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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 |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Thursday, September 30, 2004 ~ 10:19 p.m., Dan Mitchell Wrote: While handguns are banned for citizens in Washington, D.C., congressmen are allowed to have a gun for self-protection on the Capitol grounds. Well-known liberal politicians
such as Senators Chuck Schumer and Ted Kennedy have armed bodyguards. The wives of politicians, such as Senate Minority Leader Tom Daschle's wife, Linda, also have bodyguards. Undoubtedly, these politicians and
their families have extremely good reasons for this protection, but many other Americans, especially those living with the high crime rates in D.C., also feel the same way. ...While these politicians have
protection both in their homes and as they travel around in public, since September 24, 1976, other D.C. residents have lived under the nation's most restrictive gun laws. Police enforce a citywide handgun ban,
and local statutes require residents to keep long guns disassembled, unloaded, and locked up. Yet, with a murder rate of 46 per 100,000 people in 2002, the District easily holds the title of the U.S. murder
capital among cities with over 500,000 people. This was not even close to being the case prior to the ban. Crime rose significantly after the gun ban went into effect. In the five years before Washington's ban
in 1976, the murder rate fell from 37 to 27 per 100,000. In the five years after it went into effect, the murder rate rose back up to 35. During this same time, robberies fell from 1,514 to 1,003 per 100,000 and
then rose by over 63 percent, up to 1,635. ...The irony over the gun-ban debate is that Democratic national standard bearers at least publicly give lip service to the claim that Americans have an individual
right to own guns for self-protection. Senator John Kerry has said, "I believe that the Constitution, our laws and our customs protect law-abiding American citizens' right to own firearms." Senator
John Edwards claims "I believe that the 2nd Amendment protects Americans' right to own firearms for purposes like hunting and personal protection...." Senator Tom Daschle, the Democratic minority
leader, has also just affirmed his support for the Second Amendment in ads airing in his tight race in South Dakota.
Thursday, September 30, 2004 ~ 7:41 p.m., Andrew Quinlan Wrote: Greece's handouts from the EU are not yet in danger despite Athens' budgetary crisis, a spokesman from the European Commission said on
Wednesday (29 September). Brussels has allocated 563 million euro in so-called "cohesion funds" destined for Athens in 2004, of which 189 million euro had been transfered by 1 August. The Commission
spokesman for regional policy had told Reuters news agency, "We might consider the possibility of suspending cohesion funds for Greece as
foreseen by the regulations". However, the spokesman for economic affairs, Gerassimos Thomas said, "The Commission will have to evaluate
[the 2005] budget and come back with an assessment in November", adding that fines are often not needed "once a country has taken action to correct its deficit".
Thursday, September 30, 2004 ~ 8:34 a.m., Dan Mitchell Wrote: Developing countries all too often create policy risks, and add costs and barriers to competition that hamper businesses--from farmers to
micro-entrepreneurs to local manufacturing companies, the World Bank said in a new report Sept. 28. In World Development Report 2005: A Better Investment Climate for Everyone, the bank makes the case that
economic growth is needed for poverty reduction but macroeconomic stability by itself is insufficient if other conditions are absent. "A vibrant
private sector creates jobs, provides the goods and services needed to improve living standards, and contributes taxes necessary for public
investment in health, education, and other services," said Francois Bourguignon, World Bank chief economist. "But too often governments
stunt the size of those contributions by creating unjustified risks, costs, and barriers to competition." ...
Thursday, September 30, 2004 ~ 7:58 a.m., Dan Mitchell Wrote: We've long been skeptics about the science behind the political campaign to regulate greenhouse gasses, so imagine our surprise to discover that
some of the global warmists seem to agree. How else to read a paragraph that was included in a recent Senate spending bill exempting climate programs from having to pass scientific scrutiny? The legislative
language excuses any "research and data collection, or information analysis conducted by or for the National Oceanic and Atmospheric Administration" (the agency charged with monitoring climate change)
from the Data Quality Act, a new law that requires sound science in policymaking. This is the sole exemption in the bill. ...our sources say it was included at the request of Democrats on the Senate subcommittee
that wrote the spending bill in question, but that now the exemption is getting the attention of Chairman Judd Gregg, who says he intends to remove it. Let's hope so. Surely those who claim to believe most in
climate change aren't afraid to subject their theories to even basic tests of scientific accuracy. Or are they?
Thursday, September 30, 2004 ~ 6:21 a.m., Dan Mitchell Wrote: ...there is a good way to see whether charter schools raise achievement. Since most charter schools cannot admit as many as want to attend, they
choose students based on random lotteries. We can compare the performance of students who are and are not randomly assigned to charter schools. This is the method used by Department of
Education-sponsored studies and a study by Jonah Rockoff and me. We found that a large system of Chicago charter schools raised math and reading scores by about six percentiles among students who entered in
third grade or below. (Relatively few students enter after third grade, so we don't have statistically significant findings for them.) Any scientific
study of charter schools must compare apples to apples, and the lottery method is best. The AFT, in contrast, has been pushing results based on
an "apples to oranges" comparison, pitting charter students against all regular public school students, who are very different. In fact, when the
AFT narrowed in on black and Hispanic students, they found no differences between charter and public schools. This has not kept them from trumpeting the result of the crude comparison. Another serious
problem with their study: It is based on only a 3% sample of charter students in the fourth and eighth grades. ...For the entire U.S., I found
that charter students were 3.8% more likely to be proficient on their state's reading exam and 1.2% more likely to be proficient on their state's
math exam than students in the nearest regular public school. These differences rise to 5% in reading and 2.8% in math if we compare charter
schools to the nearest public school with a similar racial composition. In fact, the more similar the schools are, the more positive the differences.
Consider states where charter schools are relatively well-established. Arizona's and California's charter students are 7% to 8% more proficient
in reading than students in the nearest similar public school. Colorado's are 11% more proficient in reading and math. D.C.'s post large differences in achievement: About 36% more proficient in reading and math.
Wednesday, September 29, 2004 ~ 2:00 p.m., Dan Mitchell Wrote: The Financial Crimes Enforcement Network expects to make a recommendation by the end of the year on whether to raise the current
$10,000 threshold that triggers the filing of currency transaction reports, FinCEN Director William J. Fox told the Senate Banking Committee Sept. 28. ...He said FinCEN and the Bank Secrecy Act Advisory Group
currently are working on a recommendation. The Bank Secrecy Act Advisory Group is a team of regulators and experts from the private sector that meet regularly to discuss implementation of the Bank Secrecy
Act and other federal anti-money laundering issues. Bankers complain that CTR filings are a major regulatory burden, and that federal regulators sometimes never examine the many CTRs that banks file each year.
Wednesday, September 29, 2004 ~ 1:18 p.m., Dan Mitchell Wrote: The key problem with Social Security is that it has never taken in enough to cover all the pensions it promised to pay. Promises win votes but
collecting enough money to pay for them does not. Should we be surprised that politicians take the easy way out by promising a lot and leaving it to future politicians to figure out how to pay for what was
promised... you don't see insurance companies wringing their hands about how they can't pay out the pensions they promised when they sold annuities. That is because each generation's premiums were invested to
create additional future wealth to pay for that generation's pensions, regardless of whether the next generation is large or small. The big
difference between private annuities and Social Security is that private investment creates future wealth for the country as a whole and Social Security does not.
Wednesday, September 29, 2004 ~ 11:52 a.m., Andrew Quinlan Wrote: John A. Rapanos, a 68-year-old Michigan landowner faces a 10-month federal imprisonment and up to $10 million in fines. Rapanos cleared and
graded 175 acres of fallow farmland that he had owned since 1950 with the intention of constructing a shopping center. When the shopping center deal fell through, he leased the land to a local grain farmer. What
was his crime? Under the Clean Water Act, no person may discharge, dredge or put fill material into the navigable waters of the United States
without a permit. The closest navigable waters to Rapanos' land are in Saginaw Bay, some 20 miles away. Rapanos' crime in the eyes of the U.S.
Army Corps of Engineers was that he filled in depressions on his land without permission. According to his defense at the California-based
Pacific Legal Foundation, "the Corps has argued that isolated pools and puddles were magically transformed into 'navigable waters,' and subject
to regulations, merely by the stopover of 'migratory' birds." With the Corps' reasoning, you could go to jail if you had a tree stump ground out
and filled the hole. ...President John Adams (1797-1801) said, "The moment the idea is admitted into society, that property is not as sacred
as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence."
Wednesday, September 29, 2004 ~ 10:39 a.m., Dan Mitchell Wrote: Twenty years ago, AM broadcast pop music and news bulletins. Today it carries hours of conservative talk. What changed? Not the AM band--it
functions exactly the same as it did in 1984 or, for that matter, in 1934. What changed were the rules. Up until 1987, any radio station that
allowed time for partisan comment had to allot an equal amount of time to the other side--with the Federal Communications Commission
deciding what counted as "the other side." Daunted by that regulatory burden, AM radio stayed away from politics altogether. It's not a
coincidence that Rush Limbaugh emerged as a national voice only after the so-called Fairness Doctrine was abolished--and that liberal Rush
critics have repeatedly tried to reinstate the old rule ever since. Or think about the Swift Vets ads. Maybe you saw them on the Internet. But they
were there for you to see only because senators John McCain and Russ Feingold failed in their attempt to amend U.S. election law to prevent citizens--like the veterans--from making their voices heard during
election campaigns.
Wednesday, September 29, 2004 ~ 10:03 a.m., Dan Mitchell Wrote: Switzerland yesterday rejected proposals to ease citizenship rules for foreigners... In a referendum, a majority of the population - and most of
Switzerland's cantons - rejected government proposals to ease citizenship requirements for second- and third-generation foreigners. ...Critics said
the decision would damage Switzerland's reputation as an open and tolerant society and hinder integration....Switzerland has an unusually high proportion of foreign residents compared with neighbouring
European Union countries. Most of the foreigners, who comprise 20 per cent of the more than 7m population, are originally from southern EU countries or, more recently, from the former Yugoslavia. While the
relatively high proportion reflects Switzerland's openness and need for foreign labour, it also demonstrates the barriers to gaining nationality in one of Europe's richest states.
Wednesday, September 29, 2004 ~ 8:28 a.m., Dan Mitchell Wrote: Why has America's economy grown 55% faster than Germany's over the past 25 years? The Germans think they know. Americans suffer cruel
inequality. They work three "McJobs" just to survive. They take on more and more debt to maintain their standard of living. Washington hides the
true state of unemployment by locking up millions in jail. And forget about getting decent health care. Right-thinking Germans even have a derogatory term, Amerikanische Verhaltnisse -- literally, American
conditions -- as a shorthand for the social catastrophe they believe would result if they were ever to tackle the real cause of their slow growth: a
notoriously rigid labor market. This view is so monolithic that the conservative leader Edmund Stoiber is on record saying, "We do not want Amerikanische Verhaltnisse in Germany." So imagine the Sturm
und Drang when a German author, Olaf Gersemann, came along earlier this year and exploded all these myths. The title of his book hardly needs translation: "Amerikanische Verhaltnisse: Die falsche Angst der
Deutschen vor dem Cowboy-Kapitalismus." On each score where Europeans think their system is superior, the Washington correspondent for Germany's largest business weekly shows that the Americans have
actually pulled ahead.
Tuesday, September 28, 2004 ~ 4:39 p.m., Dan Mitchell Wrote: Games and circuses once were provided by government. How better to satiate the desire of the Roman masses than to entertain them in the
Arena? Today, governments build stadiums to attract sports franchises for the same purpose. But the American masses seem to be tiring of transferring billions of dollars to billionaire team owners. ...Stadium
advocates have been amazingly successful in taking from the poor and giving to the rich. Some wealthy sports moguls, such as Managing General Partner Al Davis of the NFL Oakland Raiders, have turned
mulcting taxpayers into an art form. Raymond Keating, chief economist for the Small Business Survival Committee, estimates that government
has poured more than $20 billion (in current dollars) into sports ventures in recent decades. Yet such facilities once were and continue to be built
privately. The only reason more franchise owners decline to construct their own stadiums is because taxpayers so often relieve them of the need to do so. ...sports spending is primarily substitutional. Stanford
University economist Roger Noll figured that only 5 percent to 10 percent of those attending games live elsewhere. Local fans divert their outlays from other leisure activities and other areas within the region.
Thus, government stadium "investments" have consistently generated meager results. Robert Baade and Allen Sanderson looked at a dozen metropolitan areas for The Heartland Institute and found no net
employment hike. Separately Baade reviewed 36 cities and found no net statistical increase in economic growth.
