore Business Times has more details:

    London is now one of the most popular tax havens. Under British law, foreigners can be taxed only on their UK, rather than worldwide, income. So foreign billionaires can live in Britain and pay only tens of thousands, instead of tens of millions, a year in income tax. No other big nation is so generous. At some point, Chancellor Gordon Brown may decide to close down the so-called non-domicile tax rule. But for now, about 100,000 wealthy foreigners living in the UK benefit from it, according to the UK Treasury.

Tuesday, April 20, 2004 ~ 12:18 a.m., Dan Mitchell Wrote:
Left-wing residents of Massachusetts choose lower taxes by landslide margin. An astounding 99.7 percent of Massachusetts taxpayers opted to pay a lower rate of tax when given the option according to a recent analysis of state tax returns. Interestingly, Sen. John Kerry was not among the 624 residents (out of 2.1+ million) who chose to pay the higher rate. The New York Post has the story:

    Weary of liberals always clamoring for higher taxes on other people, an anti-tax group managed to place a line on the tax form giving Bay Staters the option of paying at the old, since-repealed 5.85 percent rate, rather than at the current 5.3 percent rate. ...Of 2,104,326 Massachusetts state returns filed by April 15, exactly 624 taxpayers had opted to pay at the higher rate, a very small number indeed, considering that in a statewide referendum, 1,055,181 good liberals voted against cutting the income tax rate.

Monday, April 19, 2004 ~ 10:51 a.m., Dan Mitchell Wrote:
Greedy politicians attack Colorado's spending restraint law. One of the nice things about a 50-state federal structure is that there is widespread evidence of what works and what doesn't work. California's collapse, for instance, was the result of high taxes and foolish government intervention. But there are states that enact good policies (or their voters enact good policies via the ballot box), and Colorado is a good example. The state's voter-approved spending limit has helped Colorado grow faster and avoid budget problems. Unfortunately, as the Wall Street Journal explains, spend-aholic politicians want to eviscerate this pro-growth restraint:

    Twelve years ago, voters in Colorado had the good sense to put constitutional restraints on government growth. The state's Taxpayers Bill of Rights, or Tabor, holds state spending to the annual growth in inflation and population, with a 6% limit over the previous year. Surplus revenues must be returned to taxpayers, and taxes can't be increased without voter approval. The results have been impressive. Between 1995 and 2000, Colorado ranked first in gross state product growth and second in personal income growth. From 1997 to 2002, it led the country in tax reduction and issued annual rebates totaling more than $3 billion. No wonder a poll conducted last year found that 60% of Colorado voters support Tabor, while only 15% oppose it. ...A proposal by GOP State Representative Brad Young would loosen spending controls to the point of making them meaningless. And sadly, even Governor Owens has changed his tune. Now he says he wants to place Tabor and Amendment 23 "on hold" for two years, a move that would simply pass the buck to a future governor, not solve the problem. We'd have thought that allowing fiscal strictures to erode on his watch is not something a GOP Governor with Presidential aspirations would want on his resume.
    http://online.wsj.com/article/0,,SB108232838808486067,00.html?mod=opini on (subscription required)

Monday, April 19, 2004 ~ 9:59 a.m., Dan Mitchell Wrote:
Will the English save Europe? In a reversal, UK Prime Minister Tony Blair has signaled that he will allow the British people to approve or disapprove a proposed constitution for Europe. Supporters of freedom should keep their fingers crossed that voters say no. The current draft is a left-leaning, pro-centralization document that would expand the power of Brussels. And while the putative constitution supposedly will retain the national veto for tax matters, this tiny victory does not offset all the bad parts that are in the existing draft. The EU Observer reports:

Sunday, April 18, 2004 ~ 1:36 p.m., Dan Mitchell Wrote:
The looney left wants Ireland to return to its dismal high-tax past. Ireland is one of the world's success stories. Formerly known as the "Sick man of Europe," Ireland has been transformed into the "Celtic Tiger" because of dramatic supply-side tax reductions. Thanks to the 12.5 percent corporate income tax rate and other market-oriented reforms, unemployment has dropped from 15 percent to 5 percent and the economy has boomed. Indeed, Ireland is now the second-richest nation in the EU. One would think that the left would applaud these developments, but this assumes that left-wingers are motivated by helping the less fortunate (and what could be better for the poor than a booming economy?). In reality, it appears that the left primarily is driven by a hatred for success and freedom. This seems the most plausible explanation for this proposal for higher taxes and bigger government:

    ...the Conference of Religious in Ireland (CORI) called on the Republic's government to increase taxes for those that can afford them, in order to bridge the growing gap between rich and poor in Ireland. Arguing that the country's low tax policy is depriving the disadvantaged sectors of the population of improved standards of health, education, and social welfare, the social justice group revealed that according to a recent OECD survey, Ireland's tax revenue in 2002 was 28% of GDP, lower than any other EU member state. CORI went on to suggest that in order to boost Ireland's low level of social spending, the government should increase corporate taxes from their current level of 12.5% to 17.5%, should end various tax breaks for the country's wealthier citizens, and should reduce the level of tax relief provided to that group...

Saturday, April 17, 2004 ~ 10:07 a.m., Dan Mitchell Wrote:
Democracy in Britain? By all indications, Tony Blair is not a left-wing ideologue, so it is puzzling that he wants to undermine the United Kingdom's competitive position by ceding more power to the statist EU bureaucracy in Brussels. But this may be a moot point. There is growing pressure for a referendum, as the EU Observer reports:

    The most senior ministers in the UK government are backing calls for Britain to hold a referendum on the EU Constitution, according to media reports. The Sun reports that Foreign Secretary Jack Straw, Chancellor Gordon Brown, Home Secretary David Blunkett, Deputy Prime Minister John Prescott and other senior ministers are in favour of a popular vote on the issue. If the reports are confirmed, it will further increase pressure on prime minister Tony Blair, who has so far resisted calls for a referendum.

Friday, April 16, 2004 ~ 1:30 p.m., Dan Mitchell Wrote:
Will Swiss politicians sell their people into EU slavery? Okay, perhaps I exaggerate, but it is amazing to find that anyone in Switzerland wants to join the European Union. Switzerland is far more prosperous on the outside, and joining the EU almost surely would lead to the slow destruction of Switzerland's competitive position. Fortunately, the Swiss people are opposed to EU membership and almost surely would use a referendum to reject the surrender of their sovereignty to the bureaucrats in Brussels. Swissinfo.org reports:

    Fears that membership could undermine Switzerland's unique system of direct democracy - under which the people have the final say on policy - dominate the thinking of many Swiss, according to political analyst Karin Gilland Lutz. She believes those fears help to foster euroscepticism - a phenomenon that resonates well beyond Switzerland's borders. "Throughout Europe, the EU is seen as something big, highly administrative, short on democracy and distant - something that ordinary people do not have an allegiance to in the same way as to their own country," she told swissinfo.

Friday, April 16, 2004 ~ 11:28 a.m., Andrew Quinlan Wrote:
Think tank blasts UN censorship, argues against bureaucratic control of the Internet. Encouraged by repressive third world governments, the United Nations wants regulatory control over the Internet. This is a dangerous proposal, both because of the left-wing regulatory mindset of UN bureaucrats, but also because the UN has a track record of supporting censorship. An expert from the Competitive Enterprise Institute provides some historical background:

    In 1995, delegates attending a UNESCO-convened meeting on "Women and the Media" held in Toronto, Canada called for various forms of government control on the media. These included taking legislative action to combat the "predominantly male culture of the mainstream media" by passing laws mandating "gender-sensitive" hiring practices for media outlets. (This heavy-handed regulatory approach echoed again that year during a UN conference on women's issues in Beijing). This attitude does not suggest a very high appreciation on the UN's part regarding the value of ensuring that media outlets are free from clumsy government interference. The UN's readiness to sympathize with supporters of censorship made an appearance last year. Its 2002 Human Development Report praised South Africa's Human Rights Commission (a government-funded body) for persecuting journalists in 2000 who dared to write investigative reports of high-level corruption. The Commission slapped the journalists with trumped-up charges of "subliminal racism." The UN, bizarrely, said that this persecution helped to build "respect for human rights."

Friday, April 16, 2004 ~ 10:49 a.m., Dan Mitchell Wrote:
House Majority Leader urges complete repeal of income tax. Congressman Tom DeLay of Texas, the Majority Leader of the US House of Representatives, blasted the income tax yesterday and urged adoption of Congressman John Linder's proposal for a national sales tax. Such a system would boost the economy since - like the flat  tax - economic activity would be taxed only one time and the tax rate would be low. But to prevent politicians from using a national sales tax as a source of new tax revenue (as happened with value-added taxes in Europe), the income tax must be completely and permanently repealed. Fortunately, this is precisely what supporters intend. As reported by BNA, the legislation:

    ... would repeal all federal personal income taxes, corporate income-based taxes, payroll taxes, self-employment taxes, capital gains taxes, and gift and estate taxes, replacing these taxes with a revenue-neutral 23 percent sales tax on all retail sales of new goods and services. "The FairTax is the answer to the deficit, the entitlement crisis, and our need for more and better jobs in the global economy," DeLay said. Linder, the lead sponsor of the proposal since 1999, told a group of supporters that his bill "is the right thing to do to generate economic growth and help create jobs." Rep. Kevin Brady (R-Texas), a member of the Ways and Means Committee, called the U.S. tax code "too burdensome." He said the biggest obstacle to Linder's plan is that people "simply don't believe Congress would ever do it." "If America's grassroots will speak out, Congress will listen and act," Brady said. Rep. John Culberson (R-Texas), another supporter of the tax reform measure, said it was critical that "we force the debate to show the American public there is a choice and an alternative to give you complete tax freedom and control of your money.
    http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8j4c8v6 (subscription required)

Friday, April 16, 2004 ~ 9:19 a.m., Veronique de Rugy Wrote:
Tax complexity gets worse. President Bush has lowered tax rates and reduced the amount of double-taxation imposed on income that is saved and invested, but that does not mean that the tax code is more user-friendly. Indeed, a new study from the National Taxpayers Union (www.ntu.org/main/press_papers.php?PressID=
) confirms that tax code has become more complex in recent years. High compliance costs are a hidden tax, and they result in more than $100 billion of costs on the private sector. Here are some of the painful details:

    "Federal income tax rates have often risen and fallen, but the complexity of the tax system itself has almost always gone in one direction -- upwards," explained NTU Senior Counsellor and study author David Keating, adding that: "Even though paying taxes is still the biggest pain for Americans, the very process of filing taxes has become a major headache in itself." According to the NTU, it now takes the average American 28 hours and 30 minutes to prepare the 1040 "long" form with the three common Schedules A, B, and D, an increase of 34% since 1995. The 1040A, or "short" form, along with the common Schedule 1, takes nearly as long to prepare (11 hours, 32 minutes) as the long form did just nine years ago. The NTU also calculates that the increase in the tax law's complexity has added roughly 1 billion hours in annual paperwork burdens over the last 10 years, and estimates the overall paperwork burden at a massive 6.7 billion hours per year. It also points out that the 131 pages of instructions for the standard 1040 form is roughly double the length that it was in 1985, and more than triple the length of the 1975 instructions.