Tuesday, September 28, 2004 ~ 4:03 p.m., Andrew Quinlan Wrote: Would you sign a contract that enabled the other party to change the terms of that contract at will, while you could neither stop him nor make
any changes of your own? Probably not. Yet that is exactly what happens when you pay money into Social Security. ...A private annuity plan run by
an insurance company is legally required to pay you what was promised, when it was promised, and to maintain assets sufficient to redeem its promises. ...Although the stock market bounces up and down from day to
day, people are not investing today in order to retire next week. They begin paying Social Security premiums when they first get a job and they
retire decades later. Stocks are far less risky in the long run than they are in the short run because the ups and downs balance out over a long
period of time. It is virtually impossible to find any 40-year period in which the stock market has not paid a higher rate of return on your
money than you get from Social Security. ...The same political expediency which caused Social Security to be called "insurance," in order to get
public support, guaranteed that it would be nothing of the sort. Unlike an insurance company, Social Security has never had enough money to pay
for all the pensions it promised. Instead, Social Security has been run like a pyramid scheme, where the first people to pay in get money back from
the second wave of people who pay in, and the second wave get money back from the third wave, etc. This is so risky that pyramid schemes are illegal -- except when the government does it.
Tuesday, September 28, 2004 ~ 2:43 p.m., Dan Mitchell Wrote: The findings of a study undertaken by Ernst & Young and the Centre for European Economic Research has suggested that the tax gap between
Germany and the new member states of the European Union will continue to grow unless Berlin cuts rates in the years ahead... With Lithuania, Latvia, Hungary, Slovakia and Poland having cut company
taxes in recent months in a bid to attract foreign investment, and with the Czech Republic and Estonia planning further cuts, competition is
hotting up for foreign investment and the study predicts the gap in the effective tax rate between the old and new EU states will increase. "Investments in new member states can considerably reduce the tax
burden of German companies," the study observed. The research concluded: "The distance between Germany and the new EU member states will keep growing."
Tuesday, September 28, 2004 ~ 12:19 p.m., Dan Mitchell Wrote: The Conservative Party is currently examining ways in which thousands of households can be relieved from the Inheritance Tax burden should
the party win the next general election. Inheritance Tax is currently paid at 40% on the value of homes over £263,000. Although the Chancellor,
Gordon Brown, raised the threshold in his most recent budget, it has been rapidly outpaced by strong house price inflation in recent years, pushing many families on modest incomes into the IHT net, especially in
the south east. ..."Inheritance tax has become plain unfair. Once only the very rich paid it, but under Gordon Brown it is hitting ordinary families
all over Britain," commented Shadow Chancellor Oliver Letwin. He added: "Two and a half million houses with six million people living in
them are potentially liable to inheritance tax and the number is rising rapidly. Even former council houses are being drawn into the net. This
problem needs to be remedied." However, the Party has thus far refused to make any commitments to cutting or reforming IHT under a possible Conservative government, and Shadow Treasury Minister George
Osborne remarked that it would be "irresponsible to give it now".
Tuesday, September 28, 2004 ~ 11:05 a.m., Andrew Quinlan Wrote: Globalization in fact reduces poverty and the use of child labor, fosters women's rights, promotes respect for democratic norms, enriches culture,
and even sustains the environment. Multinational corporations are not wreaking havoc by leveling wages and labor standards across the globe. In fact, they raise them. The "gotcha" examples produced by
anti-globalizers of the occasional social harm done by globalization are exceptions and not the rule. To show that globalization eases poverty, Bhagwati offers a tale of two continents. In 1970 average African
incomes were 30 percent higher than average Asian incomes. Thirty years later, African incomes had remained stagnant and were then half of Asian incomes. While there were undoubtedly many causes of this
reversal, Bhagwati documents that a primary one was that Asia opened itself and adapted to external markets while Africa did not. As a result, in
1970 Africa was home to about 10 percent of the world's poor and Asia to more than 75 percent, using standard measures of the absolute level of
poverty. Thirty years later Africa had more than a third of the world's poor and Asia's share had declined to just 15 percent. Looking more closely at developments within Asia bolsters the point. Who can doubt,
Bhagwati asks, that the dramatic reductions in poverty in China and India came about only when these countries began integrating with the world economy, mimicking the tactics of Japan, Korea, and Singapore?
Trade and foreign direct investment boost growth, and growth reduces poverty.
Tuesday, September 28, 2004 ~ 9:28 a.m., Dan Mitchell Wrote: Preventing law-abiding people from owning guns in their homes (there is no talk of allowing residents the right to carry concealed handguns) has
done nothing to reduce crime, which has skyrocketed in part due to police mismanagement and corruption. In the five years after the ban took effect in 1976, the murder rate rose to 35 per 100,000 people from
27. In fact, in the three decades since the ban took effect, the annual murder rate has only once fallen below what it was in 1976. In 2002 the
murder rate hit 46 per 100,000 people. Robbery rates have also risen dramatically. Washington residents tell me that the police response times
to reports of crime are atrocious, and inner-city residents and the elderly are more vulnerable because the bad guys know they will likely be
unarmed. Little wonder that last year six local citizens filed a civil suit in federal court seeking to overturn the gun ban. ...The debate over the
district's draconian gun ban should provide valuable lessons for other cities that have foolishly tried to fight crime by disarming their citizens.
Chicago's gun ban, passed in 1982, has done nothing to curb that city's murder rate even though its police force is well-trained and well-equipped and has a good relationship with neighborhood leaders.
Chicago's murder rate was 5.5 times as high as that of five surrounding counties in 1982, when gun control passed. During the next five years the
murder rate soared to 12 times as great as in the neighboring counties. Gun control is bad for public safety, in large part because criminals
ignore gun bans that honest people feel compelled to follow. Bob Levy, a scholar at the Cato Institute in Washington, says lifting the Washington
gun ban is a moral issue. "Right now, if someone breaks into a poor person's home here, their only choice is to call 911 and pray the police
arrive in time," he says. "That's not good enough, and let's hope members of Congress grant the right to bear arms to people who can't
afford to live in the safe neighborhoods they go home to at night."
Monday, September 27, 2004 ~ 10:29 a.m., Dan Mitchell Wrote: Proposals being studied by Republicans for a national sales tax to replace the current US income tax system will impose a heavy burden on
America's middle class families according to a lengthy critique prepared by House Democrat leader Nancy Pelosi. According to Pelosi's 25-page
report, Republican plans for a national sales tax would add $6,000 to the cost of a new car valued at $20,000, whilst the prices of a number of
goods and services including prescription drugs, new homes, brokerage fees, insurance premiums and gasoline would escalate. ...Whilst President
Bush has mentioned that a national consumption tax is an option worth considering as part of plans to reform the US tax code, the White House has denied that it is a second term objective. However, senior
Republicans, including House Majority Leader Tom DeLay, are said to support the idea.
Monday, September 27, 2004 ~ 9:45 a.m., Dan Mitchell Wrote: For the few CBS News staffers who have been at the network for more than 30 years, the events of the past few weeks must make them feel
they're trapped inside Nietzsche's "eternal return." This is the third occasion over the past 32 years in which CBS News has been caught
behaving unethically and irresponsibly in the reporting and editing of a hot-button issue involving the United States, the Vietnam war, and the behavior and conduct of senior officials in Washington. The executive producer of CBS's "60 Minutes" midweek broadcast, who partially blamed the Bush White House for bogus documents used by Dan
Rather, is a former staffer for New York Democrats who was still making political contributions while on the network's payroll. Josh Howard served on the staff of Rep. Stephen Solarz and worked for Sen. Charles
Schumer when Schumer was a state assemblyman, a background confirmed by CBS. Federal election reporting records show that Howard, identifying himself as a CBS employee, contributed $1,000 in each of
Solarz's last two campaigns for Congress...
Monday, September 27, 2004 ~ 8:02 a.m., Andrew Quinlan Wrote: Various forms of fraud and abuse have resulted in substantial financial losses to states and the federal government. Fraudulent and abusive
billing practices committed by providers include billing for services, drugs, equipment, or supplies not provided or not needed. Providers have also been found to bill for more expensive procedures than actually
provided. In recent cases, 15 clinical laboratories in one state billed Medicaid $20 million for services that had not been ordered, an optical
store falsely claimed $3 million for eyeglass replacements, and a medical supply company agreed to repay states nearly $50 million because of fraudulent marketing practices.
Sunday, September 26, 2004 ~ 12:07 p.m., Dan Mitchell Wrote: Nineteenth-century historian Alexis de Tocqueville once observed, "Democracy and socialism have nothing in common but one word:
equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude." Tocqueville
was commenting on liberty and free enterprise, American style, versus socialism as envisioned by emerging protagonists of centralized state
governments. And he saw on the horizon a looming threat -- a threat that would challenge the freedoms writ in the blood and toil of our nation's
Founders. ...FDR never embraced self-reliance as the essential ingredient of a free society, nor have his Demo-successors Ted Kennedy and John
Kerry. Why? Perhaps it's because these men inherited their wealth, their privilege and their political office. Indeed, while Kerry's handlers might
try to cast their candidate as a man of the people, he is anything but. Remember, this is a man who has twice married multimillionaire heiresses; a man who has multiple mansions on multiple continents; a
man who windsurfs (poorly) off tony Nantucket; a man who rides a bicycle that costs more than some new cars; a man who spends, oh, maybe $15,000 to jet his hairdresser cross country for a trim. Yes, John
Kerry is the latest in a line of "inheritance-welfare liberals" -- those who were raised dependent on inheritance rather than self-reliance. Is it any
wonder, then, that the character and values of these inheritance-welfare liberals are all but indistinguishable from the character and values of
those who depend on state welfare? ...despite the collapse of socialism around the world, inheritance-welfare liberals, chief among them John Kerry, still dominate the Democrat Party and continue to advocate all
manner of dependence upon the state (the poor man's trust fund). V.I. Lenin knew precisely what he was talking about when he famously dubbed Western Leftists "useful idiots." Being free (or merely "feeling free") means, to many people, not only acting without restrictions or opposition, but also efficaciously, with
power, able "to do whatever one wants." And with this definition in mind, most thoughtful people see a principle of chaos. If I may swing my
fists wherever I want, and you swing your fists wherever you want, there'll be a lot of broken noses and no peace - and, after a while of this, maybe no people, either. But as philosopher Isaiah Berlin famously
noticed, this conception of freedom as "freedom to" is not the only conception. And it is not really what civilized people mean when they talk
about freedom for all, or equal liberty. What we are talking about is "freedom from." From what? Coercion. Compulsion. ...This is all basic
stuff, and most of us understand it, though often not explicitly. Your rights should include acting, within peacefully drawn boundaries, without me or someone else disrupting your scope of action with initiated
violence or threats of same. "Freedom to" cannot be equal, without chaos. But "freedom from" can. You can have it, and so can I. We all can
have it, so long as each of us limits our actions to the peaceful variety. ...Government does so many tyrannous things in part because many people want to pretend that freedoms to constitute the highest good. A
right to medical care, for instance, enslaves doctors according to the rules of the socialist state, and taken to the extreme enslaves everybody to help everybody out. And, because the demands are unlimited, but
supplies scarce, capricious regulation becomes the norm, and Soviet-style queues and shortages a way of life. In a society where "freedom to" is
the only freedom, no real freedom can remain. All are slaves to each other. We end up with a rule of fists, and broken noses everywhere. Unprincipled chaos. (Perhaps it's no accident that a raised fist is
socialism's chief symbol.)
Sunday, September 26, 2004 ~ 10:30 a.m., Andrew Quinlan Wrote: Yet while the folks on "Oprah" screamed with excitement over their new rides, out in the real world, tax professionals were trying to calculate the
wreckage come April 15. ...Brenda Schafer, a manager for tax analysis and advice support at H&R Block, has heard stunned prizewinners wailing before. The company's clients include former participants on
reality shows. Whether they got a "free" new face on "Miami Slice" or a new wardrobe on "Queer Eye for the Straight Guy" or had their $50,000
ranch house turned into a $300,000 mansion--they'll have to pony up to the IRS. As for Oprah, Ms. Schafer says, "she's thinking she's giving gifts,
but there's no getting around the fact that it's a prize for being in the audience." And according to her rough, unofficial calculation, someone
in the 15% federal bracket (making, say, $28,000 as an individual, or $56,000 if filing jointly) and a 5% state bracket who gets a $30,000 car (the figure for the G6 is about $28,500) will owe an extra $6,000 in
taxes. For a single earner in the 33% bracket kicking in at $143,500, the car adds $12,000 in tax.
Sunday, September 26, 2004 ~ 9:43 a.m., Dan Mitchell Wrote: ...a Detroit Free Press survey that revealed that Michigan publicschool teachers were twice as likely as the public at large to send their children
to private school. Fascinated by this information, a colleague at Northwestern University shared a copy of the Chicago Reporter, which followed civil rights activities in its home town. The Chicago numbers
were startling: 46 percent of that city's public school teachers (compared to 22 percent of Chicagoans in general) sent their children to private
schools. Even more interesting was the human-interest part of the story. The Reporter found a bustling private Montessori school on the South Side that enrolled so many children of public school teachers that
parent/teacher conferences were held on public school holidays! ...urban public school teachers send their children to private schools at a rate of 21.5 percent, nearly double the national rate of private-school
attendance. Saturday, September 25, 2004 ~ 3:00 p.m., Dan Mitchell Wrote: The EU is falling short of its employment targets and has much ground to make up if it is to succeed in making itself "the most competitive
economy in the World by 2010", announced the European Commission today (23 September). The EU employment rate in 2003 stagnated at 63 percent, considerably below the Union's target, set by the Lisbon
Strategy, of 70 percent by 2010. Moreover, there are "only limited employment growth prospects for 2004 and 2005", according to the Brussels executive. Employment growth rose by a meagre 0.2 percent in
2003, compared to 0.9 percent in the US.
Saturday, September 25, 2004 ~ 12:25 p.m., Andrew Quinlan Wrote: The Dutch government on Tuesday proposed cutting the country's corporate tax rate by 4.5% by 2007 in a bid to compete with Eastern
Europe and improve Holland's international competitiveness generally. Under the proposals presented in the government's 2005 budget, company income tax will be cut to 31.5% next year from 34.5%, with a
further cut to 30% slated to take place by 2007. ...the move has likely been made in the knowledge that the average corporate tax rate in the
new member states, located mainly in the former Eastern bloc, is 21.5% "In the battle for investment, corporation tax is becoming more important," the government's budget statement acknowledged. Sarkozy said France should continue reducing its corporate tax rate in the coming years, moving toward convergence with the average 30
percent rate seen across the EU. ...The 2005 budget bill includes several, previously announced measures aimed at furthering French competitiveness in the face of its new, low-tax EU competition, as well as
other low-tax destinations and jurisdictions worldwide. Friday, September 24, 2004 ~ 10:47 p.m., Dan Mitchell Wrote: Mr. Bush, like most Republicans these days, only pays lip service to smaller government and balanced budgets. He is, after all, a president
who inherited a $155 billion surplus and turned it into a $442 billion deficit. His apologists will claim that Sept. 11 caused an explosion in federal spending, but the truth is that this administration allowed
spending to explode at all levels of government. The libertarian Cato Institute reported earlier this year that discretionary domestic spending exploded at rates only surpassed by another president from Texas,
Lyndon Johnson. It is ironic that we Republicans took control of Congress in 1994 by attacking Bill Clinton for his free-spending ways. But spending grew annually under Mr. Clinton at a 3.4% rate, while
exploding under President Bush at a 10.4% clip. Republicans taking credit for restraining Mr. Clinton need to explain why they didn't hold their own president to the same standards. ...So why can't Mr. Kerry use
this Republican flip-flop as a campaign issue? Maybe it is because his voting record has already been labeled as the most liberal in Congress.
But more damning than how he voted in the past is what he has promised to do in the future. Friday, September 24, 2004 ~ 9:13 a.m., Dan Mitchell Wrote: ...the Financial Action Task Force is an organization of international bureaucrats funded by 33 countries, with the goal of fighting financial
crime. That sounds all well and good. FATF has no direct power, but it can put countries on its sanctions list, which discourages major banks from correspondent banking relations with the offending countries,
which can mean financial death to small countries. If all the FATF requirements were justified on a reasonable cost-benefit basis and did not interfere with basic civil liberties, there would be no basis for
complaint. But many of their requirements, such as the "know your customer rules" (also promulgated by the IMF and U.S. government
agencies), do not meet cost-benefit and civil liberties' tests and actually drive many low-income people around the globe out of the banking
system. This leads to both a less safe and less economically prosperous world.
Friday, September 24, 2004 ~ 8:32 a.m., Dan Mitchell Wrote: If Congress were ever so foolish as to eliminate any income ceiling on the Social Security tax, the United States would face the highest marginal
tax rates in the civilized world. ...If the cap were eliminated on Social Security taxes, as it was with Medicare taxes, doing so would add another 10 percentage points for everyone now in the 28-35 percent
income tax brackets. The top two tax rates on labor income would then be about 56 percent and 60 percent. Even the most brutally overtaxed, stagnant economies of Europe do not impose marginal tax rates that
high. The United States would have a higher marginal tax rate than Germany (47 percent) and even Sweden (56 percent). Nearly all major countries still cap the amount of annual income subject to Social Security
tax (such as 54,000 euros in Germany). And Social Security taxes are generally deductible in Europe and Japan, to avoid double taxation of labor.
Friday, September 24, 2004 ~ 8:00 a.m., Dan Mitchell Wrote: When the International Monetary Fund meets next week in Washington, it is hoping to persuade the U.S. to approve its no-strings-attached,
multi-billion-dollar foreign aid expansion. If that sounds odd at a time when U.S. resources are already stretched, wait until you see the list of
beneficiaries. The new IMF financing would make Iran eligible for a total of $465 million, Syria would be entitled to $90 million, Robert Mugabe's
Zimbabwe $115 million and Sudan $100 million. Oil-rich, authoritarian Venezuela would have $840 million and the gentle junta running Burma $80 million. As the creditor nation in the Fund, the U.S. would be asked
to cough up the lion's share of the dough.
Friday, September 24, 2004 ~ 7:45 a.m., Dan Mitchell Wrote: French Budget Minister Dominique Bussereau confirmed yesterday that there are no plans in the government's 2005 budget to abolish or reform
the unpopular wealth tax, thought responsible for billions of euros in capital flight from the country. "If the government had a preference on
this, we would have proposed a measure," Bussereau told French television, according to Reuters. "If the senators or deputies propose one,
we will study it," he added. Whilst Finance Minister Nicolas Sarkozy has acknowledged that the wealth tax, known as the ISF (Impôt Sur la
Fortune), is an obstacle to capital repatriation, he is awaiting the results of a parliamentary debate on the issue before proposing any changes to
the regime. ...According to a parliamentary report, the tax is thought to be responsible for the flight of around EUR11 billion from France in the last five years. Friday, September 24, 2004 ~ 6:22 a.m., Dan Mitchell Wrote: The Social Security system's long-run cash flow deficit is $11.9 trillion, and the new prescription drug benefit will require $16.6 trillion. Add in
Medicare Part A (hospital insurance, completely paid by taxpayers) and Part B (doctors' insurance, three-fourths funded by taxpayers) and the
total Medicare shortfall comes to $61.9 trillion. Over and above payroll taxes and premium payments made by the elderly, the unfunded liability
in these two programs combined totals more than $73 trillion -- about seven times the size of our economy. ...This generation of workers faces a
clear choice. Will they tighten their belts a bit and save more? Or will they ask their children and grandchildren to choose between reneging on promises to retirees, going without government services, or paying
exorbitant tax rates? Thursday, September 23, 2004 ~ 9:02 p.m., Dan Mitchell Wrote: Japanese Finance Minister Sadakazu Tanigaki told the governmental Tax Commission yesterday that fiscal reform is crucial for sustaining
economic growth, suggesting that future tax hikes may be inevitable. ...The Finance Minister's comments reflect a growing acceptance within Japan that tax hikes are seemingly inevitable. Last week, Japan's most
influential business group Nippon Keidanren added weight to the argument by arguing for an increase in consumption tax to 15% to avert a future national debt crisis. Thursday, September 23, 2004 ~ 11:00 a.m., Dan Mitchell Wrote: Chirac has been a long-standing advocate of a worldwide tax, and earlier this year appointed a panel of experts including economists,
business leaders, government officials and activist groups to examine the issue. The 150 page report produced by the panel has suggested a
number of different revenue-raising ideas including taxes on emissions of greenhouse gasses, certain financial transactions, arms sales, airline
tickets, credit card purchases or shipping. The document also contained proposals for a levy on multinational firms and the creation of an
international lottery. It is thought that a global tax system could build a pot of around $50 billion... While the proposals may be realistic in a
technical sense, from a political standpoint they are unlikely to be practical, especially in the face of vehement opposition from the United States government. Summing up the American view on the matter, US
Agriculture Secretary Ann Veneman argued that global taxes are "inherently undemocratic". "Implementation is impossible," she added. Thursday, September 23, 2004 ~ 10:38 a.m., Dan Mitchell Wrote: Another, perhaps more useful way to explain earnings differentials is that one's earnings depend on his ability to serve his fellow man plus the value
his fellow man places upon that service. Then, there's a supply side of the story. Shaquille earns many times more than the brightest neurosurgeon.
Why? It isn't because basketball is more important to society than neurosurgery; it's because the supply of people with aptitudes to become bright neurosurgeons far exceeds those with skills to do what Shaquille
does. However, if it were the other way around, thousands upon thousands with Shaquille skills and few with neurosurgeon skills, the earnings picture would be reversed. People spend too much time
worrying about income inequality. ...Making people more productive is the challenge. Whining about income inequality is a cop-out. Thursday, September 23, 2004 ~ 9:15 a.m., Andrew Quinlan Wrote: Billions of pounds, enough to pay for the entire primary health and education needs of the world's developing countries, are being siphoned
off through offshore companies and tax havens, according to a body formed to expose the offenders. ...While in the 70s there were just 25 tax havens, there are at least 63 now, about half of them British
protectorates or former colonies. Tax avoidance in Britain alone is estimated at between £25bn and £85bn. This month the Tax Justice Network, which was formed last year by tax experts and economists
worried about the trend, launched an international secretariat in London. It will work with the UN and other international bodies to reverse the
practice of hiding money from governments worldwide. ...The notion of tax havens goes back to just after the Napoleonic wars when demobbed officers moved to Jersey, but it was not until the 1960s that the high
rates of British taxation acted as a motivation for people to move their money abroad. Thursday, September 23, 2004 ~ 8:37 a.m., Dan Mitchell Wrote: European Union auditors uncovered fraudulent or misspent farm aid worth 3.1 billion euros ($3.79 billion) between 1971 and 2002, the EU's
financial watchdog said on Tuesday. Export refunds plus subsidies to fruit and vegetable farmers accounted for over half the missing aid, the European Court of Auditors said. ...Only 25 percent of the misspent
funds have been recovered or written off and 21 percent of the cases pre-date 1994 according to the report published by the Court of
Auditors. "My personal feeling is that if (you're getting) less than half of the irregular payments back, you ought to be pretty unhappy," British
member of the Court, David Bostock, told a news conference. ...Italy and Germany have the worst record for getting back misspent farm aid from farmers and traders, running recovery rates of 10 percent over the
1971-2002 period.
Thursday, September 23, 2004 ~ 7:00 a.m., Dan Mitchell Wrote: Hungary's largest bank, OTP, has slammed the government's decision to introduce a higher corporate tax bracket for financial institutions,
warning the move could force it to concentrate on business outside of the country. Branding the move as a "populist" measure by the government,
the bank cautioned that it may be forced to lay off staff and pass on the increased costs brought about by the tax to its customers. ...Finance Minister Tibor Draskovics announced last week that a plan will be
presented to parliament to introduce a second corporate tax band of 24% for the banking sector, leaving the majority of the nation's firms to pay income tax at the standard rate of 16%.
Thursday, September 23, 2004 ~ 6:15 a.m., Dan Mitchell Wrote: The second reason for non-support of the extension of the ban is that there is no such thing as an assault weapon. This is why the courts have
regularly held "assault weapons" bans as unconstitutionally vague unless specific guns or features are named. Anti-gun advocates have confessed that they deliberately used the term "assault weapon" to
confuse people into thinking that semi-automatic civilian firearms are the same as assault rifles (i.e., machine gun-type weapons that are used by
the military and have long been illegal to manufacture and sell to civilians). In fact, armies don't use AWs because, being only civilian-type
arms, they are far less lethal than actual assault rifles. ... In considering gun controls, we must remember what criminological research shows: Dangerous though guns are in the wrong hands, there is much more
beneficial use of guns than wrongful use. Law-abiding, responsible adults use guns more than 2.5 million times each year to repel and defeat crime.
And states that have enacted laws giving good people a permit to carry guns for protection have experienced, not an increase in criminal violence, but a decrease. Criminals have no more desire to face an armed
victim than victims have to face an armed criminal. To be sensible, gun laws must focus on disarming criminals and the insane, not ordinary law-abiding, responsible adults.
Wednesday, September 22, 2004 ~ 8:05 a.m., Dan Mitchell Wrote: French President Jacques Chirac has called for an international tax to help fight poverty. Speaking at the United Nations in New York, Mr
Chirac praised a report prepared by a French working group, which suggested an international tax be levied on arms sales and some financial
transactions in a bid to eradicate poverty. ...But Mr Chirac's ideas were strongly attacked by the US delegation. US Agriculture Secretary Ann Veneman said, "global taxes are inherently undemocratic.