Friday, April 16, 2004 ~ 8:24 a.m., Dan Mitchell Wrote:
A victory for the Terminator. It appears that Governor Schwarzenegger has forced the left-wing legislature in California to accept sweeping reforms in the state's workers' compensation system. Interestingly, this victory was only possible because Schwarzenegger threatened to place a referendum on the ballot if the politicians refused to act. The Wall Street Journal explains why the current system is an economic disaster:

    California's workers' comp system is one of the most expensive in the country while simultaneously paying some of the lowest benefits. Thanks to litigation and a flood of claims, employers have seen their premiums rise 70% in the past two years to an average of $5.85 per $100 of payroll. The national average is $2.46. Dozens of insurers have gone out of business or stopped issuing policies. Meanwhile, to meet costs businesses have laid off workers, cut wages or left the state altogether. This mess, starting in the 1980s, has grown into a major drag on California's economy. Yet liberal lawmakers, taking dictation from lobbyists and lawyers, refused to enact change. Former Governor Gray Davis's own "reform" in 2002 consisted of mandating bigger benefits for workers with no corresponding relief for employers. No wonder then that a February poll from the State Chamber of Commerce showed nearly 80% of voters were willing to back the Governor's reforms.
    http://online.wsj.com/article/0,,SB108207301792084504,00.html?mod=opini on (subscription required)

Friday, April 16, 2004 ~ 7:58 a.m., Dan Mitchell Wrote:
Tom Sowell comments on French hypocrisy and phony discrimination arguments. In a Townhall.com column of random thoughts, Tom Sowell notes that the French wanted America's unilateral help in 1940 and did not wait around for the League of Nations to enact 17 resolutions condemning the Nazis. Sowell also notes that Asian Americans earn more, on average, than Caucasians, which presumably indicates that there is not racial oppression in America:

    Just before France surrendered to the invading Nazi armies in 1940, French Premier Paul Reynaud broadcast an appeal to America -- which was not in the war at that time -- to send planes and tanks to enable France to fight on. He didn't ask that we consult other countries or go to the League of Nations. He wanted unilateral American help. The latest Census data (P60-221, for you skeptics) shows that in 2002 the average white household had an income of just under $47,000, while the average Asian American household had an income of just over $52,600. Does that prove discrimination against whites?

Friday, April 16, 2004 ~ 5:15 a.m., Dan Mitchell Wrote:
British Labor Party rebels against European super-state. Tony Blair is plotting to impose a new European Constitution on the United Kingdom, but the Tory Party is not the only source of opposition to this scheme. A number of Labor Party members are reluctant to surrender sovereignty to the bureaucrats in Brussels, as the EU Observer notes:

    According to UK media reports, eurosceptic MP Iain Davidson on Tuesday (13 April) indicated that he intends to launch a new parliamentary campaign group called 'Labour Against A Superstate'. "People in Britain signed up in a referendum to joining a single market. They did not sign up to handing over substantial powers to Brussels to create a superstate", said Mr Davidson.

Friday, April 16, 2004 ~ 5:02 a.m., Dan Mitchell Wrote:
Will bloated government turn Europe into a tourist attraction? Business lobbyists are demanding that policy makers in Brussels put more emphasis on economic growth to prevent Europe from becoming a "tourist attraction." The lobbyists certainly are correct that Europe is falling further and further behind the US, but their efforts would be more useful and successful if they proposed specific policies - such as lower tax rates and smaller government - and aggressively worked to implement those policies. The EU Observer has the story:

    Eurochambres - which represents over 15 million businesses in Europe - said today, "we should be aware what will happen if we fail to position the Lisbon target as the focal point: In this case Europe will be reduced to a tourist attraction". The Lisbon target is the EU's ambitious goal of becoming the most competitive, knowledge-based economy in the world by 2010. However, the target is widely seen to be slipping and it looks increasingly unlikely that the EU will be able to catch up with the US by the end of the decade.

Thursday, April 15, 2004 ~ 4:15 p.m., Andrew Quinlan Wrote:
Tax and spend Republicans in Virginia. Government greed has no partisan boundaries. At least, that is the lesson from Virginia, where a Democrat governor and Republican legislature are ganging up to screw taxpayers. Interestingly, the politicians don't even have the phony deficit excuse to hide behind. As the Wall Street Journal explains, this tax hike is designed to facilitate higher spending:

    Revenue growth has been so healthy that the National Conference of State Legislatures predicts Virginia will run a small surplus this year. The budget, which is biennial, can grow by a full 11% without any tax increase at all. But that's not enough for the politicians. Governor Mark Warner, a Democrat, has proposed a $1 billion tax hike that would allow 13% to 15% in more spending. The Senate, which will now consider the House bill, originally proposed $4 billion in new levies, though the leadership has since scaled that back to a mere $2 billion.
    http://online.wsj.com/article/0,,SB108198502025283159,00.html?mod=opini on (subscription required)

Thursday, April 15, 2004 ~ 4:01 p.m., Dan Mitchell Wrote:
Future tax cuts don't help today's economy. A new academic study from the National Bureau of Economic Research finds that the Bush Administration made a mistake when it deferred lower tax rates as part of the 2001 tax bill. Fortunately, this mistake was reversed in 2003 as all the tax rates were immediately reduced. Not coincidentally, the economy surged:

    Phased-in tax reductions are a common feature of tax legislation. This paper uses a dynamic general equilibrium model to quantify the effects of delaying tax cuts. According to the analysis of the model, the phased-in tax cuts of the 2001 tax law substantially reduced employment, output, and investment during the phase-in period. In contrast, the immediate tax cuts of the 2003 tax law provided significant incentives for immediate production and investment. The paper argues that the rules and accounting procedures used by Congress for formulating tax policy have a significant impact in shaping the details of tax policy and led to the phase-ins, sunsets, and temporary tax changes in both the 2001 and 2003 tax laws.

Thursday, April 15, 2004 ~ 3:50 p.m., Dan Mitchell Wrote:
Former bureaucrat admits IRS targets small business. A former IRS agent, Richard Yancey, has written a book about his experiences. Not surprisingly, it turns out that the agency targeted small business because it is easy to pick on a small entrepreneur than it is to tackle a wealthy taxpayer who has access to lawyers, lobbyists, and accountants. A flat tax, of course, would create a system that treated all taxpayers equally, and wouldn't that be better than the kind of system Yancey describes in the New York Times:

    And whose doors did I knock on? The carpet installer, the day-care center operator, the Wal-Mart clerk, the carpenter, the print shop owner. The majority of the taxes I collected were from the small-business owner with fewer than 20 employees. I long ago lost count of how many weed-choked fields I have trudged across to inspect some broken-down piece of farm equipment; how many musty warehouses, dilapidated mobile homes, cluttered shops and offices reeking of sweat and that peculiar odor of human desperation I have sat in; the number of ill-educated tradesmen, struggling entrepreneurs and desperate homemakers I have interrogated, demanding the impossible and promising the full fury of my federal power when my demands could not be met. It is no secret that the nation's tax code favors the wealthy and protects big business. ...The individuals and businesses I encountered during my career did not have an army of tax lawyers, certified public accountants and lobbyists to guide and protect them. Most netted less than $30,000 per year. Most operated out of rundown store fronts in tired strip malls. Most were honest people who knew my arrival was the death knell of their American dream.

Thursday, April 15, 2004 ~ 3:33 p.m., Dan Mitchell Wrote:
Breaking news: The OECD adopts a free-market position. Miracles do happen. The OECD actually has decided to take the correct side of an issue. The bureaucrats are recommending that the US government cease providing subsidies to two government-sponsored housing enterprises. Fannie Mae and Freddie Mac are notoriously corrupt institutions, but they have carefully protected their subsidies by giving lavish salaries to politically well-connected Republicans and Democrats. Forbes.com notes that Alan Greenspan also has urged that the time has come to end the Fannie and Freddie gravy train:

    The Organization for Economic Cooperation and Development...said the United States could bolster its economy by slashing ties to mortgage finance giants Fannie Mae and Freddie Mac. The OECD's recommendation, in a periodic survey of the U.S. economy, comes as policy makers debate stronger supervision of the government-sponsored enterprises and potential risks from their growth and size. Congress, motivated by an accounting scandal at Freddie Mac and a $1.2 billion book-keeping error at Fannie Mae last year, took steps to strengthen oversight. The Bush administration, however, said proposals were ineffectual. However, the OECD said that to ensure stable U.S. economic growth over the next 10 years, lawmakers need to aim higher than merely tightening supervision of the two companies. "Reforms should go beyond that by eliminating their special status," the economic group said. Officials at Fannie Mae and Freddie Mac were not immediately available for comment. In a February congressional appearance, Federal Reserve Chairman Alan Greenspan warned lawmakers that the rapid expansion of Fannie Mae and Freddie Mac -- who stand behind $4 trillion in U.S. mortgages -- may well cause problems if allowed to grow unchecked.

Thursday, April 15, 2004 ~ 3:04 p.m., Andrew Quinlan Wrote:
The looming Medicare crisis. An expert from the Cato Institute has a depressing editorial in today's Wall Street Journal. He writes about the giant unfunded liability in the program - a long run deficit that is hidden by deceptive accounting. This article has the grim details:

    A program's financial imbalance can be neatly summarized in one number -- the amount of additional money in an interest-bearing account today that would be sufficient to plug all future shortfalls between its projected outlays and receipts. According to the Trustees' report, Medicare Part A -- which reimburses hospital services for retirees -- faces a financial imbalance of just under $22 trillion. The Supplementary Medical Insurance program (Medicare Part B) and the new Prescription Drug program (Medicare Part D) receive funding out of general revenues. ...General revenue transfers to Parts B and D are decided each year to make up the difference between expected benefit payments and expected premiums collections from the program's enrollees during the next year. Because the law requires such general revenue appropriations, Medicare's actuaries assumed general revenue availability for Medicare Parts B and D throughout the future -- and reported zero unfunded obligations for these subprograms. However, economists, including those with the Private Enterprise Research Center run by Thomas Saving (one of Medicare's public trustees) have released briefing notes suggesting that Medicare's total shortfall is much larger -- about $62 trillion. Unlike the Trustees' report, PERC does not treat general revenues as a dedicated funding stream for Medicare when calculating its financial imbalance.
    http://online.wsj.com/article/0,,SB108198618492283212,00.html?mod=opini on (subscription required)

Thursday, April 15, 2004 ~ 2:44 p.m., Dan Mitchell Wrote:
The OECD urges higher taxes in America, possibly even a VAT. If nothing else, the Organization for Economic Cooperation and Development deserves praise for being consistent. The Paris-based bureaucracy is notorious for its anti-tax competition effort, an effort that would significantly undermine America's competitive advantage in the global economy. But now the OECD has launched a frontal assault, producing a country survey (www.oecd.org/dataoecd/34/12/31483632.pdf ) demanding higher taxes in America. This is not a personal interpretation. Even the news media recognizes the OECD's agenda:

    the OECD warned that cutting back on government spending would not be enough, adding that the tax base should be widened rather than reversing disputed tax cuts. ...The OECD said that if widening the tax base did not generate enough income then the US should consider a national value added tax.