Implementation is impossible". Mr Chirac has also caused controversy in the EU by proposing a harmonised way of calculating corporate tax, which is strongly opposed by the UK.
Wednesday, September 22, 2004 ~ 7:51 a.m., Dan Mitchell Wrote: Sweden, which has the highest tax burden among OECD countries, will cut taxes by SKr8.1bn ($1.1bn, EUR891m, £606m) or slightly more than
1 per cent of the government's tax intake. Inheritance and gift taxes will be abolished.
Wednesday, September 22, 2004 ~ 7:17 a.m., Dan Mitchell Wrote: Australian Treasurer Peter Costello has indicated that he wants to overhaul the country's international taxation system to ease the tax
burden on firms operating overseas if the ruling Liberal/National coalition retains power after October's general election. ..."I would like
to improve Australia's international taxation arrangements so that Australian companies can expand in foreign jurisdictions, while remaining domiciled in Australia," Costello told the FT. "We want to
promote Australia as a place for regional headquarters - for Australian companies but also for foreign companies," he added. Costello spoke as
News Corp, the largest firm listed on the Australian Stock Exchange, prepares to move its domicile and primary listing to the United States.
Wednesday, September 22, 2004 ~ 6:45 a.m., Andrew Quinlan Wrote: ...many schools claim they are broke and, unwilling to streamline their bloated bureaucracy, they demand tax increases or bond initiatives to
jack up the money flow. When taxpayers resist these raids on their pocketbooks, public schools look for easier ways to raise money. Where
can free-spending liberals go? They run to lawyers and activist judges for money, even though policy and spending decisions and tax increases
should originate with the legislature. ...On Aug. 25, the Spokane, Wash., Public School Board voted unanimously to demand court-ordered funding increases by joining a planned lawsuit with many other
Washington State school districts. The districts hired the law firm of Bill Gates' father, Preston, Gates and Ellis, to loot millions of taxpayer
dollars. Liberal legislators are inciting these lawsuits nationwide as a way to appease teachers unions while avoiding accountability as elected
officials. ...In the state of New York, 17 school districts have expressed interest in joining the July 23 lawsuit of the Utica City School District
demanding a judge order increased funding. A Utica official said that, without additional funding, 190 jobs would be eliminated. ...An astounding half of all states now face lawsuits by public schools
demanding that judges increase their funding. While haters of President Bush blame his No Child Left Behind Act, most of these lawsuits have
having nothing to do with that federal legislation. ...Seven lawsuits were pending in Idaho asking judges to raise taxes that the voters would not
approve. In August, the Idaho supreme court finally stopped this racket by unanimously prohibiting judges from raising taxes for public schools.
...Hooray for one court that recognizes taxes are an issue to be decided by elected representatives who are accountable to voters, not by judicial
supremacists. Other states and Congress should follow suit by forbidding judges to raise taxes anytime anywhere.
Tuesday, September 21, 2004 ~ 10:45 p.m., Dan Mitchell Wrote: It has been predicted that income tax could jump by as much as 5p in the pound in order to avert a crisis in the UK's public pension system, a
report revealed last week. Watson Wyatt, the firm of actuaries, have claimed that the shortfall in the public sector pensions system amounts to
some £580 billion or the equivalent of 5p on the standard rate of income tax, the Independent newspaper reported. The estimate is apparently £200bn more than the Government has previously admitted, the report
noted.
Tuesday, September 21, 2004 ~ 7:21 p.m., Dan Mitchell Wrote: With the country on the brink of a deficit crisis, Philippines president Gloria Arroyo is reportedly planning to forge ahead with plans to
increase taxes, despite evidence that there is widespread opposition to the proposals. Warning that the country is on the brink of an Argentine
style economic crisis, Arroyo has warned that the country faces "death throes" in two years time unless it somehow raises more than 180 billion
pesos (US$3.2 billion) in additional tax revenues. ...According to a Presidential spokesman, most of the new tax will be extracted from those most able to pay.
Tuesday, September 21, 2004 ~ 10:50 a.m., Dan Mitchell Wrote: The International Labor Office recently published a report from its World Commission on the Social Dimension of Globalisation A Fair
Globalisation: Creating Opportunities for All. ...the ILO report wants policy changes to ensure that globalisation becomes "a positive force for
all people and all countries," since it believes that at the moment it benefits the elite from the rich world. In particular the ILO Report wants
reform at the World Trade Organisation to protect the poor. They draw their conclusions mainly from the alleged increase in inequality between
rich and poor countries. Of course inequality measures are irrelevant and misleading. But the ILO, and all the pressure groups they support, imply
that the reason that countries like poor countries like Indonesia grow slower than richer countries like Britain, is because Britain is part of the
elite, and distorts the world trade environment in its favour: "the process of globalisation is generating unbalanced outcomes, both within and
between countries." But nowhere does the Report provide a justification for why globalisation has caused poor growth. It just relies on measures
of inequality as if they were the cause of all ills. ...The belief that poor countries are prevented from performing by their rich and powerful counterparts has a long and undistinguished history, but with no
intellectual support. Indeed, the Report acknowledges that many problems have nothing to do with international trade or globalisation at all. Cuba under Castro, Venezuela under Chavez, Iraq under Saddam,
North Korea under Kim, Zimbabwe under Mugabe and myriad countries (adding up to the 23 imploding nations identified by the Report) have all
failed because they are "dysfunctional states torn apart by civil strife, authoritarian governments of various hues and States with democratic
but severe inadequacies in terms of the policies and institutions required to support a well-functioning market economy," says the Report.
Tuesday, September 21, 2004 ~ 9:13 a.m., Andrew Quinlan Wrote: In a press conference last Friday, Treasurer Peter Costello revealed that GST revenues have come in A$3 billion higher than predicted in this
year's budget. According to Costello, the states and territories of Australia will get a cumulative windfall of A$11.8 billion over and above their guaranteed amounts, forecast in March 2000. Mr Howard
observed: "One of the reasons why the federal government's budget position is so much stronger is because we've collected a lot more company tax. It means that more people are in work, companies are
making higher profits." However, opposition parties have interpreted the figures in an entirely different way. Labor Party leader Mark Latham claimed the bigger GST payments to the states confirm the
Liberal-National coalition is the nation's highest taxing government on record.
Tuesday, September 21, 2004 ~ 8:38 a.m., Dan Mitchell Wrote: ...before the Members leave Washington this year, they do have one bit of urgent business: Fix U.S. corporate taxes in order to remove European
tariffs that are pummeling U.S. exporters. ...The American Farm Bureau Federation estimates that U.S. farmers will lose $150 million in sales
over the first year the tariffs are in place. Stephan Farrar, director of business for Guardian Industries Corp., told AP that his company may
have to ship its tinted auto glass from a plant in Thailand rather than factories in Pennsylvania and Michigan if the tariffs continue much longer. We'd have thought that politicians moaning about the alleged
"jobless recovery" would want to prevent this. As usual, the tax bill is stalled over the multiple demands of Members to lard it up with
special-interest tax breaks. The Senate is especially culpable here, as Finance Committee Chairman Chuck Grassley allowed his colleagues to
satisfy just about every constituency in the land. Of course, if the U.S. corporate tax rate of 35% wasn't among the highest in the world, so many companies wouldn't feel they had to play the political angles in
search of relief. The Senate bill amounts to a walking advertisement for tax reform.
Monday, September 20, 2004 ~ 12:35 p.m., Dan Mitchell Wrote: The $299 billion measure currently is stuck in a House-Senate conference committee chaired by Republican Senator Jim Inhofe of Oklahoma. It will
stay there until a majority of the 21 Senators on the conference can agree to vote it out. Without Mr. McCain's backing, Senator Inhofe would have to find a Democratic replacement, and Senate Democrats of
late have been nothing if not remarkably unified in their obstructionism. ...Democrats are reasoning that they'll stand a better chance of getting what they want (more spending) after the November elections,
particularly if the White House changes parties. They also know that the GOP has yet to find a way to make Democrats pay politically for blocking legislation. Our own glee at the current gridlock stems from the
fact that the bill itself deserves to die. Though not as gargantuan as the Members once hoped, it remains a pork-barrel monster that misallocates
taxpayer resources at a time of war. It also exemplifies the lack of domestic spending discipline that has characterized this White House and Congress.
Monday, September 20, 2004 ~ 10:29 a.m., Dan Mitchell Wrote: Germany's finance minister is calling for fat people to be more heavily taxed to relieve expanding health service costs. Hans Eichel said urgent
measures were needed to close the 41 billion euro budgetary gap, and is now looking to increased insurance costs for overweight Germans as well as extreme sport fans. ...President of the German Chamber of
Doctors, Dr Guenther Jonitz, said: "Minister Eichel is on the right track when he talks about nutrition-based behaviour. But it would be difficult
to control. "We would literally need weight watchers to calculate how much health insurance people should pay depending on their weight."
Instead Dr Jonitz suggested a 'Big-Mac tax' be introduced on foods that contain sugar, animal fats and salt as well as on alcohol and nicotine products. Money spent on sports and exercise should be tax deductible as part of a national strategy to fight flab, say doctors in Britain... the Royal College
of General Practitioners called on the government to consider tax breaks to make exercise more accessible and affordable to everybody. The group, the standard bearer for general medical practice, also urged the
government to get healthier food into schools and workplaces. ...Britain already has an "exercise on prescription" program, whereby doctors can
refer patients to supervised exercise programs in gyms or local leisure centers. There are no official statistics tracking how successful the
initiative has been since it was launched in 2001, but a survey conducted last year suggested that 89 percent of local health authorities offered exercise on prescription. Each local health authority handles the
program differently and services range from discounted rates at sports centers to free trial memberships. Monday, September 20, 2004 ~ 9:00 a.m., Andrew Quinlan Wrote: An alliance of opposition parties in Romania has pledged to cut several types of taxation should they win the election scheduled for November
28. The financial newspaper Ziarul Financiar revealed earlier this week that an alliance comprised of the opposition liberals (PNL) and democrats (PD) intends to cut income and profit taxes as well as social
security contributions. The ruling Social Democratic Party (PSD) recently approved cuts in all three of these taxes, including a cut to 14% from 18% in the lowest income tax bracket, a reduction from 40% to
38% in the highest tax bracket and a decrease in corporate tax to 15% from 19%. Sunday, September 19, 2004 ~ 2:12 p.m., Dan Mitchell Wrote: Soon -- perhaps on the first Monday in October -- the court will announce whether it will hear an appeal against a 4 to 3 ruling last March by
Connecticut's Supreme Court. That ruling effectively repeals a crucial portion of the Bill of Rights. If you think the term "despotism"
exaggerates what this repeal permits, consider the life-shattering power wielded by the government of New London, Conn. ...The question is: Does the Constitution empower governments to seize a person's most
precious property -- a home, a business -- and give it to more wealthy interests so that the government can reap, in taxes, ancillary benefits of that wealth? Connecticut's court says yes, which turns the Fifth
Amendment from a protection of the individual against overbearing government into a license for government to coerce indi- viduals on behalf of society's strongest interests. Henceforth, what home or business
will be safe from grasping governments pursuing their own convenience? But the Fifth Amendment says, among other things: "nor shall private
property be taken for public use, without just compensation" (emphasis added). Every state constitution also stipulates takings only for "public
use." The framers of the Bill of Rights used language carefully; clearly they intended the adjective "public" to restrict government takings to
uses that are directly owned or primarily used by the general public, such as roads, bridges or public buildings. ...If the court refuses to review the
Connecticut ruling, its silence will effectively ratify state-level judicial vandalism that is draining the phrase "public use" of its power to
perform the framers' clearly intended function. That function is to prevent untrammeled government power -- in a word, despotism.
Sunday, September 19, 2004 ~ 12:47 p.m., Dan Mitchell Wrote: Kathryn Harrington was flying home from vacation last month when screeners at the Tampa, Fla., airport found her bookmark. It's an
8.5-inch leather strip with small lead weights at each end. Airport police said it resembled a weighted weapon that could be used to knock people unconscious. So the 52-year-old special education teacher was
handcuffed, put into a police car, and charged with carrying a concealed weapon. She faced a possible criminal trial and a $10,000 fine. But the state declined to prosecute, and the Transportation Security
Administration said it probably won't impose a fine.
Saturday, September 18, 2004 ~ 1:16 p.m., Dan Mitchell Wrote: The recent World Bank research department paper titled "Doing Business in 2005" details the critical nexus between growth and smaller
government. But over in the Bank's lending operations, the addiction to shoveling money out the door to poor-country governments shows no signs of abating. What happens when Bank researchers conclude that
Bank lending operations not only are an improbable source of development but perhaps even an impediment? Probably nothing, given the consultants, bureaucrats and politicians with a vested interest in
keeping the Bank's money flowing. ...Even in government fantasyland, where seven-figure handouts are dismissed as pocket change, $500 billion in poverty assistance can't be sneezed at. Yet, what rankles here is
not so much the volume of aid as its failure to make people better off, a fact that explains why the World Bank refuses to allow independent, outside auditing of its projects. Poverty's resistance to so much
international largess raises logical questions. As development economist Lord Peter Bauer observed long ago, "Lack of money is not the cause of
poverty, it is poverty." The cause is something else entirely. As "Doing Business in 2005" notes, a key cause of underdevelopment is the burden
that government regulation imposes on the poor who are trying to climb out of poverty. Successful economies, the researchers note, have less regulatory drag and unsuccessful countries could do better simply by
reducing regulation. ...in Australia it takes two business days to complete the regulatory requirements for starting a business. Brazil stands in sharp
contrast to this, in next to last place in Latin America, draining 152 days for a business start-up. Haiti is last, where it takes 203 days. Denmark is
the least expensive place in the world to start a business and happily, Brazil ranks third in Latin America, just behind Chile. Haiti brings up the
rear again in this measurement, costing 176% of national per-capita income, or the income from almost two years of work effort. In labor rigidity, Hong Kong and Singapore rank as the best worldwide and show
up Mexico and Brazil, which tie regionally at the bottom of the pile. It can take a long time, over 500 days, to enforce a contract in Brazil, but Guatemala comes in last in this category at 1,459 days.
Saturday, September 18, 2004 ~ 11:45 a.m., Dan Mitchell Wrote: Is Kyoto making a comeback? Don't bet on it. It is difficult, in fact, to see how the treaty will survive the winter. ...The treaty was drawn up in
1997, and the target date for the reductions is 2012, but there is not the slightest chance the goal will be met. The protocol lacks enough large
ratifying nations for approval, and, even though some countries are voluntarily trying to cut greenhouse gases, emissions are up 20% globally
since 1990, according to the most recent estimates. The treaty exempts poorer countries from its strictures, but it is in precisely those nations,
especially India and China, where most of the growth in the use of fossil fuels will occur over the next few decades. Kyoto has been ratified by 28
European nations as well as Japan, Canada and New Zealand, but it won't go into effect until at least one major holdout -- Russia or the U.S. -- approves. ...even if Kerry wins and brings with him a Democratic
Senate (the Senate is the body that approves treaties in the United States), Europeans should not get their hopes up. Ratification would be highly unlikely. This year's Democratic Party platform takes pains to
omit any mention of Kyoto -- in stark contrast to the platform of 2000, which stated, "We negotiated the historic Kyoto Protocols. . . . Al Gore
and the Democratic Party believe we must now ratify those Protocols." Why? Very simply, Kyoto has always been unpopular among policy
makers. In July 1997, as the treaty was being negotiated, the Senate, in a resolution that passed 95-0, stated that it would not approve a protocol that exempted developing nations or would do harm to the U.S.
economy. Kerry voted aye. Friday, September 17, 2004 ~ 8:30 a.m., Dan Mitchell Wrote: ...mounting evidence shows that tax evasion and benefit fraud are becoming more widespread throughout Europe, including in Britain. Under- or non-reporting of output, income and employment can no
longer be dismissed as a "southern" or Latin trait. It reflects not only greater loyalty to the extended family or business network than to the
state, as in southern Europe, but also a breakdown of respect for laws and societal norms more generally. And government policies that distort incentives, heap a high tax and regulatory burden on entrepreneurs,
employees and consumers, and reward idleness, have accentuated the trend. A new study published in the Economic Journal estimates that the
"black economy" -- defined as the economic activities that are hidden from public authorities to avoid taxation -- amounts to 10.6% of Britain's
gross domestic product. ...But the analysis only covers households consisting of married couples whose head is employed and their main source of income is from wages or self-employment. ...So the real black
economy in Britain might be even larger. The OECD Employment Outlook Report 2004 cites estimates of the size of the black economy for other northern countries ranging from 13% to 16% of GDP in Poland,
Latvia and Lithuania, roughly on a par with the levels in Italy and Spain. Questionnaire surveys found that 20.3% of the population aged 18-74 admitted carrying out black activities in Denmark in 1997-2001. The
proportions for Norway, Sweden, Germany and Britain were 17.3%, 11.1%, 10.4% and 7.8%, respectively. In many countries, actual social security receipts are well below the theoretically expected liability based
upon contribution rates and the level of wages and salaries recorded in the national accounts. The OECD reports shortfalls of 28% in Belgium, 24% in France, 22% in the U.K., 18% in Italy and 11% in Finland in
2000. ...Among the many factors responsible for the spread of the black economy, the following can be highlighted: * Higher tax burdens increase incentives to evade. Government revenues from taxes on
income and profits in the EU-15 soared to 14.6% of GDP in 2001 from 8.8% in 1965. They more than tripled in Italy to 14.4% over the same period. Social security contributions and other payroll taxes further
inflated the cost of labor and squeezed profits. High taxes on goods and services also substantially increase the rewards for those who can bypass them. VAT rates in the EU average nearly 20% and excise taxes on
cigarettes, fuel and alcohol are higher still. ...* Distorted benefit incentives. It often pays to be registered as sick or disabled rather than
unemployed. In Britain, the long-term rate of incapacity benefit is £74.14 per week compared with £55.65 for jobseekers allowance. Thus the numbers claiming the benefit have risen by nearly 10% since 1996 to
reach 2.7 million, roughly three times the number claiming unemployment allowances. Only 2-3% of people on incapacity benefit ever come off it, says an expert. Why spend time and energy looking for
taxable employment when they could be devoted to black activities, while keeping an income cushion provided by taxpayers? Friday, September 17, 2004 ~ 7:55 a.m., Andrew Quinlan Wrote: In 64 A.D. Emperor Nero was blamed for doing little as Rome was engulfed in flames. Similarly, federal policymakers have fiddled as U.S. tax competitiveness has gone up in smoke. While the U.S. led the world
with a corporate tax rate cut in 1986, today it has the secondhighest corporate tax rate in the 30-nation Organization for Economic Cooperation and Development. The U.S. corporate rate is 40 percent,
including the 35 percent federal rate and the average state rate. By contrast, ...the average rate in Asia, Europe, and Latin America is 30
percent or less. ...Many Eastern European countries have sharply slashed their tax rates to attract investment. Since the late-1990s, Poland cut its
rate from 40 to 19 percent, Slovakia cut its rate from 29 to 19 percent, the Czech Republic cut its rate from 39 to 28 percent, Hungary cut its rate from 33.3 to 16 percent, and Russia cut its rate from 35 to 24
percent. In August, Greece announced that it will cut its corporate rate from 35 to 25 percent, and the Netherlands announced that it will cut its
rate from 34.5 to 30 percent. ...Despite this global economic reality, U.S. policymakers seem to assume that America has a right to high growth
and good jobs despite making little effort to create a competitive tax climate. But an unreformed U.S. corporate tax will have an increasingly
negative effect on U.S. productivity, wages, and growth. In addition, the tax's high rate and excessive complexity creates an ideal breeding
ground for Enron-style tax scandals. The solution is to cut the 35 percent federal corporate tax rate to 20 percent. After a rate cut, Congress should proceed with tax reform to replace the income tax with a
consumption-based tax, which would boost investment and make U.S. firms more competitive in global markets. Friday, September 17, 2004 ~ 7:22 a.m., Dan Mitchell Wrote: President Bush's bold convention promise to propose fundamental tax reform in his second term creates a real opportunity to modernize a tax
code that is a half-century old. The president's first objective will be to promote American economic growth and job creation. There are many
ways our tax system retards growth, but three are most important. Trade is the most sensitive. America is the only major country that taxes its companies and individuals no matter where they do business in the
world, while letting its consumers buy goods produced overseas by foreign-owned companies tax free. This may have made sense in the 1950s when the tax code was written, it doesn't today, and creates a
problem known as "border adjustability." Markets respond. A major reason why Daimler-Chrysler is not Chrysler-Daimler is the discriminatory treatment given to American owned corporations under
American tax law. ...growth is held back by the way we tax capital. Taxation of capital has become less onerous in recent years, but is still a problem. Our corporate income-tax rate is among the highest in the
world. But, a potentially bigger problem is its unevenness. Some capital income enjoys almost indefinite deferral of tax. Other types, notably
dividends, are overtaxed. Prior to last year's tax cut, the double taxation of dividends resulted in an effective tax rate of over 60%. Few would
consider such a rate "fair," no one could argue it is good for economic growth. The other big challenge to capital formation is our very complex
depreciation system. Not only does it create a record-keeping problem, but, by its nature, does not reflect economic reality. High-technology
goods subject to rapid innovation depreciate in value faster than the law allows, effectively raising the tax rate on them. The best fix is to allow
the expensing of all capital goods purchases. In turn, this would result in other changes that would make cash flow the basis for determining the
tax base. Third, growth is inhibited by high tax rates. The economic distortions caused by a tax -- what economists call the excess burden -- is
related to the square of the tax rate. So when rates go up, not only does the tax base shrink, but economic activity is redirected to less efficient
and useful areas. The combined effect is to make raising revenue very costly in economic terms, as rates rise. For example, when the top income tax rate rises from 40% to 50%, the burden of the extra tax on
the public is $1.55 for every dollar collected by the government. Raising rates from 50% to 60% costs the public $1.90 for every extra dollar
collected by the government. The only solution to this is to have a tax system with rates that are as low as possible. Friday, September 17, 2004 ~ 6:00 a.m., Dan Mitchell Wrote: Germans and Finns take the most days off work for "sickness" than any other Europeans, according to a scientific study. The "Third European
Survey on Working Conditions" published recently in "Occupational and Environmental Medicine" magazine tracked absenteeism in the old
EU-15 in 2000. The report shows that 24 percent of Finns took at least one day off work due to health reasons. The Finns were closely followed by the Dutch and the Germans (20.3 percent and 18.3 percent
respectively). Friday, September 17, 2004 ~ 4:33 a.m., Dan Mitchell Wrote: Japan's most influential business group has called upon the government to increase the rate of consumption tax in order avert a crisis that could
see the country's debt levels swell to over five times the size of the economy. Reports earlier in the week revealed that Nippon Keidanren, the Japan Business Federation, prophesised the debt to GDP ratio will
reach 478% by the year 2025 if tax revenues are not increased ...According to Keidanren's calculations, the debt level will be kept more or less in check if consumption tax, currently levied at 5%, is gradually
lifted to around 15% by fiscal 2013. ...Prime Minister Junichiro Koizumi has pledged to reform Japan's fiscal finances by reining in spending.
However, he has resolutely refused to countenance a hike in consumption tax whilst he is in office.
Thursday, September 16, 2004 ~ 9:56 p.m., Andrew Quinlan Wrote: A new report has shown that US firms have dramatically increased the amount of profits taken in offshore locations in recent years, whilst at the
same time significantly cutting back profits taken in countries where they engage in most of their economic activity, a revelation likely to propel
the international taxation issue back to the top of the election agenda. According to the study published in 'Tax Notes,' based on Commerce Department data, during the period from 1999 to 2002, US corporations
increased the amount of profits taken from offshore subsidiaries by 68% from $88 billion to $149 billion. Total offshore profits earned by US
multinationals rose by 23% in the same period. Additional analysis of the Tax Notes data by the New York Times suggests that for each dollar of
profit taken in Luxembourg in 1999, American corporations took $4.56 of profit in 2002. In Bermuda this $1 increased to $2.96; in Ireland $2.01; and in Singapore $1.72. By contrast, in the UK and Germany,
each dollar of profit taken in 1999 was equal to 67 cents and 46 cents respectively in 2002.
Thursday, September 16, 2004 ~ 6:16 p.m., Dan Mitchell Wrote: A new leaked European Commission proposal on the number of hours employees can work has provoked sharp criticism from both business
leaders and unions in the UK, according to the FT. ...Employers are concerned that the limits on working time will harm the flexibility of the UK labour market. John Cridland, from the CBI - a leading employers'
organisation in the UK, fumed, "These proposals are totally unacceptable. The Commission is trying to impose a Franco-German style of industrial relations through the back door"
Thursday, September 16, 2004 ~ 2:25 p.m., Dan Mitchell Wrote: The Air Transportation Stabilization Board, a federal body created in the bailout rush after September 11, is still on the hook for some $650
million in loan guarantees that it first issued to US Air in early 2003. The carrier has now filed for bankruptcy-court protection -- again -- and
while it may make good eventually on its financial commitments, it's just as possible that Uncle Sam will come out of this with a pilot's license.