Thursday, April 15, 2004 ~ 1:29 p.m., Veronique de Rugy Wrote:
Classical liberals ponder dangers of the EU and tax harmonization. The world's leading forum for classical liberal scholars featured intense discussion about the risks of European expansion. Writing for the Scotsman, a journalist who attended the Mont Pelerin Society regional meeting ponders the coming clash of high-tax nations in Old Europe and market-oriented nations from New Europe:

    This was the main theme to emerge from a series of papers and presentations delivered at a gathering of the prestigious Mont Pelerin Society last week in Hamburg. The participants, which included Vaclav Klaus, the Czech president and an impressive collection of Nobel-prize winning economists, leading international academics and think-tankers, exposed the European Union's enlargement and its new constitution as what it really is: a bureaucratic nightmare which will prove immensely damaging for the prosperity of ordinary Europeans.

The biggest and most important battle looming will be over tax competition, as Daniel Mitchell of the Heritage Foundation and Richard Rahn of the Institute for Global Economic Growth argued at the conference. ...For high-tax EU nations, the challenge is clear. Either they succeed in crushing the small, low-tax member states and impose tax harmonisation, perhaps with the help of the European Court of Justice and the new charter of fundamental rights, or else they will have to slash their taxes too to retain capital and people.

Thursday, April 15, 2004 ~ 12:36 p.m., Dan Mitchell Wrote:
How would the budget look if taxpayers could choose how money is spent? Charles Murray of the American Enterprise Institute speculates in today's New York Times about what would happen if the people paying the bills got to decide where their tax dollars got spent. Not surprisingly, he believes that this would be bad news for many parts of the government (and therefore good news for the economy). Who, after all, would you ever give money to a cesspool like the Department of Housing and Urban Development? Murray writes that bureaucrats would be the big losers:

    ...suppose you could choose which government entities your tax dollars support - and in what proportion. Since it's a thought experiment, let's assume that local and state government functions are part of the list. What percentages will you assign to which departments, agencies and programs? ...allowing taxpayers to name where their tax dollars go would put large segments of local, state and federal government out of business. To see what I mean, go to the Web and bring up the organizational chart of any government department. Some of the boxes will catch your eye as something you might like to support (mine safety, the national archives) but there will be plenty of other boxes about working groups, directorates for planning or administration or diversity, offices of compliance exemption or regulatory development, all of which sound like a ton of bureaucracy for an ounce of output.

Thursday, April 15, 2004 ~ 12:19 p.m., Dan Mitchell Wrote:
Clinton Administration put tax harmonization above fighting terrorists. Bill Clinton and his team were supporters of the OECD anti-tax competition effort. Constitutional freedoms, legal protections, and civil liberties were tossed out the window in an effort to prop up profligate governments. Yet this is the same Administration that refused to use appropriate and legal measures to investigate terrorists. The Wall Street Journal writes about the previous Administration's misplaced priorities:

    Mr. Ashcroft pointed out that the wall was raised even higher in the mid-1990s, in the midst of what was then one of the most important antiterror investigations in American history--into the 1993 World Trade Center bombing. On Tuesday the Attorney General declassified and read from a March 4, 1995, memo in which Jamie Gorelick--then Deputy Attorney General and now 9/11 Commissioner--instructed then-FBI Director Louis Freeh and United States Attorney Mary Jo White that for the sake of "appearances" they would be required to adhere to an interpretation of the wall far stricter than the law required. ...From any reasonably objective point of view, the Gorelick memo has to count as by far the biggest news so far out of the 9/11 hearings. The Mary Jo White prosecutions and the 2001 Moussaoui arrest were among our best chances to uncover and unravel the al Qaeda network before it struck the homeland. But thanks in part to the Clinton Administration's concern with appearances and in part to its legacy, these investigations were hamstrung.

Thursday, April 15, 2004 ~ 11:51 a.m., Dan Mitchell Wrote:
Tax-consumers versus taxpayers. The Tax Foundation has just issued a report about how tens of millions of Americans have been taken off the tax rolls. Everyone should pay less taxes, but it is a worrisome development when people pay no taxes. As the Tax Foundation reports, people who don't bear the cost of government have no incentive to control its size:

    ...a record 44 million tax returns will be correctly demanding the return of every dollar (or more) that is being withheld from their paychecks during the year. In other words, after taking all the available credits and deductions, they will owe no income taxes and Uncle Sam may well owe them. ...This is a 50 percent increase in the number of zero-tax filers in just four years. ...These findings raise some serious questions about the future of the U.S. income tax system. Are any future tax cuts, or even tax reforms, possible when the lion's share of the tax burden is increasingly borne by a shrinking pool of taxpayers who - at least on paper - appear to be "upper-income"? And will the expanding pool of non-payers demand even higher income taxes?

Thursday, April 15, 2004 ~ 11:06 a.m., Dan Mitchell Wrote:
More education spending by government does not produce better test scores. Frederick Hess has a devastating article on the miserable performance of the government school monopoly. Big spending increases under Bush have not led to any impovements in academic performance. But this should not come as a surprise. Hess' article reveals that taxpayers get a remarkably poor return on their tax dollars:

    Since 2001, the Department of Education's discretionary budget authority has increased by 39 percent. Title I, the main program providing federal dollars to schools serving poor children, has grown 52 percent. In the Bush administration's first two years, Title I spending increased more than during the previous seven years under President Clinton. In fact, this entire NCLB spending debate is obscuring the fact that American schools are actually well funded, by any reasonable standard. After inflation, education spending in the United States more than tripled between 1960 and 2000. It may surprise some to learn that, in fact, we rank at the top of the international charts when it comes to education spending. In 2000 (the latest available data), the Organization for Economic Cooperation and Development (OECD) calculated that the United States spent significantly more than any other industrial democracy, including those famous for generous social programs. In primary education, on a per-pupil basis, the United States spent 66 percent more than Germany, 56 percent more than France, 27 percent more than Japan, 80 percent more than the United Kingdom, 62 percent more than Belgium, and 122 percent more than South Korea. High school figures were similar. Despite this spending, the United States ranked fifteenth among the thirty-one countries that participated in the OECD's 2000 Program for International Student Assessment (PISA) reading exam. Ireland, Iceland, and New Zealand were among those that outperformed us while spending far less per pupil. The results in math are equally disquieting: on the 1999 Trends in International Mathematics and Science Study, the United States ranked nineteenth of thirty-eight participating countries. Most troubling is that America's standing actually deteriorates as students spend more time in school.

Thursday, April 15, 2004 ~ 9:51 a.m., Andrew Quinlan:
Leftists undermine higher education. Walter Williams has a hard-hitting editorial criticizing college administrators for being more concerned with political correctness than they are with academic achievement. According to his Townhall.com column, Williams suggests that alumni think twice before subsidizing foolish fads on campus:

    In far too many instances, what passes as college life and education today is no less than shameful. Under the name of diversity and political correctness, billions of taxpayer dollars and donor contributions are used to promote what might be charitably called enlightened racism, uniformity of thought and political proselytizing. ...Diversity is all the rage on college campuses; many have established offices of diversity with diversity personnel. One thing for sure is that college administrators are not calling for political and intellectual diversity. David Horowitz and Eli Lehrer did a study titled "Political Bias in the Administrations and Faculties of 32 Elite Colleges and Universities." The overall ratio of Democrats to Republicans they were able to identify at the 32 of the nation's elite schools was more than 10 to 1 (1,397 Democrats, 134 Republicans), while for the American population, Republicans and Democrats are roughly equal in number. The same political lopsidedness is found in university administrations. David Horowitz and Eli Lehrer report, "In the entire Ivy League, we identified only three Republican administrators." The brainwashing of students and other shameful college practices occur because as taxpayers and donors we're lazy and indifferent, and college administrators take advantage. Before legislators make an appropriation to or before you donate one dime to a college, check out its Web site. If you see a diversity office, women's studies or transgender studies, that college is the wrong place to send your money.

Wednesday, April 14, 2004 ~ 10:45 p.m., Dan Mitchell Wrote:
Maybe the government should shoot us if we don't exercise. Taking the nanny-state to a new extreme, the Mayor of Oakland wants to tax people who eat salty foods and sugary foods. This is the ideal scenario for a politician - a chance to seize more tax revenue and meddle in people's lives at the same time. The Heartland Institute explains why the proposal should be shelved:

    Oakland, California Mayor Jerry Brown has recommended the state solve its budget woes by exploiting residents' bad habits, by taxing behaviors such as drinking and eating junk food. In an interview published on December 20, Brown told the San Mateo Daily Journal "there are a number of activities" that could be taxed and suggested a tax on people who eat salty and sugary foods as well as "a tippler tax on those who drink at the bar." Brown's spokeswoman, T.T. Nhu, said the mayor has been influenced by policies in Canada, which "taxes chocolate in addition to alcohol and cigarettes."

Wednesday, April 14, 2004 ~ 2:05 p.m., Dan Mitchell Wrote:
Smaller government will lead to less bribery. The World Bank Institute has released a study estimating that $1 trillion-plus is paid in bribes each year. The WBI study shoud have mentioned that a significant amount of bribery takes place only because government has the power to redistribute resources. If government becomes smaller, politicians have less loot to redistribute, and those who want to live off the earnings of other people will have less reason to bribe public officials. Bureau of National Affairs reports on the study:

    More than $1 trillion is paid in bribes each year in rich and developing countries, not counting embezzlement of public money, the World Bank said April 12. ...According to WBI research, countries that tackle corruption and improve the rule of law can boost national income by as much as four times in the long run and reduce child mortality by up to 75 percent-- "a 400 percent governance dividend." Moreover, countries like Botswana, Chile, Costa Rica, and Slovenia, which have been able to curtail corruption to levels comparable to those of many rich, industrialized countries, show that developing countries are able to improve governance.
    http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8j1f6t9 (subscription required)

Wednesday, April 14, 2004 ~ 10:52 a.m., Dan Mitchell Wrote:
Economic reform in Russia. Richard Rahn writes in today's Washington Times about a recent Cato Institute conference on economic liberalization. I attended the Moscow conference and gave a speech on the relationship between taxes and growth. This gave me an opportunity to talk to many people from the region and I echo Dr. Rahn's comments. Russia has made impressive strides, but much more needs to be done. Fortunately, as Richard indicates, Putin's top economic adviser is very competent and committed to free market policies:

    President Putin has received mixed reviews in the West. On one hand, he has been reforming Russia's economy while retrenching on some press freedoms and democratic reforms. He has a very able team of market-oriented economists. His chief economic adviser, Andrei Illarionov, is highly regarded by many Western economists who have known or worked with him over the last decade. One of Mr. Illarionov's favorite themes, presented at the Cato conference, is the optimal size of government. He has compiled an impressive amount of evidence that most governments, including Russia's, are too large to maximize economic growth

Wednesday, April 14, 2004 ~ 10:13 a.m., Dan Mitchell Wrote:
Class warfare works in Europe, not America. John Samples of the Cato Institute has a fascinating article showing that the politics of hate-and-envy does not work as well in America because US voters recognize that they have the ability to improve their position in life. This is a key difference between the US and Europe - though guilt-ridden rich left-wingers on both continents have a lot of similarities. The Nationalreview.com story discusses these findings:

    More puzzling still, making war on the wealthy will not win many elections. The liberal concern about inequality is not widely shared in the United States. Three scholars from Harvard and the London School of Economics recently analyzed attitudes toward inequality in Europe and here. In Europe, surveys have found that inequality of wealth makes two groups unhappy: rich leftists and the poor. By contrast, only rich leftists are troubled by inequality in the United States. The three professors argue that the poor in the U.S. are not concerned about inequality of wealth because they expect to rise up the income ladder whereas Europeans feel stuck in their assigned status in society. Americans do not resent the rich; Americans want and expect to be like them thanks to social mobility. The American Dream lives on except for wealthy progressives.