This is what you get when Congress chooses to dump the airline industry onto an ad-hoc bureaucracy like the ATSB. It is taken for granted that
every time the economy sours Washington will infuse the industry with enough cash to see it through the next boom-bust cycle. This bailout culture is so routine that nobody bothers discussing the fact that this
hole-to-nowhere comes courtesy of lawmakers who won't tackle the regulatory and tax problems that hobble the industry. ...the airlines are
still asked to collect high ticket taxes from passengers, and pay segment fees, security charges, facility charges, infrastructure fees and frequent
flier taxes (for starters). Continental Airlines chief Gordon Bethune noted in testimony this summer that in a year when the industry will lose $3
billion, it will hand the federal government $14 billion in taxes. This is nuts. Want more? There's the question of why airlines are nearly alone
among U.S. companies in being forbidden from tapping foreign capital. How come the Department of Transportation takes such a hard line on airline alliances and code-sharing agreements that would also reduce
costs? And when, if ever, will the government finish the job of airline deregulation begun under President Carter in 1978 -- relinquishing its
role, for instance, in running the inefficient air traffic control system?
Thursday, September 16, 2004 ~ 12:42 p.m., Dan Mitchell Wrote: How would you like to take a trip to California's incomparable Monterey Peninsula, play golf in the company of Arnold Palmer and Craig Stadler,
and have your expenses covered by a tax-exempt organization subsidized both by big government and big business? That is what 21 teen-agers did
Labor Day Weekend when they played in the first annual First Tee Open, a pro-am tournament on the Champions Tour (the professional senior golf circuit), held primarily at the legendary Pebble Beach Golf Links.
...The First Tee also has received $4.5 million in federal funds over the last two fiscal years, and, Caruso says, is asking for another $3 million
this year. In fiscal year 2003, Congress earmarked $500,000 for the group through the Justice Department and $1 million through the Department of Education. In fiscal 2004, Congress earmarked another
$1 million through Education and $2 million through Justice. The First Tee is now seeking another $2 million from Justice and $1 million from
Education. ...With a $422 billion deficit, it is irresponsible for Congress to spend money on unnecessary programs, and there is no "golf" clause
in the Constitution. But just as importantly, this type of expenditure is unfair. Why should taxpayers who cannot afford to golf themselves, let
alone take their own kids golfing, pay for someone else's kid to golf for free?
Thursday, September 16, 2004 ~ 11:00 a.m., Dan Mitchell Wrote: The Bush administration sees removing the income tax burden on Americans at the lower end of the earnings spectrum -- families earning
less than $50,000 a year -- as desirable. When President Reagan successfully got Congress to remove 6 million Americans from the tax rolls, he described his tax reform initiative as one of the proudest
achievements of his administration. At the time, I argued that doing so was nothing to be proud about, and I extend that same criticism to President Bush. ...Removing so many Americans from federal income tax
liability contributes to the political problem we're witnessing this election: class warfare and the politics of envy. When 122 million Americans are outside of the federal income tax system, it's like throwing
chum to our political sharks. These Americans become a natural spending constituency for big-government politicians. After all, if you have no income tax liability, how much do you care about how much
Congress spends and the level of taxation? ...Tax cuts to many Americans mean just one thing: They threaten the handouts they receive. ...here's my idea. Every American regardless of any other consideration
should have one vote in any federal election. Then, every American should get one additional vote for every $10,000 he pays in federal income tax. With such a system, there'd be a modicum of linkage between
one's financial stake in our country and his decision-making capacity.
Thursday, September 16, 2004 ~ 10:31 a.m., Dan Mitchell Wrote: One of the great mysteries of our time is why so many seemingly intelligent people in the West believe that when delegates from 191
nations, many of them despicable tyrannies, convene in a particular building on 46th St. in New York, their pronouncements (mostly in support of inaction) suddenly become holy writ in international relations.
Multilateralists, prominent in Europe and in the campaign entourage of John Kerry, seem to have a quasi-religious belief in the healing powers of
the U.N., as if diplomats can purify the regimes they represent by simply walking into the U.N. headquarters. Thus even ambassadors from countries with badly stained human rights records, like China, can
pontificate on that subject and get a hearing because the U.N. bestows on them an aura of authority.
Thursday, September 16, 2004 ~ 9:22 a.m., Dan Mitchell Wrote: Despite claims that allowing the ban on some semiautomatic weapons to end will cause a rise in gun crimes and a surge in police killings, letting
the law expire will show the uselessness of gun-control regulations and the inconveniences they cause. ...Ratcheting up the fear factor to an
entirely new level, Sen. John Kerry finally entered the fray Friday by claiming that sunsetting the ban makes "the job of terrorists easier."
Despite the heated rhetoric, there is not one single academic study showing that these bans have reduced any type of violent crime. Even research funded by the Justice Department under the Clinton
administration concluded that the ban's "impact on gun violence has been uncertain." When those same authors released their revised report
in August looking at crime data up through 2000, the first six full years of the law, they claimed: "We cannot clearly credit the ban with any of
the nation's recent drop in gun violence." My own research examining crime data from 1977 through 1998 also found no reductions in any type of violent crime from either the state or federal laws.
Thursday, September 16, 2004 ~ 8:37 a.m., Dan Mitchell Wrote: With rumours of mushroom clouds over North Korea and genocide in Sudan, it's good to know the Government has identified the real threat in
the world today. As The Telegraph reported: "Chief constables intend to site CCTV cameras on hedgerows, fences and trees along known hunting
routes to enable them to photograph hunt members who break the law after hunting with hounds is outlawed. ...Hunting is a small loss in a
country bent on tearing up so much of its past, but it is a significant one. The criminalisation of a law-abiding group is not something respectable
governments should embark on lightly, and in this case, regardless of how many trees and hedgerows they wire up to the network, the cure is almost certainly worse than the disease, extending to the police more
opportunities for frivolous intrusion.
Thursday, September 16, 2004 ~ 8:00 a.m., Dan Mitchell Wrote: Tax practitioners said while the details of the new tax had yet to be fleshed out, the GST was likely to add more to government coffers,
paving the way for corporate and income tax reductions for which the business community has long lobbied. ...Lee said there was "a certain amount of pressure" on the government to reduce personal and
corporate income tax rates due to competition from neighboring Singapore. Singapore's standard corporate income tax rate is 22 percent, compared to Malaysia's 28 percent, and the government plans to reduce
this to 20 percent in 2005.
Thursday, September 16, 2004 ~ 6:18 a.m., Dan Mitchell Wrote: The Dominican Republic's Senate will consider the week of Sept. 13 a measure that would raise several taxes in order to satisfy conditions for
entering negotiations for a loan from the International Monetary Fund intended to resolve the nation's economic crisis. ...The version of the law
approved by the Chamber of Deputies would raise from 12 percent to 16 percent the tax on the transfer of goods and services, raise to 10 percent
the taxes on telecommunications services and advertising, raise to 0.15 percent the tax on checks and electronic money transfers, raise to 1 percent the tax on luxury real estate and unused urban property, and
raise to 40 percent the alcohol and tobacco taxes. According to a congressional analysis of the legal project, the additional taxes collected would total 2.61 percent of the gross domestic product.
Wednesday, September 15, 2004 ~ 9:00 a.m., Dan Mitchell Wrote: The Commission's European Tax Survey, undertaken by seven hundred EU companies, shows that cross-border activity currently leads to higher
company tax and VAT compliance costs for companies. According to the survey results, compliance costs are significantly higher for companies with at least one subsidiary in another EU Member State compared to
companies without subsidiaries abroad, and the costs increase according to the number of such subsidiaries. Compliance costs are also proportionately greater for SMEs than for large companies. ...The main
findings of the European Tax Survey were that: A parent company with subsidiaries in other EU Member States appears to have significantly (about 5 times) higher compliance costs than companies without
subsidiaries; Annual compliance costs are about EUR202,000 for the average SME compared with EUR1,470,000 for a large company, corresponding to an estimated cost-sales ratio of 2.6% for SMEs
compared to 0.02% for large companies; ...Taxation is a factor for investment location decisions and affects company structure decisions.
Wednesday, September 15, 2004 ~ 8:45 a.m., Dan Mitchell Wrote: ...in a speech in Greensboro, N.C., Wednesday, Kerry offered up a proposal for nothing less than a whole new Cabinet department. "What I
want to do, what I'm determined to do, and it's in my health-care plan, is refocus America on something that can reduce the cost of health care
significantly for all Americans, which is wellness and prevention," Kerry said, according to the online magazine, Slate. "And I intend to have not
just a Department of Health and Human Services, but a Department of Wellness." Kerry didn't elaborate on his idea. He has played up the
wellness theme in promoting his overall health-care plan throughout the campaign, and his wife, Teresa Heinz Kerry, has been even more vocal in her support for preventive health initiatives.
Wednesday, September 15, 2004 ~ 7:03 a.m., Dan Mitchell Wrote: Nearly 18 months after U.S. forces demolished Saddam Hussein's government, pledging to create a prosperous, free-market democracy,
Iraq remains in some ways the world's ultimate welfare state. ...The monthly supply of flour, rice, beans and other goods is worth about $15
per person, but for the poor majority, battered by years of sanctions, war and economic collapse, it is a safety net. Even among those who are
well-off, food rations have come to be regarded as an entitlement and - to the chagrin of senior economic officials and their U.S. advisers -
people want the list of free items expanded. ...The system has enormous costs, direct and indirect. Importing and distributing the goods eats up
$3.8 billion a year, or close to one-fifth of the national budget. It has fostered bureaucratic corruption, creates a culture of dependency and, by
relying almost entirely on imported goods, suppresses domestic farming and industry. In another example of costly subsidies, gasoline sells for
less than 10 cents a gallon. Other fuels are similarly cheap. Altogether, the cost to the government amounts to $5 billion in lost revenues, or about $200 per person.
Wednesday, September 15, 2004 ~ 6:31 a.m., Dan Mitchell Wrote: Residents of New York pay the highest state and local taxes in America, according to a new study examining the tax burden and competitiveness
of each US state. The study, undertaken by the Massachusetts Taxpayers Foundation, found that New York taxed its citizens most heavily, with taxpayers contributing $132 for every $1,000 in income in 2002. This
compares to the $84 tax for every $1,000 income in the least taxed state of Tennessee.
Tuesday, September 14, 2004 ~ 8:22 a.m., Dan Mitchell Wrote: Presidential campaigns are many things -- exciting, annoying, boring and exhausting -- but among their more useful functions is to establish a
mandate for governing. So we are pleased (and, yes, excited) to note that President Bush is beginning to promote the cause of tax reform. ...There
are several possible reforms to explore, ranging from a flat tax to some kind of tax on consumption. But any reasonable reform would have to reduce loopholes (and thus the need to phase them in-and-out), lower
rates, and abolish the tax bias against saving and investment. The result would be a simpler system, easy for taxpayers to figure out, and
transparent so that the price of government services are readily visible. It would deliver a whole lot more equity among taxpayers and tax neutrality among economic activities, and a whole lot fewer distortions.
Tuesday, September 14, 2004 ~ 7:55 a.m., Andrew Quinlan Wrote: Lawmakers in the core economies of the euro zone have been unable to persuade voters to embrace radical overhauls of labor markets and fiscal
policies that analysts say would raise competitiveness, and so have wound up dealing with the threat mostly by tinkering. In some cases, they are banding together to try to prevent undesirable aspects of
competition: France and Germany, for instance, are calling on Brussels to put a floor under European corporate tax rates in an effort to stop
what they call "tax dumping" in the new EU member states that has attracted businesses like a magnet. But some smaller countries among
the 15 pre-existing EU members are breaking ranks, in the first signs of the kind of chain reaction Eijffinger cites. Some, such as the Netherlands,
are pushing for reductions in their own corporate tax levels to compete with the aggressively low rates of the new EU countries.
Tuesday, September 14, 2004 ~ 7:11 a.m., Dan Mitchell Wrote: EU finance ministers have agreed to look at ways of harmonising the method of calculating company taxes in Europe despite opposition from
five member states. ...German finance minister Hans Eichel welcomed the move as a step towards corporate tax harmonisation. "The first step is harmonising the tax base and then we can talk sensibly over a
minimum rate", he said according to Reuters. UK finance minister Gordon Brown however, said that he "would not support any move
towards tax harmonisation", adding, "There is no need for it and it is certainly not a priority. Economic reform is a priority". ...France's
finance minister Nicolas Sarkozy received little support at the meeting for his plan to stop EU structural funds going to countries with low
corporate tax rates. Even Germany - which has supported this initiative in the past - appeared to have deserted Mr Sarkozy, who defiantly
asserted, "I don't mind being alone and right", according to the FT.