Wednesday, April 14, 2004 ~ 8:22 a.m., Dan Mitchell Wrote:
French socialist whines that "shadow of sovereignty" is undermining Europe. While this page occasionally criticizes the French, they certainly know how to pursue their national interests. The effort to create a European super-state is largely a French-driven project to boost France's role in international affairs. The EU's anti-tax competition proposals are largely French-driven efforts to insulate and protect the over-taxed French economy. France flouts EU rules that it doesn't like and seeks to impose rules on the rest of Europe. Yet if politicians from other nations emulate the French by seeking to protect their national interests, French officials complain that those policy makers are "weakening" Europe. The French may be wrong on just about everything, but you have to admire their chutzpah. This story from the EU Observer provides the latest example:

    Europe is "dominated by the shadow of sovereignty and weakened by its divisions", according to a former French Europe Minister, Pierre Moscovici. ..."Europeans are unclear about their common destiny: never has European public opinion been so uneasy, so morose, so uncertain".

Wednesday, April 14, 2004 ~ 5:17 a.m., Andrew Quinlan Wrote:
Congress acts to protect US legal sovereignty. Writing for Townhall.com, Phyllis Schafly writes about the efforts of international bureaucracies to undermine American sovereignty. She cites the World Court interference in death penalty cases and the dangers of the International Criminal Court. On a positive note, she reports that the House Judiciary Committee is taking steps to make sure that the US legal system is not vulnerable to this nonsense:

    Globalists are always trying to get the United States locked into some kind of international legal system. Another court in The Hague, the International Criminal Court, is trying to assert jurisdiction over U.S. citizens even though Bush unsigned the ICC treaty. Belgium passed a universal-jurisdiction law purporting to give its courts jurisdiction over alleged war crimes committed by nationals of any other country, but the law was later repealed in August 2003. Attempts by other countries to pretend they can exercise jurisdiction over U.S. citizens would be just plain silly if it weren't that U.S. Supreme Court Justice Sandra Day O'Connor told the Southern Center for International Studies in Atlanta in October that "I suspect that, over time, we will rely increasingly, or take notice at least increasingly, on international and foreign courts in examining domestic issues." Her suspicion was expressed in approving terms ... To ensure that the U.S. Supreme Court doesn't do that in the future, the Constitution Subcommittee of the House Judiciary Committee just held a hearing on the "Reaffirmation of American Independence Resolution." It states that U.S. laws should not be interpreted using foreign judgments or laws.

Wednesday, April 14, 2004 ~ 3:05 a.m., Dan Mitchell Wrote:
The government's misplaced priorities. You would think that espionage is a more serious offense than cheating on your taxes, especially in the post-9/11 environment. But that assumes politicians care more about protecting the country than they care about being able to redistribute other people's money to special interests. The Washington Post reveals the sordid truth:

    The husband of a former American University researcher, who was sentenced to seven months in prison for selling sensitive technology to China, got a stiffer sentence yesterday than his wife did -- a year in prison -- for failing to report the income on their taxes.

Tuesday, April 13, 2004 ~ 8:49 p.m., Dan Mitchell Wrote:
Davey Crockett: Before the Alamo, he fought for freedom. With a new movie about the Alamo in theaters, there is renewed attention to the heroic actions of Davey Crockett. Less well known, however, is that the frontiersman also spent some time in the US Congress. John Fund of the Wall Street Journal points out that Crockett believed in the principle of limited government. It would be nice if politicians today understood that compassion isn't achieved by spending other people's money. The article quotes Crockett on this key distinction:

    "I will not go into an argument to prove that Congress has not the power to appropriate this money as an act of charity. Every member on this floor knows it. We have the right as individuals, to give away as much of our own money as we please in charity; but as members of Congress we have no right to appropriate a dollar of the public money. I am the poorest man on this floor. I cannot vote for this bill, but I will give one week's pay to the object, and if every member of Congress will do the same, it will amount to more than the bill asks."

Tuesday, April 13, 2004 ~ 7:27 p.m., Dan Mitchell Wrote:
Will Schwarzenegger turn into a high-tax European? The Wall Street Journal is worried that California Governor Arnold Schwarzenegger is getting wobbly on the tax issue. The editors note that California voters have expressed their opposition to higher taxes, and they hope the Governor does not break his promise:

    Just last month voters reiterated their aversion to more tax-and-spend solutions by approving a balanced-budget requirement and soundly rejecting a ballot measure that would have made it easier for lawmakers to raise taxes. If the Governor can take the necessary steps to get state finances under control without raising taxes, he'll be rewarded with even more political capital, which in turn could be used to take on other pressing problems in California, such as the anti-jobs workers compensation system and a steeply progressive tax code that results in wild revenue swings. To equivocate on taxes now would irk voters who want politicians to keep their word. And it would reward state lawmakers who are trying to make permanent the exorbitant spending levels put in place in the 1990s with windfalls from stock options and capital gains. The message from voters seems to be that they've had their fill of Sacramento-styled "progressivism." There was a time when Arnold shared their sentiments. We hope he still does.
    http://online.wsj.com/article/0,,SB108171978609779773,00.html?mod=opini on (subscription required)

Tuesday, April 13, 2004 ~ 11:56 a.m., Dan Mitchell Wrote:
Pro-market policies help Slovakia overcome legacy of communism and corruption. The International Herald Tribune reports today on the incredible rise of Slovakia. Interestingly, the left-leaning paper acknowledges the role of market-oriented reforms, including the 19 percent flat tax:

    Slovakia, which came into independence in 1993 as the poor cousin of its former mate, the Czech Republic, became ever more isolated. Shunned by foreign investors, Slovakia's economy lagged its neighbors. In 1997, near the end of Meciar's bleak tenure, it received only $84 million in foreign direct investment, compared to $1.2 billion in the Czech Republic, $1.7 billion in Hungary, and $3 billion in Poland. .When Dzurinda took over in 1998, his center-right government overhauled the pension and health care systems, shook loose the calcified labor market, and introduced a flat tax of 19 percent for corporations and individuals. .Slovakia's tax has captured most of the attention, especially among analysts in Western Europe, who say this ex-Communist country is now more enlightened in its tax policy than Germany or France. ."Slovakia has become the fair-haired child of Central Europe," said Ben Slay, the director of the Bratislava regional center of the United Nations Development Program.

Tuesday, April 13, 2004 ~ 11:11 a.m., Dan Mitchell Wrote:
Academic study links city job losses with tax increases. Writing for the National Bureau of Economic Research, four economists found that higher taxes in New York City and Philadelphia caused large job losses. Advocates of tax competition will be interested in knowing that the authors also found that, "...a city's revenue capacity is limited by the mobility of its residents and businesses." According the the NBER:

    For two of the cities for which the authors have employment data -- New York and Philadelphia -- the effect of tax increases is to reduce city jobs. In 1970, New York City had 5.28 percent of the nation's jobs. By 2001 it had 2.88 percent. The job situation reflects in part the statistically significant negative effect of income tax rate changes: taxes rose from a top marginal rate of 2 percent to 4.66 percent in 1994 before dropping to 3.592 percent in 2001. The authors predict that the city's total job loss because of increases in city income tax rates would have been 490,000 jobs, but Mayor Giuliani's 1994 tax cuts restored 160,000 of those jobs for a final, tax-induced decline in city employment of about 330,000 jobs. Similarly, Philadelphia lost 173,000 jobs between 1971 and 2001 because of increases in city wage tax rates. However, the authors estimate that without Mayor Rendell's wage tax cuts begun in 1996, Philadelphia's job loss would have been an additional 30,000 jobs. The New York City and Philadelphia experiences lead the authors to conclude that lowering city taxes is likely to be a cost-effective way to increase city employment.

Tuesday, April 13, 2004 ~ 10:06 a.m., Dan Mitchell Wrote:
Reunification, ja; redistribution, nein. The eastern part of Germany deserves some sympathy. First, the region suffered under decades of communist oppression. Now, it is suffereing from smothering socialism thanks to misguided compassion from Berlin. The Wall Street Journal opines today:

    Since 1990, Mr. Kohl and his successor Gerhard Schroeder have pumped a whopping €1.25 trillion into eastern Germany. The results, compiled in a recent study commissioned by the government, are nothing short of catastrophic. Unemployment in the east is 20%, twice the already high national average. In relative terms, there are 30% more public-service employees in the east than in the already bloated west German administration. ...Most East European countries introduced swift economic reforms after the fall of communism and -- without the help of wealthy brothers to the west -- enjoyed exceptional growth rates in recent years. In stark contrast to these success stories, the east German economy has been underperforming even sluggish west Germany.
    http://online.wsj.com/article/0,,SB108180587956780637,00.html?mod=opini on (subscription required)

Tuesday, April 13, 2004 ~ 7:55 a.m., Dan Mitchell Wrote:
Tax amnesty doesn't work when taxes are too high. It seems that the Germans can't do anything right. They are offering a tax amnesty in an effort to lure flight capital back into the country, but the amnesty doesn't reduce tax rates once the money is back in Germany. But that is precisely why oppressed taxpayers took the money out of the country in the first place, as the Frankfurtuer Allgemeine Zeitung explains:

Monday, April 12, 2004 ~ 2:12 p.m., Dan Mitchell Wrote:
Liechtenstein leader warns that savings tax cartel will cause capital flight from Europe. Prince Hans-Adam II notes that the proposed savings tax directive will cause a huge exodus of funds from Europe if it is ever implemented. The Prince specifically cites Singapore and Hong Kong as likely beneficiaries, but the United States and Panama also would be attractive options for oppressed European taxpayers. But the one thing that is certain is that European economies will be further depressed as a result of the capital outflow:

    "If a comprehensive exchange of data in matters of finance develops within Europe and if taxes continue to increase, these assets will be transferred out of Europe, possibly to Singapore or Hong Kong." Thus the statement of the reigning Prince of Liechtenstein, Hans-Adam II, in an interview published in last week's issue of the Austrian news magazine "Profil". Prince Hans-Adam II expects the pressure of the European Union on Switzerland and Liechtenstein to accept a comprehensive exchange of data in financial matters to increase.

Monday, April 12, 2004 ~ 1:39 a.m., Andrew Quinlan Wrote:
Wasteful spending in Brussels. The European Commission squanders an incredibly large amount of money, largely due to protectionist subsidies for agriculture (that impose significant damage on the third world) and counter-productive transfers to poorer nations (Ireland has shown that free market policies are the correct prescription for growth). The EU Observer has a commentary on how this waste is hurting the EU:

    A far more serious problem is that about 80 percent of the EU budget is allocated to agriculture (the CAP) and to regional infrastructure (the cohesion fund). The Franco-German deal in 2002 over CAP, while shifting funds towards income support, does little to reduce the share of the budget going to farm subsidies. Because these two categories will absorb the bulk of expenditure for years to come, capping the budget means that there will be little to spend on new needs such as increased EU competitiveness (the Lisbon targets), raising living standards quickly in the poorest new member states, building new infrastructure, extending research or increasing internal and external security.

Monday, April 12, 2004 ~ 11:19 a.m., Dan Mitchell Wrote:
Are the Germans coming to their senses? It appears that Germany doesn't want to commit economic suicide - or at least they don't want to accelerate their economic decline. Failed socialist Prime Minister Gerhard Schroeder is signalling that Germany does not want to abide by the radical Kyoto Protocol if other nations do not agree to make the same mistake. Techcentralstation.com reports:

    A new crack has appeared in Kyoto's wall. German Chancellor Gerhard Schroeder said Europe should not rush into enforcing targets to curb greenhouse emissions if Russia fails to sign the Kyoto protocol [http://www.alertnet.org/thenews/newsdesk/L26197834.htm] . "We hope that Kyoto will be ratified, for example by Russia," told Schroeder. "But if that doesn't happen, it will distort competition at the expense of European and especially German economy." In fact, according to DRI/WEFA estimates [http://www.iccfglobal.org/PDFs/White%20Paper %20REV%2010-02.pdf] , under the Kyoto protocol the price of home heating could rise by 28 percent in Germany by 2010; gasoline and diesel prices would rise by 9 percent and 14 percent. GDP would shrink by 2.9 percent below the baseline forecasts, and employment would fall by 1.0 million jobs annually during the 2008-2012 budget period.

Monday, April 12, 2004 ~ 9:28 a.m., Dan Mitchell Wrote:
EU bureaucrats continue their assault on Gibraltar. The anti-market ideologues in Brussels are ruling that Gibraltar's new tax system is a violation of "state aid" rules (to the statists at the European Commission, the choice not to tax is akin the a subsidy). Amazingly, this rule is based on Gibraltar being a direct part of the United Kingdom - even though it is clear that the two economies are completely de-linked.

    EU Competition Commissioner Mario Monti said last week that plans to replace the current the 35 per cent rate with a new tax capped at 15 per cent of profits was in breach of EU rules on state aid. He said the changes would give Gibraltar-registered companies an unfair advantage over UK-based companies which face a 30 per cent main rate of corporation tax. However, Gibraltar's Chief Minister Peter Caruana said the commission was guilty of erroneously regarding Gibraltar as a fiscal part of the UK when under its 1969 constitution the British possession enjoys fiscal autonomy. A spokesman for the British government said: 'We will study this judgment very carefully. The commission say lower corporate tax in Gibraltar amounts to state aid, but we are convinced that Gibraltar can establish a different tax from the UK and still remain within the EU's state aid rules. Gibraltar is not part of the UK for this or any other purpose, and going to the European Court of Justice is one of the options we will be looking at.'
    http://www.iomonline.co.im/ViewArticle2.aspx?SectionID=872&ArticleID=7 69976

Sunday, April 11, 2004 ~ 11:07 a.m., Dan Mitchell Wrote:
Kerry's tax plan is still bad, even if it has one good idea. If a lunatic said he was going to give you $5, but then cut off your leg, that would be a step in the wrong direction because the benefit (presumably) is outweighed by the cost. The same is true of John Kerry's tax plan. It does have a few decent ideas, including a tiny reduction in the corporate tax rate and a provision to reduce the tax rate on past profits. But these policies are more than offset by the panoply of higher tax rates proposed by the Massachusetts lawmaker. Steve Moore writes in the Wall Street Journal in support of one of Kerry's few good ideas:

    Sen. Kerry would reduce the tax on profits that our companies earn abroad, if they reinvest the capital in job-producing investments back here in the U.S. It's a sensible idea, since an estimated $500 billion of capital owned by U.S. multinational firms -- ranging from Sun Microsystems to Microsoft, to GE -- remains trapped overseas. But these firms are not "Benedict Arnolds," as Sen. Kerry has alleged. They are simply responding to unpatriotic features of the federal tax code that penalize reinvestment in the U.S., at the expense of our own workers. Under the current IRS law, American multinational firms must pay the business taxes in the foreign country in which they earned the money; and then they are whacked with a second, add-on tax of up to 35% if they reinvest the capital here. We are virtually the only nation in the world that penalizes repatriated capital in this way.
    http://online.wsj.com/article/0,,SB108138596868577528,00.html?mod=opini on (subscription required)

Sunday, April 11, 2004 ~ 9:54 a.m., Dan Mitchell Wrote:
Destroying jobs with government intervention. Younger workers and low-skilled workers need experience and training to climb the economic ladder. Entry-level jobs provide these skills - but only if employers and employees both have the freedom to determine market-based wages. But as Tom Sowell explains, minimum wage laws and other labor market interventions hinder this process and cause economic hardship for lower-income workers:

    Jobs have long been harder for young people to find. Some might say that this is due to their lesser skills and experience. But there is no inherent reason why low-skill people should be any less employable at low wages than high-skill people are at high wages. The difference is that the government sets a lower limit to the movement of wages and also mandates working conditions and other benefits that are the same for everyone. All these things cost money and in effect make the minimum wage higher.

Saturday, April 10, 2004 ~ 3:54 p.m., Dan Mitchell Wrote:
French and German politicians: United in stupidity. France and Germany have serious economic problems caused by bloated government, yet politicians think the solution is to make government even bigger. The latest scheme is to impose minimum wages, even though there is near-universal recognition that these policies cause higher unemployment. The Wall Street Journal comments on these short-sighted policies:

    Paris and Berlin have, as so often, returned to an old, failed ploy: the minimum wage. In France, the minimum wage is currently €7.19 per hour. It has had a particularly devastating effect on the country's youth unemployment rate, which stands at 25%. The government now wants to raise the minimum wage by a further 3.7% in July and by the same level in 2005, double the rate of inflation. This will spell more disaster for France's low-skilled unemployed. In Germany, where there is no minimum wage yet, the government is mulling the introduction of this "sweetener." This would undercut those few reforms already in place. The government has pushed through legislation to cut the benefits for long-time unemployed, a big problem in Germany where around 50% of the jobless haven't worked for a year or more. Introducing a minimum wage would undermine efforts to get people back into work.
    http://online.wsj.com/article/0,,SB108128820927875920,00.html?mod=opini on (subscription required)

Saturday, April 10, 2004 ~ 1:17 p.m., Dan Mitchell Wrote:
France's continuing collapse. Techcentralstation.com writes on the recent election in France, which saw the left-wing government lose support to the far left. The fact that French voters support national self-destruction is perhaps due to the closed nature of French society, as ths article indicates:

    The French are not the only pretentious people. But, among the developed countries, France is probably the one where political elites have the tightest control of the media and the political system. All media are in the hands of conglomerates that do business with the state and thus do not criticize the "civil-servant-politician" caste. Intellectuals, specialists and journalists repeat false statements until people think they are true. ...In the meantime, before the French elites and their foreign socialist counterparts, with the help of the United Nations, were able to convince the world to build a communist planet, France is collapsing "alone" with other socialist countries. But France is failing more rapidly since its system is closer to communism than any other.

Saturday, April 10, 2004 ~ 6:47 a.m., Andrew Quinlan Wrote:
Time for Republican traitors to switch sides. Cal Thomas, one of America's most widely-read columnists, writes about the big tax increase in Virginia - a tax increase that is only possible because Republicans have decided to help make government bigger. As the article explains, this is a reprehensible betrayal of GOP principles:

    Gov. Mark Warner, a Democrat, is getting aid and comfort from 20 Republican members of the House of Delegates and others in the Virginia Senate in his effort to raise state taxes that will soak citizens for an additional $1.8 billion annually... Those Virginia Republicans who want to raise taxes instead of first cutting waste, selling assets and in other ways reforming their government should stop calling themselves Republicans and change their name. "Democrat" would better represent how they are thinking and behaving.

Saturday, April 10, 2004 ~ 6:31 a.m., Dan Mitchell Wrote:
Foreign aid hinders development. Charles Krauthammer has an excellent column explaining how foreign aid subsidizes economically destructive policies. The real solution to poverty is free markets. Unfortunately, bureaucracies such as the IMF and World Bank are reluctant to support liberalization since it would reduce their power. Krauthammer's column provides plenty of evidence on the failure of income transfers:

    The answer is not foreign aid, which is corrupting and often worse than useless. In many cases, it actually further impoverished an already poor country. Enriched urban elites bought luxury goods, while donated food and socialist controls drove down the local price of food, ruining the farmers on whom these subsistence economies had depended.  We now know that the secret to curing hunger and poverty is capitalism and free trade. We have seen that demonstrated irrefutably in East Asia, which has experienced the greatest alleviation of poverty in the history of man. In half a century, places like Hong Kong, Taiwan and South Korea have gone from subsistence to First World status. And now free markets and free trade are lifting tens of millions of people out of poverty in India and China.

Friday, April 9, 2004 ~ 11:43 a.m., Andrew Quinlan Wrote:
Justice Department proves that its own persecution of Oracle is unfounded. Thanks to flawed economic, the lawyers at the Justice Department have been blocking Oracle's purchase of PeopleSoft. According to the lawyers, there are only three firms in the market and a merger would be anti-competitive. Yet the Justice Department just purchased high-function enterprise software from another company. Maybe the purchasing bureaucrats should talk to the antitrust bureaucrats so this foolish intervention by the Department can be withdrawn. The Wall Street Journal comments:

    Oracle has taken a lot of hits as it tries to complete its hostile takeover, but the biggest blow came in February when DOJ sued to stop the deal. The Antitrust Division says Oracle can't be allowed to swallow up PeopleSoft because that would leave big software buyers hostage to two major suppliers -- Oracle and SAP. How inspiring then to hear that Justice -- a big software buyer itself -- had broken free of this industry tyranny and picked an entirely different firm to supply its internal financial-management software. DOJ will pay as much as $24 million for software from American Management Systems, one of the many niche players that makes this market so dynamic. Oracle, PeopleSoft and SAP -- the "only three vendors of high-function enterprise software" (according to the DOJ suit) -- didn't make the cut.
    http://online.wsj.com/article/0,,SB108138476708577494,00.html?mod=opini on (subscription required)

Friday, April 9, 2004 ~ 10:32 a.m., Dan Mitchell Wrote:
US governments ignore World Court interference. The anti-American bias at the World Court has led to a number of silly decisions. Fortunately, thanks originally to the leadership of Ronald Reagan, the US government does not cater to this left-wing body. The Wall Street Journal as an editorial correctly describing why the World Court is yet another irrelevant international bureaucracy:

    Sitting in The Hague, in a "Peace Palace" originally paid for by Andrew Carnegie, the "World Court" has effectively ordered the U.S. to halt the execution of all foreigners within its borders. Now that the ICJ has thrown in its lot with the anti-death penalty movement, it may be time for the U.S. to turn its back on the World Court. ...Last week's case demonstrated yet again that the ICJ has allowed itself to become a forum for attacking the U.S. and its allies. In 1985, it allowed Nicaragua to challenge American support of the Contras as illegal aggression. In response, the Reagan administration withdrew from the treaty granting the Court jurisdiction and refused to participate in the proceedings, rather than allow the ICJ the power to review a sovereign American decision to use force in pursuit of national security. Although international lawyers and governments howled, the Reagan administration ignored the ICJ, and rolled back communism in Central America.
    http://online.wsj.com/article/0,,SB108130267526676331,00.html?mod=opini on (subscription required)

Friday, April 9, 2004 ~ 9:49 a.m., Dan Mitchell Wrote:
Will Blair allow a vote on staying in the EU? The European bureaucracy is a very anti-Democratic institution, and member nations of the EU rarely allow citizens any say in what happens in Brussels. That is why it is rather interesting that Tony Blair may allow UK voters to decide whether they want to remain in the EU. His motives are not pure - he wants an all-or-nothing proposition to get support of the Euro and the new EU Constitution, but it is still noteworthy that at least one European politician is willing to let voters decide:

    A report by the tabloid newspaper, The Sun, today claims that UK prime minister Tony Blair is set to call a referendum on whether or not Britain should remain in the EU. ...Such a "do or die" vote would represent a risky but potentially clever strategy for Mr Blair, who is coming under increasing pressure to define once and for all Britain's relationship with the EU. The majority of people in the UK are against joining the euro but want to remain in the EU and want a referendum on the Constitution. By combining all the issues, Mr Blair would force voters into choosing "all-in" or "all-out".