Monday, September 13, 2004 ~ 11:07 a.m., Andrew Quinlan Wrote: We don't really care if Oracle CEO Larry Ellison succeeds in his hostile takeover bid for PeopleSoft. That's a matter for PeopleSoft shareholders
to decide. But last Thursday's court decision overruling antitrust objections to the Oracle bid is nonetheless a much-needed rebuke of the Bush Justice Department. U.S. District Court Judge Vaughn Walker's
164-page opinion amounted to an antitrust policy smackdown. PeopleSoft CEO Craig Conway -- backed by Justice and the usually litigious gang of state Attorneys General -- had thrown up the antitrust
objections as a way to deny his shareholders a chance to vote on Mr. Ellison's $21 a share offer. But Judge Walker eviscerated the claim so thoroughly that we hope it will set a new and higher bar for future
antitrust objections to mergers in high-tech markets. Justice's odd legal claim had been that the market for business software could be defined by
whatever a few large customers claim it is. In other words, if General Motors insisted that only three companies could provide it with business
application software -- say, Oracle, PeopleSoft and Germany's SAP -- then the combination of any two of those suppliers would constitute an antitrust violation by putting too much market power in too few firms.
Monday, September 13, 2004 ~ 10:38 a.m., Dan Mitchell Wrote: Conservative pundits routinely accuse the news media of injecting a liberal bias into coverage of issues from abortion to gun control to gay
marriage. ...The two economists combed through 389 newspapers and A.P. reports contained in the LexisNexis database from January 1991 through May 2004, during the administrations of George H. W. Bush, Bill
Clinton and George W. Bush. They picked out headlines about gross domestic product growth, unemployment, retail sales and orders of durable goods and classified the headlines' depiction of the economy as
either positive, negative, neutral or mixed. Then they crunched some numbers. They found that Mr. Clinton received better headlines than the two Republican presidents. Even after adjusting the data to compensate
for differences in economic performance under the three presidents, the Republicans received 20 to 30 percent fewer positive headlines, on average, for the same type of news, they concluded. ...The researchers
said liberal bias in economic reporting was also uncovered in a 1988 study by Ted J. Smith III of Virginia Commonwealth University. In it, he
said that network television coverage during the Reagan administration focused on negative economic stories, criticized the administration for bad news and failed to give it credit for good news.
Monday, September 13, 2004 ~ 9:32 a.m., Dan Mitchell Wrote: ..the results in Nevada highlight an issue well worth pursuing: taxes. Voters went to the polls to decide 34 primary election contests for the
state Legislature, where Republicans currently run the Senate and Democrats control the Assembly. A budget battle last year, which resulted in a $833 million tax hike, led to several primary challenges.
Two veteran Republican Senators, Ray Rawson and Ann O'Connell, were defeated. Both supported the tax increase.
Monday, September 13, 2004 ~ 7:50 a.m., Dan Mitchell Wrote: Paris is to train 2000 teachers over the next three years in a bid to promote the French language in the enlarged EU. The French Foreign
Ministry yesterday announced the three-year plan, designed, they say, to promote the language in the 10 new EU member states as well as Bulgaria and Romania. Each wave of enlargement in the European
Union in recent decades has resulted in an increase in the prominence of English in Europe, often to the detriment of French.
Sunday, September 12, 2004 ~ 12:05 p.m., Dan Mitchell Wrote: What ought to be a disgrace -- the persistence of Third World poverty under years of IMF tutelage and World Bank aid -- will be trotted out
with fanfare to make the case for support of more of the same. ...Brazilian liberal economists have for years been complaining about what they call the "Brazil cost," that is the heavy burden that the
monstrous Brazilian government imposes on the economy. Sure enough, this is where the trail leads Mr. Lewis. "Most people don't recognize the destructive power of big government on economic development. Big
governments demand big taxation. When part of the economy is informal, and untaxed, the burden falls heavily on legitimate businesses,"
he explains in the book's prologue. ...The culprit is the voracious appetite of big government. Despite higher productivity, formal-sector businesses
don't have a pricing advantage against informal, less-productive businesses because they are saddled with so many taxes -- payroll taxes, value-added taxes, sales taxes and income taxes. Moreover, Brazil's
corporate tax rates are scandalously high. "Brazilian corporations pay 85% of all taxes collected, compare with 41% for U.S. corporations."
This not only hampers legal-sector businesses but it also deters small, informal businesses from growing and moving into the legal sector.
Sunday, September 12, 2004 ~ 10:32 a.m., Dan Mitchell Wrote: Slovakia and Colombia were the two most successful investment climate reformers last year, reducing red tape and regulatory delays, the World
Bank said Sept. 8. Slovakia was the leading reformer because it introduced flexible working hours, eased the hiring of first-time workers,
opened a private credit registry, cut the time to start a business in half, and reduced by three-quarters the time it takes to recover debt. ...according to Doing Business in 2005: Removing Obstacles to
Growth...done jointly by the World Bank and the International Finance Corp.--the bank's private sector affiliate--that uses quantitative indicators to benchmark regulatory performance and reforms in 145
nations. The indicators are: starting a business, hiring and firing workers, enforcing contracts, getting credit, closing a business, registering property, and protecting investors. The report's main
conclusion is that--due to administrative procedures--poor nations make it two times harder than rich nations for entrepreneurs to start, operate
or close a business; and businesses in poor countries have less than half the property right protections available to their rich country counterparts. ...The study said the payoffs to reform "appear to be
large": a country that moved from the bottom to the top quartile of countries on the ease of doing business would gain 2.2 percentage points in annual economic growth. Moreover, the report said that heavy
regulation and weak property rights exclude the poor from doing business--particularly women and young people.
Saturday, September 11, 2004 ~ 11:00 a.m., Dan Mitchell Wrote: With the federal assault weapons ban sunsetting on Monday at midnight, the gun-control movement has a lot to fear, but not what most people
think. Despite claims that letting the 10-year-old ban on some semiautomatic weapons expire will result in a surge in gun crimes and police killings, the fact is that letting the law expire will probably just
show the uselessness of gun-control regulations. A year from now it will be obvious to everyone that all the horror stories about the ban--a cornerstone of the gun-control movement--were wrong. ...there is not a
single published academic study showing that the ban has reduced any type of violent crime. Even research funded by the Justice Department under the Clinton administration concluded only that the ban's effect on
gun violence "has been uncertain." When those same authors released their updated report in August looking at crime data up through
2000--the first six full years of the law--they stated, "We cannot clearly credit the ban with any of the nation's recent drop in gun violence." The
reason for these findings is simple: There is nothing unique about the guns that are banned under the law. Though the phrase "assault
weapon" conjures up images of the rapid-fire machine guns used by the military, in fact the weapons covered by the ban function the same as any
semiautomatic hunting rifle; they fire the exact same bullets with the exact same rapidity and produce the exact same damage as hunting rifles.
Saturday, September 11, 2004 ~ 10:40 a.m., Dan Mitchell Wrote: The body representing the interests of business throughout the European Union has urged the European Commission to reject any policy that
leads to harmonisation of EU corporate tax rates. "Harmonisation of corporate tax rates is unacceptable and rules out business and industry
support for the project," UNICE Secretary General Philippe de Buck stated in a letter to Internal Market and Taxation Commissioner Frits
Bolkestein. "Such a development would impede tax competition between the member states, which is an indispensable counterweight to the upward pressure on government spending." ...Nevertheless, UNICE is
open to the idea of harmonising the EU's corporate tax base, which it says would make life considerably easier for firms conducting business in more than one member state. With European Union finance ministers set to spar over the issue of corporate taxation, a survey published Sept. 9 indicated that European
Union companies with subsidiaries in more than one EU member state face tax compliance costs as much as five times as high as firms that operate in only one member state. ...In a letter to Bolkestein obtained by
BNA, the Union of Industrial and Employers Confederations of Europe (UNICE) outlined its support for the CCTB plan, albeit with a few caveats. "Having to satisfy the requirements of 25 different tax
authorities runs counter to the concept of the single market and seriously affects the competitiveness of European business and industry," UNICE
said. "It is crucial to provide EU companies with a modern and attractive tax base that encourages investment and economic risk-taking and which allows them to compete in a global economy," the letter
continued.
Saturday, September 11, 2004 ~ 7:18 a.m., Dan Mitchell Wrote: Echoing a proposal by Finance Minister Nicolas Sarkozy this week, he called on Chirac to push for tax harmonization across the European
Union to prevent new member states in the East from tempting French companies with their lighter fiscal burden. He also said Chirac should lobby fellow EU leaders to turn the euro area's budget rules, known as
the Stability and Growth Pact, into a "stability and employment pact," and to increase EU spending on education and research. When EU finance ministers and central bankers gather Friday and Saturday in the Netherlands for talks about the long-term budget, some
of the richer, but now slow-growing and lethargic Western nations will tell Central and Eastern European countries that they must raise their business taxes and so stop luring away companies and jobs from the
West. Germany and France, whose economies have become moribund and where unemployment is high, believe Eastern countries are indulging in harmful and unfair tax competition. ...Fears of harmful tax
competition have been around for two decades. In the 1980s, Britain cut business taxes to 35 percent from 52 percent as part of a "reinvention"
of its own economy. In the 1990s, Ireland went further, lowering business taxes to 12.5 percent and triggering a boom in high-tech foreign investment on the Western fringe of the Continent. Now, the countries of
the East want to emulate Ireland's experience, and have started to cut company taxes from already attractive rates. ...Easterners are not isolated in this battle. The British and Irish oppose tax-rate
harmonization. A country's tax rate, they say, is its own business, and tax competition is healthy because it forces governments to be efficient with
public money and also because low taxes stimulate growth. "It's simply about national sovereignty," a British official said. "It's as simple as the Boston tea party."
Friday, September 10, 2004 ~ 5:12 p.m., Dan Mitchell Wrote: If the world could cast a vote in the United States presidential election, John Kerry would beat George W. Bush by a landslide, according to a
poll released on Wednesday that is described as the largest sample of global opinion on the race. ...The most negative attitude toward the U.S. came from France, Germany and Mexico, ...Norway and Germany tied -
at 74 percent - as the countries where those polled most strongly support Kerry. Canadians preferred Kerry by a ratio of 61 percent to 16 percent for Bush.
Friday, September 10, 2004 ~ 12:10 p.m., Dan Mitchell Wrote: Official statistics published last March in the Survey of Current Business showed an increase of 2.8 million jobs outsourced by American-owned
multinational corporations during a quarter of a century ending in 2001. Over that same span of time, there was an increase of 4.7 million jobs
outsourced to Americans by foreign-owned multinational corporations. ...Any laws passed to stop the outsourcing of American jobs to other countries are almost certain to bring laws in other countries to stop the
outsourcing of jobs to Americans. We had something like that during the Great Depression of the 1930s, when international trade restrictions were imposed in order to save jobs during a period of record
unemployment. Countries around the world did the same thing, with the net result of a sharp reduction of international trade and a needless
prolonging of the depression. Many policies designed to "save jobs" have effects that are the opposite of their intentions. Germany has some of the
strongest job protection laws in the world -- and double-digit unemployment rates are common in Germany.
Friday, September 10, 2004 ~ 10:30 a.m., Dan Mitchell Wrote: When the good ship IRS goes off in search of more booty, count us among those who believe the more Congressional scrutiny the better.
And when Republicans start looking to fatten IRS coffers by turning ordinary Americans into bounty hunters, it's time to run up the colors. Alas, giving Americans a financial interest in turning the IRS loose on
their fellow citizens is precisely the thrust of a measure that Finance Committee Chairman Charles Grassley has included in the Senate version of a corporate tax bill. The idea is to encourage people to inform
on tax cheats by giving them a hunk of whatever the IRS ends up collecting....giving people a financial stake in calling the IRS -- with its
awesome police powers -- to descend on fellow citizens is not exactly our idea of friendly self-government. Surely even the most zealous deficit
hawk recognizes that unleashing bounty hunters on highly sensitive (and private) tax information raises many more questions than those involved
in reporting standard fraud. ...Whatever the revenue-enhancing merits of such a provision, moreover, our biggest objection is that the proposal
itself is all too indicative of a mindset we had hoped we had left behind. If Congress were really serious about tax cheats, the answer is obvious: slash rates and simplify the code to guarantee more voluntary
compliance. This is what the countries of Eastern Europe have been doing by introducing flat-tax regimes, and we thought this is what President Bush was driving at last week in his GOP convention address.