Friday, April 9, 2004 ~ 9:18 a.m., Dan Mitchell Wrote:
Slovakia continues to lead the way toward economic reform. The Heartland Institute reports on the recent legislation in Slovakia to create private retirement accounts. More than two dozen nations have taken this important step. Slovakia deserves special praise, though, because the level of private savings - 9 percent of wages - will allow almost complete privatization:

    Jose Piñera, architect of groundbreaking social security reform in Chile, is working to promote personal retirement accounts (PRAs) worldwide. Citizens for a Sound Economy (CSE) recently released a letter Piñera received from the minister of labor in Slovakia announcing the country's decision to privatize beginning in 2005. "On Tuesday, the 16th December 2003, the Slovak Parliament approved the law on the old-age pension savings scheme," wrote Ludoviit Kaniik, Minister of Labor and Social Affairs. "Thus, as of 1 January 2005, Slovak workers will start depositing 9% into their personal savings accounts."

Friday, April 9, 2004 ~ 7:09 a.m., Andrew Quinlan Wrote:
Italian leaders move nation toward pro-growth policies. Italy's growth rate has been substandard, but a commitment to lower tax rates indicates a brighter future. Prime Minister Berlusconi has indicated that he wants further reductions in the corporate tax rate and significant reductions in the top tax rate on personal income. But good intentions will not generate job creation and growth. The economy will not benefit until and unless tax rates are reduced:

    Italy's deputy prime minister said April 1 that the government would not lower personal income tax levels in the 2005 budget, leaving experts to conclude that the next round of tax cuts will come in the form of lower corporate taxes. Prime Minister Silvio Berlusconi vowed March 27 to include a fifth consecutive year of reduced taxes when he submits the country's 2005 budget later this year ...the prime minister did mention plans to eventually lower the corporate Imposta sul Reddito delle Societa, or IRES, to 30 percent from its current level of 33 percent and to reduce the top rate for the Italian personal income tax, or IRPEF, to 33 percent from its current level of 46 percent.

Thursday, April 8, 2004 ~ 5:35 p.m., Andrew Quinlan Wrote:
Conservatives seek changes in Patriot Act. The Washington Times reports on a growing movement of right-leaning Republicans who want to make sure the Patriot Act does not infringe on constitutional protections. Many of the provisions in the law represent reasonable updates in criminal law to reflect changes in technology, but other provisions raise troubling concerns as former Congressman Bob Barr notes in the article:

    "Kerry isn't a supporter of terrorism any more than I am, just because we both raised some questions about whether some things in the Patriot Act go too far," said former Rep. Bob Barr, a Georgia Republican who thinks aspects of the law violate personal privacy. "The Fourth Amendment is a nuisance to the administration, but the amendment protects citizens and legal immigrants from the government's monitoring them whenever it wants, without good cause — and if that happens, it's the end of personal liberty," Mr. Barr said.

Thursday, April 8, 2004 ~ 11:52 a.m., Dan Mitchell Wrote:
No wonder the French are so ill-informed. A Wall Street Journal columnist notes that the highly centralized education system in France puts the state in total control. The left even objects to the hiring of a few token free-market professors:

    "Everything for the state, nothing outside the state, nothing above the state": Benito Mussolini's bragging motto suits the French educational system well. Higher education in France is almost by definition public and heavily centralized. Researchers and teachers are civil servants, and universities enjoy very little freedom in choosing their staff.
    http://online.wsj.com/article/0,,SB108111362888973724,00.html?mod=opini on (subscription required)

Wednesday, April 7, 2004 ~ 2:03 p.m., Dan Mitchell Wrote:
Jack Kemp says politicians should fix bad policies instead of persecuting "outsourcing." Writing for Townhall.com, former Vice Presidential candidate Jack Kemp argues for free-market reforms to help make America more attractive for job creation. This is in contrast to the "punish the victim" approach of John Kerry and other statist lawmakers:

    The hot-button issue for the Democratic Party this year is "outsourcing," the latest political euphemism that seeks to stigmatize companies voting with their feet and escaping high taxes and onerous regulations that drive up the cost of labor, increase the cost of capital and drive down rates of return on investment. By way of illustration, Sen. John Kerry seeks to demonize firms that move operations offshore to more business-friendly environs by labeling their CEOs "Benedict Arnold CEOs" with the obvious implication that they are traitors. The enemy of American jobs is not Japan, India or China, but rather stupid policy made in Washington, D.C. Therefore, a more apt metaphor is "refugee CEOs" who are fleeing punitive government policies that hurt both capital and labor.

Wednesday, April 7, 2004 ~ 6:45 a.m., Dan Mitchell Wrote:
Free market tax policies are verboten! Every so often, the high-tax nations in Europe let their true colors show, and the recent statements condemning low tax rates in Eastern Europe from German - and now Swedish - politicians are a perfect example. The Swedish prime minister is throwing a tantrum because nations like Poland and Estonia are not treating taxpayers like sheep being fattened for slaughter. The EU Observer reports:

    Swedish prime minister Göran Persson has criticised tax policies in new EU member states, creating a political storm. In media interviews and most recently on a visit to Berlin Tuesday (30 March), Mr Persson argued that Sweden is not prepared to pay for new member states via EU contributions, when the people earning most in these countries are not taxed or taxed at a very low rate.... Mentioning Poland and Estonia as possible examples of such countries, Mr Persson concluded, "they must also tax their best earners" in an interview with Hufvudstadsbladet.

Wednesday, April 7, 2004 ~ 6:17 a.m., Andrew Quinlan Wrote:
Republicans and Democrats are both big government parties. Bob Novak has a discouraging article posted at Townhall.com. He writes about how Republicans and Democrats are conspiring together to rip off taxpayers in pursuit of special interest pork. Novak describes the shameful behavior:

    In the face of President Bush's repeated veto threats, Republicans are determined to pass a bill filled with earmarked spending for individual members of Congress. The 1982 highway bill contained only 10 earmarks. The 1991 bill, the last highway bill passed under Democratic leadership, contained 538 such projects. But the addiction for pork has grown so large that the current bill contains at least 3,193 earmarks. The addiction is bipartisan, thanks to the policy of the House's reigning king of pork. While House Transportation Committee Chairman Don Young has packed the bill with money for his state of Alaska, he makes sure Democrats are allocated their share of money for roads and other goodies in order to build a bipartisan majority on the floor.

Tuesday, April 6, 2004 ~ 1:11 p.m., Dan Mitchell Wrote:
Is the EU savings tax cartel dead? Great news today. The tax-aholic Frits Bolkestein of the European Commission has announced that so-called third countries have not capitulated to Brussels on the savings tax directive. Switzerland deserves most of the credit (though the US government announced its non-participation nearly two years ago). EU politicians are supposed to vote in early June whether to move forward with this proposed tax cartel. Hopefully, they will pull the plug on Mr. Bolkestein's statist proposal:

    Two months before the European Union will decide whether to implement its controversial savings taxation legislation, it still has not reached an agreement with Switzerland, Liechtenstein, Andorra, Monaco, and San Marino on the terms of banking information exchange, the European Commission said April 3. Following intense negotiations in recent weeks, Taxation Commissioner Frits Bolkestein told European Union finance ministers that progress with all the countries had been made but there was still no agreement. ...Switzerland is holding out over the Schengen negotiations in order to ensure that terms of the treaty dealing with combating fraud cannot be used as a backdoor attempt to force the country to give up bank secrecy laws.

Tuesday, April 6, 2004 ~ 12:27 p.m., Dan Mitchell Wrote:
Flat tax would boost growth according to academic study. Bruce Bartlett has a column in Townhall.com today about the inverse relationship between tax rates and tax collections from the rich. Bruce notes that the rich pay a larger share of the tax burden now that tax rates have been reduced. But his column also reports on a new scholarly study demonstrating that a low-rate flat tax will boost economic growth:

    Unfortunately, all taxpayers pay a price for the steeply graduated tax system that has evolved. A new study by economists Steven Cassou and Kevin Lansing shows that a flat rate tax would add significantly to economic growth. Published in the April issue of Economic Inquiry, it concludes that real per capita gross domestic product might rise by 0.143 percentage points per year. This may not sound like much, but it's the difference between doubling in 33 years instead of 36 years.

Tuesday, April 6, 2004 ~ 11:54 a.m., Dan Mitchell Wrote:
Greedy EU bureaucrats lobby for bigger budget. The European Commission has proven to be a poor steward of taxpayer money. Scandals are common and accountability is nil, yet the bureaucracy wants an even bigger budget. Amazingly, the bureaucrats argue that a larger budget will help make the EU more competitive. This greed is too much even for the left-wing governments of European nations, many of which are resisting the demands for more handouts:

    Commission President Romano Prodi and his team will put the case for an increase in the EU budget, but can expect short shrift from some member states - including the 'big three'. ...Brussels argues that more cash is necessary if the EU wants to be a major player on the world stage, both in terms of foreign policy clout and in meeting its objective to become [http://www.euabc.com/index.phtml?word_id=635] "the most competitive economy in the world by 2010". ...German finance minister Hans Eichel and his British counterpart Gordon Brown have both said that member states will stick to their guns. Swedish finance minister Bosse Ringholm described the Commission's plans as "totally unacceptable" and said in an interview with this news-site that some of the new member states were likely to join the six net contributors in calling for a cap in the budget.

Tuesday, April 6, 2004 ~ 11:07 a.m., Dan Mitchell Wrote:
Swiss resist EU duplicity. By pushing a pact that would obligate Switzerland to agree to enforce the bad laws of other nations, the bureaucrats in Brussels want the Swiss to agree to the back-door suspension of financial privacy laws. Fortunately, the Swiss are not that stupid and the government has stated that it has no intention of allowing either direct or indirect attacks on the rights of law-abiding individuals to confidentiality. Swissinfo.org reports:

    Finance Minister Hans-Rudolf Merz has told Germany that banking secrecy is not up for negotiation in a new set of bilateral accords with the European Union. His German counterpart, Hans Eichel, said the EU simply wanted secrecy regulations eased to assist the fight against money laundering and tax fraud. Merz, who held talks with Eichel in Berlin on Friday, insisted that banking secrecy was strictly regulated and was non-negotiable. The issue has proved a major stumbling block to negotiations between Bern and Brussels on a second set of nine bilateral treaties. Bern is reluctant to sign any of the accords until it has secured an opt-out on items which it believes could jeopardise banking secrecy. Switzerland, which is not a member of the EU, is also insisting that all nine accords be treated as a single package, contrary to Brussels' wishes.

Tuesday, April 6, 2004 ~ 9:15 a.m., Andrew Quinlan Wrote:
Federal Reserve study confirms that higher taxes and spending hurt growth. A detailed academic study from the Dallas Federal Reserve Bank uses sophisticated statistical techniques to confirm that big government is economically destructive. This is hardly a surprise to anyone who has examined French economic performance, but it is good to see further evidence on the importance of limited government. Key findings include:

    ..an increase in spending and taxes leads to a decrease in employment growth that is significant for two years. As the lower figure shows, this increase in the size of the public sector leads to a persistently slower rate of job growth. ...Taken as a whole, the three policy cases support two broad conclusions. First, growth in government stunts general economic growth. Regardless of how it is financed, an increase in government spending leads to slower economic growth. Second, the deficit is an unreliable indicator of the stance of fiscal policy. Depending on the budgetary action being financed-a tax cut or spending increase-an increase in the deficit can be either expansionary or contractionary. Tax increases that reduce the deficit are contractionary where spending cuts that accomplish the same goal are expansionary.

Monday, April 5, 2004 ~ 5:02 p.m., Dan Mitchell Wrote:
More wasteful government spending. Government is too big and it spends too much, but sometimes it is the "little" examples that really demonstrate the waste in Washington, DC. Citizens Against Government Waste just released its annual Pig Book, and Cal Thomas culls through the latest issue and writes about some of the scandalous ways politicians are squandering our tax dollars:

    Spending runs the gamut from ridiculous to outrageous. Why must taxpayers shell out $100,000 to renovate an historic Coca-Cola building in Macon, Ga., when the soft drink company made millions last year and could fund the project itself? When we have a $521 billion deficit and a $7.1 trillion national debt, why is Congress playing Santa Claus by spending $200,000 for "recreational improvements" in North Pole, Alaska?

Monday, April 5, 2004 ~ 12:44 p.m., Dan Mitchell Wrote:
So-called moderate Republicans advance the left-wing agenda. Tax rate reductions in 2001 and 2003 have helped boost economic growth and certainly are one of the reasons why the US economy is out-performing the rest of the world. Unfortunately, these tax reforms "sunset" at the end of 2008 (dividends and capital gains) and 2010 (rate reductions and death tax repeal). Making these tax cuts permanent is critically important for long-run growth and competitiveness. Unfortunately, a handful of Quisling Republicans wants to implement "paygo" rules that would create a supermajority requirement for this type of legislation. As the Wall Street Journal explains, these Republicans are carrying water for the left:

    ...the paygo rules would all but guarantee future tax increases, and large ones, as the current Bush tax cuts expire in coming years. So while President Bush campaigns for re-election against John Kerry's tax-hike proposals, Republicans on Capitol Hill would essentially be endorsing them. Strange. ...President Bush's tax cuts are a main reason the economy has recovered as well as it has, and now he is making taxes one of the defining issues for this election. But some Republicans want to embarrass him and his message -- and all in the name of pleasing the editorial writers of newspapers that always endorse Democrats. We're beginning to wonder why in the world some Republicans want to be in the majority, other than to be called "Mister Chairman."
    http://online.wsj.com/article/0,,SB108079405263571370,00.html?mod=opini on (subscription required)

Monday, April 5, 2004 ~ 6:17 a.m., Andrew Quinlan Wrote:
Columnist warns against UN plan to seize control of Internet. Neil Boortz writes in Townhall.com about the dangers of UN bureaucrats grabbing a role in the governance of the Internet. The Internet has been a technological and economic success because of the absence of government control and regulation. United Nations intervention - at the very least - would mean inefficient bureaucracy and mindless intervention. Boortz reports on the UN efforts:

    You can be assured, then, that when a new method of spreading information starts to gain steam, predatory tyrants will start licking their chops. And so it is with the United Nations. There was a little-noticed meeting in New York City last week; a meeting on the rarified upper floors of the UN building. Kofi Annan was having a little sit-down with the head of ICANN. ...the Internet Corporation for Assigned Names and Numbers. This quasi-public corporation, operating under the auspices of the Commerce Department, assigns Internet domain names both here in the US and around the world. So why was Kofi Annan, the erstwhile president of the whole wide world, interested in ICANN? Because while he was meeting upstairs, downstairs at the UN we had representatives from about 200 nations and other organizations who were interested in seeing the United Nations gain control over the Internet, that's why.

Monday, April 5, 2004 ~ 5:32 a.m., Andrew Quinlan Wrote:
EU's attack on Microsoft symptomatic of broader problem. The European Union apparently believes that big companies are bad (unless, of course, they are state-owned monopolies). But this ideological bias overlooks the fact that companies only become big by offering something of value to consumers. Techcentralstation.com writes that this Microsoft decision is a sign of how the EU has lost any remnants of a free-market philosophy:

    Since the early 1990's the EU has increasingly rejected the market-oriented philosophy of the Treaty of Rome in favor of the meddlesome antics of the Brussels Commission. A plethora of intrusive regulations or programs have been instituted or proposed, including attempts to quash smoking, tell people how to take vitamins, play with toys, and even use condoms. ...When a company acquires majority market share through open competition, a strange thing happens to bureaucrats and politicians. They begin to worry about "anti-competitive pricing" that could eliminate competition and eventually harm consumers. But in order to achieve and keep any comfortable position in the marketplace, a company must cater to the wants of consumers. The very process of rising to a position of dominance is one driven by satisfaction of consumer demand. Big companies are big precisely because they have succeeded in offering something valued by their customers.

Sunday, April 4, 2004 ~ 1:08 p.m., Dan Mitchell Wrote:
The real racists are the people who block school choice. A former college football player has gotten in trouble for suggesting that his school should lower academic standards to attract more black players. It is impossible to know whether his statement below was motivated by racism, but commentators are missing the point. Many blacks (and other low-income Americans) receive a substandard elementary and secondary education because of the monopoly government school system. The answer, of course, is school choice. Competition would boost academic performance and help prepare students for higher education. Unfortunately, left-wing politicians and their union allies at the National Education Association don't want black Americans to have this option:

    During a radio interview Tuesday night in Detroit, he told WXYT-AM before the Michigan Sports Hall of Fame banquet that Notre Dame has to "ease it up a little bit" on its standards. "We can't stay as strict as we are as far as the academic structure is concerned because we've got to get the black athlete," [Former Notre Dame Heisman Trophy winner Paul] Hornung said. "We must get the black athlete if we're going to compete."

Saturday, April 3, 2004 ~ 4:40 p.m., Dan Mitchell Wrote:
Welfare destroys lives. A review in the Carolina Journal discusses an important new book by Theodore Dalrymple (Life at the Bottom: The Worldview That Makes the Underclass). As noted in the review (page 18), Dalrymple explains that welfare has a greater destructive effect on the people getting benefits than the people financing those handouts. This is why saving tax dollars is just a fringe benefit of welfare reform. The main goal is to rescue people from government dependancy:

    Socialism (if not a socialist paradise) may be dawning, at least in Britain, with the fattening of the masses, not their starvation. While it does seem that as societies grow richer their "nonproducing " classes become larger, it is not the ranks of the "idle rich" that is swelling; it is the ranks of the statists and their dependents. First, there is the expanding, tax-funded, "bureaucracy of compassion" with its attendant caregivers, social workers, regulators, intellectuals, and social scientists. This group comprises the ever-growing state sector of the new order. Second, there is the expanding, taxsupported group that Theodore Dalrymple, a doctor in a British prison and inner-city hospital, calls the "underclass." These people are dependent on the state for their day-to-day existence. They live in public housing, are guaranteed an adequate supply of food and a minimum allowance, and (like all Britons) receive free medical care. They are not "poor" in a global or historical sense, yet their lives are devoid of hope. With no incentives apart from instant gratification, they grow bored, restless, unhappy, and increasingly violent. In Dalrymple's words, they suffer from a "sheer ignorance of how to live." This group provides the moral and philosophical justification for the activities and livelihoods of the first group.

Saturday, April 3, 2004 ~ 7:50 a.m., Dan Mitchell Wrote:
Is Europe dying? Niall Ferguson of New York University recently spoke to the American Enterprise Institute about the future of the European Union. He remarked that the EU has become a sclerotic bureaucracy, one that will be incapable of playing a significant role in world affairs:

    My suggestion is not that the European Union will vanish, but simply that its institutions are in danger of atrophying and that it, too, may one day be no more than a humble data-gathering agency with expensive but impotent offices in the city of Brussels and elsewhere. ...In every year of the last decade but one--that was 2001--the economy of the United States has grown in real terms faster than that of the European Union. In every year but two out of the last nine years, productivity has grown faster in the United States than in Europe. If you look at the average of unemployment--and these are the standardized measures of unemployment that the OECD uses--you can see that on average over the last decade unemployment in the European Union has been double what it has been in the United States.

Saturday, April 3, 2004 ~ 6:54 a.m., Dan Mitchell Wrote:
Switzerland continues to resist EU bullying. The European Union wants Switzerland to sacrficie the rights of individuals to help enforce a savings tax cartel (even though the cartel will drive capital from Europe to Asia and America). Fortunately, the Swiss government is resisting the EU's extortion, as this article notes:

    The Swiss government, which is negotiating a second round of bilateral treaties with the European Union, has again insisted that the nine accords be treated as a single package. ...the Federal Chancellery said in a statement "...all the dossiers have to be concluded simultaneously and in such a way as to guarantee the preservation of Switzerland's banking secrecy."

Friday, April 2, 2004 ~ 9:33 p.m., Dan Mitchell Wrote:
Ending welfare has helped the poor. The Wall Street Journal has a very encouraging editorial today about the dramatic reductions in poverty following the elimination of the welfare entitlement. As the column indicates, poor children have seen some of the biggest improvements in living standards:

    Government "reform" rarely works, as these columns often point out. But eight years after Congress ended welfare as a federal entitlement, the evidence is undeniable that this experiment in conservative social policy is a historic success. The only problem is that some people still won't forgive the reformers for being right. ...The Department of Agriculture reports that between 1995 and 2001, the number of children it counted as "hungry" was cut in half. And over that same period the number of children living in "deep poverty" -- defined as families with income less than half of poverty level income -- dropped to 5.1 million from 5.9 million. One of the most impressive trends post-reform has been the drop in poverty among children of single mothers -- a group whose numbers had barely budged in the previous quarter-century. In 1995 the poverty rate for this demographic was 50.3%, down only slightly from 53.1 percent in 1971. By 2001, and notwithstanding the recession, the number had fallen to 39.8%, a record low.
    http://online.wsj.com/article/0,,SB108087696840172617,00.html?mod=opini on

Friday, April 2, 2004 ~ 12:15 p.m., Dan Mitchell Wrote:
Free markets promote democracy. In a National Review online article on prospects for Iraqi democratization, Jonah Goldberg cites some interesting research on the link between prosperity and democracy. Interestingly, the relationship between income and democracy does not apply to oil-rich nations:

    ...Adam Przeworski of New York University confirmed this truism by studying every attempted transition to democracy around the globe. He and his colleagues found that once a country passes $6,000 in per capita income it is virtually guaranteed to succeed in its transition to democracy. States between $3,000 and $6,000 have less than a 50-50 chance of staying democracies. And countries below $3,000 are almost bound to fail. Why is this? The short answer is that liberty tends to come with a thriving middle class, which needs or demands stuff like relatively uncorrupt courts and bureaucracies, unions, enforceable contracts and property rights, healthcare and access to education, particularly for women. The one great exception are nations with huge amounts of oil or other natural resources. As Fareed Zakaria notes in his wonderful book, The Future of Freedom, these states didn't "earn" their wealth and so they didn't develop the liberal habits and institutions necessary to sustain a democracy.

Friday, April 2, 2004 ~ 10:41 a.m., Dan Mitchell Wrote:
John Kerry's plan to make America less competitive. Bruce Bartlett writes in Townhall.com about Senator Kerry's proposal to impose higher taxes on companies competing in the global marketplace. His article points out that a big chunk of US exports are sales from parent companies to their overseas subsidiaries. Needless to say, if these overseas subsidiaries shut down or downsize because of Kerry's plan, this will mean less exports from the US - and fewer jobs in the US. Bruce has the data:

    There are many problems with Kerry's plan to tax the unrepatriated overseas profits of U.S. companies. The main one is that few other countries tax the foreign profits of their companies at all. Consequently, U.S. firms are already at a competitive disadvantage tax-wise. Kerry's plan would make the situation worse, encouraging U.S. companies to reincorporate in other countries. ...As far as jobs are concerned, the Kerry plan probably would reduce employment in the United States. ...According to the Commerce Department, in 2001 (latest year available), U.S. companies exported just over $1 trillion worth of goods and services. Of this, $230 billion went to their foreign subsidiaries.

Friday, April 2, 2004 ~ 7:07 a.m., Dan Mitchell Wrote:
Another international bureaucracy targets America. The Belgium-based World Court ruled earlier this week that the United States is in violation of "international law" because of state death penalty procedures. Fortunately, the US government has no intention of letting these irrelevant busy-bodies trample US sovereignty. Indeed, as this AP article indicates, state governments have ignored these rulings in previous cases:

    The world court ruled Wednesday that the United States violated the rights of 51 Mexicans on death row to receive diplomatic help, and ordered Washington to review their cases. ...The United States had argued the case was a sovereignty issue, and that the 15-judge tribunal should be wary of allowing itself to be used as a criminal appeals court, which is not its mandate. ...It is the third time the United States was brought before the court over death penalties imposed against foreign nationals. Germany lodged a suit in 1999, seeking a ruling on the execution of two German brothers, convicted for murder after a botched robbery. Karl LaGrand was executed before the court could intervene. His brother, Walter, was executed later despite the decision. Paraguay filed suit against the United States in 1998 to stop the execution of its citizen, Angel Francisco Breard, on Virginia's death row for murder and attempted rape in 1992. It withdrew the case, also based on the Vienna Convention, after Breard was executed.

Friday, April 2, 2004 ~ 6:42 a.m., Dan Mitchell Wrote:
Onshore jurisdictions have the weakest anti-money laundering laws. Like most international bureaucracies, the International Monetary Fund has a bias in favor of higher taxes. As such, it was a surprise to see that the IMF produced a report acknowledging that low-tax jurisdictions have the strongest laws against money-laundering. By contrast, one columnist points out that fewer than half of "onshore" jurisdictions receive passing grades:

    This week we report on the recently released assessment of the financial supervision standards in the OFCs by the International Monetary Fund (IMF). The IMF report confirms that, on average, the OFCs are more in compliance with international supervisory standards for financial services than other jurisdictions assessed by the IMF. The IMF reports that OFCs have a higher rate of compliance with the Basel Core Principles in the areas of cross-border banking, information disclosure requirements and, significantly, in prudential regulations and requirements. And in the area of money laundering prevention 76% of the offshore jurisdictions were in compliance with the Basel Core Principles compared to only a 45% compliance rate for onshore jurisdictions.

Thursday, April 1, 2004 ~ 3:01 p.m., Dan Mitchell Wrote:
Berlusconi pushes Italy in the right direction. The Prime Minister of Italy understands that his country will never prosper unless the high tax burden has been reduced. And as previous blog entries have noted, he even understands that high tax burdens are immoral. The Bureau of National Affairs writes today about Berlusconi's latest effort to boost the Italian economy:

    Italy's 2004 budget eliminated taxes on most corporate capital gains and reduced the corporate income tax by 1 percentage point, reducing the country's average tax burden for the fourth consecutive year. Soon after, Berlusconi promised to continue to reduce taxes in the 2005 and 2006 budgets, but there had been widespread speculation that slower-than-expected economic growth in Italy would force the prime minister to change or push back plans for further tax cuts. Instead, Berlusconi said in televised comments from Palermo, Sicily, that further reducing taxes was the only way to stimulate economic growth, and he vowed to continue to reduce taxes ..."The economy needs a shock," Berlusconi said. "What can be done is to spur spending and there is only one way to do that, by cutting taxes," Berlusconi said. "Italy is the only country [in Europe] seeking to put some order in public accounts without putting our hands into the pocketbooks of our citizens."

Thursday, April 1, 2004 ~ 2:29 p.m., Dan Mitchell Wrote:
EU draft Constitution is a minefield of government intervention. The draft constitution of the European Union includes supposed "rights" that are better described as entitlements. Fortunately, proponents of statism have not succeeded in adding tax harmonization language to the draft, but that risk still exists. The Wall Street Journal editorialized today about the shortcomings of the proposal:

    ...they'll find a radical economic program buried in the fine print. Title IV of Part II declares 12 social objectives to be inalienable, fundamental constitutional rights. These include the right not to be unjustly dismissed; the right to working conditions that respect the worker's "health, safety and dignity" (without reference to cost); the right to receive state benefits for unemployment, sickness and old age (without reference to cost); and the right to strike (for public and private sector employees alike). These social rights differ from the individual rights -- such as the right to free speech and to the free exercise of religion -- that have figured prominently in liberal, democratic constitutions for 200 years.
    http://online.wsj.com/article/0,,SB108077325831170741,00.html?mod=opini on

Thursday, April 1, 2004 ~ 1:07 p.m., Dan Mitchell Wrote:
Will Israel choose free markets? Economic issues traditionally don't dominate the headlines in the Middle East, but that doesn't mean they are not important. Israel's economy traditionally has been moribund because government is too big. But this may be changing. As this Wall Street Journal column discusses, Israeli officials apparently have learned that French-style economics are a recipe for stagnation:

    Addressing foreign journalists in a Knesset conference room last fall, Ehud Rassabi began his talk with the following statement: "I am a fan of Milton Friedman." As the parliamentarian went on to detail his plans to cut Israel's public sector, slash taxes, draw down entitlements and privatize state assets, several reporters looked around in confusion, wondering if they were still in the land of the kibbutz.... This stab at transformation couldn't have come too soon. When Mr. Netanyahu took over, Israel was years into a steep recession. Tax revenues were in a free-fall even as the country handed over more money to welfare programs (with some 30% of its $70 billion budget going to transfer payments). The Bank of Israel, worried about inflation, had kept interest rates high, strangling an economy that the financial community was worried could collapse. Even a year into Mr. Netanyahu's emergency economic reforms, GDP growth has remained anemic -- just 1.3% in 2003. Some 10% of the work force is unemployed, despite the government employing one out of every three workers. And Israel's government expenditures total a startling 55% of GDP. U.S. expenditures, both federal and state, are less than one-third.

Thursday, April 1, 2004 ~ 11:44 a.m., Dan Mitchell Wrote:
Politicians and business conspire to rip-off consumers. Governments inevitably do the wrong thing, and Walter Williams' latest column is a great example. The state of Maryland has created a "minimum price" law for gasoline to help line the pockets of gas station owners. Why would politicians do something this foolish? As Williams explains, they know they can count on the support of the gas station owners and they assume that the average motorist will be too busy to care:

    At each of the 20 gasoline pumps, there was a sign posted that Wawa would no longer dispense free coffee to its gasoline customers. Why? The station was warned that dispensing free coffee put it in violation of Maryland's gasoline minimum-price law. Here's my no-brainer question to you: Do you suppose that Maryland enacted its gasoline minimum-price law because irate customers complained to the state legislature that gasoline prices were too low? ...The beneficiaries of the gasoline seller collusion are relatively few in number and well organized. The victims, mainly gasoline customers, are difficult to organize, and the costs they bear are relatively small and widespread. In other words, how many gasoline consumers would be willing to spend their time and energy fighting to unseat a legislator whose actions imposed, say, a nickel a gallon additional cost upon them? It's cheaper just to pay the nickel a gallon more and forget about it, but that's not true about gasoline retailers. It is worth their time and energy to pressure legislators for minimum-price laws, and politicians know this.

Thursday, April 1, 2004 ~ 7:09 a.m., Andrew Quinlan Wrote:
Time to kill the pork-filled energy bill. Politicians in Washington are trying to blame each other for rising gasoline prices. This political spat is largely irrelevant, and so is the energy bill making its way through Congress. If lawmakers really wanted to lower gas prices, they would reduce taxes and regulations and lift restrictions on energy exploration. But statists from both parties rejected this option. Now we are left with an energy bill that should be called The Special Interest Pork Barrel Enrichment Act. The Wall Street Journal notes:

    As for GOP claims, the energy bill stopped having much to do with oil after the White House gave up trying to promote drilling in Alaska. The bill is now a $200 billion pork fiesta that no one believes will have any immediate effect on energy prices, and maybe not in the long run either. The Bush campaign's one legitimate point is that the 50-cent-a-gallon gas tax that Mr. Kerry has supported would make things worse.
    http://online.wsj.com/article/0,,SB108069865166669867,00.html?mod=opini on

Thursday, April 1, 2004 ~ 6:45 a.m., Dan Mitchell Wrote:
Are Europeans waking up to the cost of chicken-little environmentalism? Several years ago, the European Union stated that it wanted to be the world's most competitive economy by 2010. This "Lisbon Goal" has become a bit of a joke, especially since Europe is falling farther and farther behind the US thanks to excessive taxes and regulation. But if Europe really wants to commit economic suicide and end any chance of competing with the US, it should implement the Kyoto protocol. It appears, however, that common sense may come to the rescue. Many European governments now realize that catering to the secular god of radical environmentalism is a recipe for economic disaster:

    ...the EU faces a reality check on March 31, the day each member nation must submit a plan for reducing emissions of greenhouse gases. The projected costs, as well as the likely loss of economic competitiveness with the United States, has the EU wondering if it can virtually go it alone in implementing the Kyoto Protocols on climate change. The protocol has yet to take effect as a binding treaty since the US and Russia won't sign on, and China and India were given a pass for now.

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