Friday, September 10, 2004 ~ 7:51 a.m., Dan Mitchell Wrote: No anti-globalization book seems to be complete without a few anecdotes about the deplorable wages and working conditions in the export
industries in poor countries. High-profile multinationals, not least in the sportswear industry are often targeted for criticism. ...The anti-globalizers often win the emotional argument, because they are good
storytellers and trick us into accepting a yardstick that in the short and medium term is completely unrealistic -- the standards of the rich capitalist countries. Even though defenders of globalization and
capitalism would benefit from becoming better storytellers, only cool-headed research can answer the question of what actually benefits the poor. ...The International Labor Organization confirms that wages in
export processing zones are higher than in the villages were the workers come from. The U.S. Department of Labor has found that wages in typical export industries in poor countries, such as shoes and clothing,
are higher than in alternative employment, such as agriculture. Tons of other evidence point in the same direction. ...using data for all Indonesian manufacturing plants with more than 20 employees in the
period 1975-99. Foreign owned companies paid wages 44 percent above average for blue-collar workers and 68 percent higher for white-collar workers. Adjusting for all other factors than ownership, such as
education level, industry and region, the researchers were left with a residual of 20 and 12 percent respectively. Thus foreign ownership per se accounts for a non-trivial higher wage level.
Thursday, September 9, 2004 ~ 11:53 p.m., Dan Mitchell Wrote: Four countries - Ireland, Portugal, Greece and Spain - were revealed to receive more money from the EU pot than they pay in. Each Irish citizen
received just under 400 euro last year from EU funds. At the other end of the scale, Dutch citizens each paid in 120 euro to the EU coffers. Other
net contributors were Sweden (106 euro per citizen), Germany (93 euro), Belgium (75 euro) and the UK (46.5 euro). The French pay 32 euro each.
Thursday, September 9, 2004 ~ 5:36 p.m., Dan Mitchell Wrote: ...the census folks took two lists that include everything from burger-flippers to CEOs, stuck a pin in the middle of each list, compared
them, and that's supposed to determine equal pay for equal work? If women really do offer equal work for 23 cents less on the dollar, why does anyone bother hiring men? The point being that there may be sexual
discrimination in pay, but there are also plenty of other possible reasons for discrepancies. The DNC would force employers to ignore those other
reasons and pay me a certain salary simply based on my gender. ...I want to earn what I get, deserve what I earn, and decide exactly what I do
with my earnings instead of handing that responsibility off to a political party. I am capable of that and much more, because I'm a girl.
Thursday, September 9, 2004 ~ 2:41 p.m., Dan Mitchell Wrote: Campaigners have reacted furiously to a statement by German finance minister Hans Eichel saying that the EU will not succeed in its aim to
become the "most competitive economy in the world by 2010" and catch up with the US. ...the Lisbon Council, a Brussels-based organisation
campaigning for economic reform in the EU, reacted furiously to Mr Eichel's comments. Executive Director Ann Mettler fumed, "Mr. Eichel's comments are outrageous and destructive. What does the Finance
Minister of the largest European economy want to achieve with such a self-defeatist attitude"?
Thursday, September 9, 2004 ~ 11:17 a.m., Andrew Quinlan Wrote: If it's your vision that out there somewhere there's a pile of money to be divided among Americans, the reason the top fifth of Americans have
much more than the bottom fifth is that they got to the pile of money first and took an unfair share. Justice, of course, would require that their
ill-gotten gains be confiscated and redistributed to their rightful owners. But in a free society, income is mostly determined by one's ability and
willingness to produce goods and services that satisfy his fellow man. The top fifth of income earners (earnings greater than $84,000) are not only
more productive and have higher skills and education than the bottom fifth of income earners, they work more hours and have more people in
their household working. There's something else that gets little attention. There's considerable income mobility in our country. According to Internal Revenue Service tax data, 85.8 percent of tax filers in the
bottom fifth in 1979 had moved on to a higher quintile, and often to the top quintile, by 1988. Income mobility goes in the other direction as well.
Of the people who were in the top 1 percent of income earners in 1979, over half, or 52.7 percent, were gone by 1988.
Wednesday, September 8, 2004 ~ 2:20 p.m., Andrew Quinlan Wrote: Tax policy can play a significant role in encouraging -- or discouraging -- entrepreneurial risk-taking. It is startling how many entrepreneurs
starting a business are subject to the individual income tax (as sole proprietorships, partnerships, or S corporations). Because entrepreneurship is a risky undertaking, prospective entrants evaluate
possible after-tax returns from success and failure in deciding whether to start a business. The income tax weighs in because the government is not
an equal partner in success and failure. While the government does not grant a complete offset for business losses, the progressive income tax
imposes a "success tax" on a good outcome. If this success tax is high enough, a prospective entrepreneur may forego a risky venture to
continue working for someone else. How important is this effect. Using data on U.S. households, William Gentry and I found that the "success
tax" has a potent negative effect on entry into entrepreneurship. We estimated that President Clinton's 1993 tax increase, which raised
substantially the top individual income-tax rate, reduced the probability of entry for upper-middle-income households by as much as 20%. Should
Mr. Kerry reverse the president's tax cuts, that estimate suggests an important hit to new entrepreneurial activity. ...How many new jobs do entrepreneurs create for others? Because, again, the individual income
tax applies to many starting business owners, changes in tax rates affect the cost of hiring additional employees. In an important paper, Robert Carroll (now deputy assistant secretary of the Treasury), Douglas
Holtz-Eakin (now the director of the Congressional Budget Office), Mark Rider (now with Georgia State University, formerly with Treasury's Office of Tax Analysis), and Harvey Rosen (now a member of the White
House Council of Economic Advisers) found that higher taxes on business owners lower the probability that their firms will hire workers. Tax increases also cause those entrepreneurs to decrease their wage
payments to workers.
Wednesday, September 8, 2004 ~ 1:31 p.m., Dan Mitchell Wrote: A new report from the Congressional Budget Office explains the deficit is a virtually meaningless measure of the government's indebtedness. The
main reason for this is the federal government uses cash accounting rather than accrual accounting. What this means is the government can acquire massive debts far into the future with virtual impunity. The
government can also, in effect, cosign for loans and provide insurance that could potentially cost taxpayers hundreds of billions of dollars
without it ever showing up in the budget until a check has to be written. ...In the Nebraska Law Review last year, George Washington University Law Professor Cheryl Block compared the federal government's
bookkeeping to those involved in corporate scandals and finds not much difference. Congress, she said, "has been guilty of using accounting devices remarkably similar to those used by Enron, WorldCom and
others to 'cook the books' and to mislead the public with regard to government finances."
Wednesday, September 8, 2004 ~ 11:01 a.m., Dan Mitchell Wrote: Hurricanes come through Florida every year about this time. And, every year, politicians get to parade their compassion by showering the
taxpayers' money on the places that have been struck. What would happen if they didn't? First of all, not as many people would build homes in the path of a well-known disaster that comes around like clockwork
virtually every year. Those who did would buy insurance that covers the costs of the risks they choose to take. That insurance would not be cheap
-- which would provide yet another reason for people to locate out of harm's way. The net result would be fewer lives lost and less property
damage. Is it not more compassionate to seek this result, even if it would deprive politicians of television time? In ABC reporter John Stossel's
witty and insightful book "Give Me a Break," he discusses how he built a beach house with only "a hundred feet of sand" between him and the
ocean. It gave him a great view -- and a great chance of disaster. His father warned him of the danger but an architect pointed out that the government would pick up the tab if anything happened to his house. A
few years later, storm-driven ocean waves came in and flooded the ground floor of Stossel's home. The government paid to have it restored. Still later, the waves came in again, and this time took out the whole
house. The government paid again.
Wednesday, September 8, 2004 ~ 9:00 a.m., Dan Mitchell Wrote: In spite of the difficulties in calculating the true financial burden of public education nationally, a simple cost comparison of public versus
private schooling does suggest how much the current educational system is needlessly inflating state and municipal deficits. The National Center
for Education Statistics estimates the average per pupil spending in more cost efficient religious and independent schools at $4,600 -- a $2,000 savings when compared with per pupil spending at America's public
schools. The real difference in per pupil cost is actually higher (for reasons that will shortly become apparent) but when even this conservative $2,000 figure is multiplied by the U.S. Department of
Education's estimated number of American public school students (47.6 million), the result exceeds the worst predictions for all state budget deficits in fiscal 2003 combined. ...public education's growing
contribution to America's fiscal woes would be a lot easier to accept if it were accompanied by a parallel improvement in student performance.
Yet in spite of the fact that that public schools' per pupil expenditure has increased 22.8 percent in constant dollars over the last two decades, the
average score of today's high school pupils on most standardized tests is lower than it was in 1977. Indeed, 69 percent of public school eighth graders taking the most recent National Assessment of Educational
Progress (NAEP) reading test, last given in 1998, scored below "proficiency." Government spending on public education is higher in the
U. S. than in any other developed country, with an average per pupil cost of $6,857, yet American middle and high school students ranked last in
mathematics and science among the seven industrialized countries which administered the most recent International Assessment of Education Progress.
Wednesday, September 8, 2004 ~ 7:15 a.m., Dan Mitchell Wrote: 24 viewers complained to Ofcom that that the item was "misleading", "went far beyond reasoned criticism" and "misrepresented the truth".
...Fox News was therefore in breach of Sections 2.1 (respect for truth), 2.7 (opportunity to take part), and 3.5(b) (personal view programmes -
opinions expressed must not rest upon false evidence) of the Programme Code.
Tuesday, September 7, 2004 ~ 9:19 p.m., Dan Mitchell Wrote: The average UK higher rate taxpayer is currently seeing half of his salary disappear in taxation according to a recent study. According to
figures published by accounting firm Smith & Williamson, a family man with two children who earns £40,000 per annum is paying up to 50p in
the pound to the Treasury through a combination of direct and indirect taxation, the Daily Telegraph has reported.
Tuesday, September 7, 2004 ~ 7:39 p.m., Dan Mitchell Wrote: The EU's Culture Commissioner Viviane Reding has announced plans to double future EU spending on the European film and audio-visual
industry. Speaking at the 61st Venice International Film Festival, Ms Reding presented the package "Media 2007" under which the industry
could expect to see the EU budget grow from some 500 million euro to over 1 billion euro. The primary aim of the program is to double the number of films shown outside their country of origin, Ms Reding said.
"It is going to be one of the essential and strong policies to preserve cultural identity in Europe", she was quoted saying by AFP. The
European industry has a domestic market-share of only 40 percent for television fiction, roughly 30 percent for cinema and just 20 percent for video.
Tuesday, September 7, 2004 ~ 4:12 p.m., Dan Mitchell Wrote: As Congress returns from recess today for a short pre-election session, one unfinished dispute is how long to extend the beefed-up child tax
credit, marriage-penalty reduction and broadening of the bottom tax bracket (to 10% from 15%) before all of them expire next year. We think
this is a rare tax-cutting case in which shorter is better, both on political and policy grounds. ...the risk is that Republicans could win re-election
only to find it politically much more difficult next year to preserve their 2003 cuts in the top marginal rate on earned income to 35%, and on
capital gains and dividends to 15%. Those cuts begin to expire in 2008 unless Congress acts. Marginal-rate cuts cost less in forgone revenue
than the "middle-class" cuts now at issue, but those cuts are the ones that have lifted the current expansion by encouraging the most productive members of society to work and invest. If they aren't
extended, both economic growth and the stock market are likely to suffer. However, they are also harder to pass politically because Democrats demagogue them as benefits for the rich. In a time of tight
budgets next year, liberal Republicans in the Senate may oppose their extension the way they already have this year. That's why it is probably
better that all of the Bush tax cuts be considered for extension at the same time in the next Presidential term. As an economic matter, we think
tax credits do far less good than do cuts in marginal income-tax rates. But they do serve a useful political purpose if they are the grease that helps get marginal-rate cuts passed into law.
Tuesday, September 7, 2004 ~ 12:05 p.m., Dan Mitchell Wrote: With all eyes fixed on the American presidential elections, the scale of the looming crisis in France and Germany has gone largely unremarked. But
it may so change the political geography of Europe that British arguments for and against the EU will be made redundant. A pervasive sense of decline in both countries, only partially justified but none the less
virulent, is destabilising not just the structures of the EU - but the political systems of France and Germany. ...France as a do-nothing regime that is fiddling while the country burns. The economy is mired in
low growth and high unemployment; government spending at 54 per cent of GDP can go no higher. ...In Germany, Gerhard Schröder is presiding over the wreckage of the SPD, once the standard bearer of European
social democracy.
Tuesday, September 7, 2004 ~ 11:35 a.m., Dan Mitchell Wrote: French finance minister Nicolas Sarkozy has said that countries rich enough to charge a low corporate tax rate should not be eligible for EU
regional funding, again putting pressure on new member states. ...He added, "I will propose that new members whose tax rates are lower than
the EU average are no longer eligible to receive structural funds". ...France and Germany charge a high rate of corporate tax on companies, with rates ranging from 35 to 40 percent and they fear
companies could move their investment to EU member states with lower rates. Estonia has a zero percent rate for reinvested earnings while Latvia, Lithuania and Cyprus charge 15 percent and Poland 19 percent.
The "old European" countries are therefore pushing for a harmonised minimal corporate tax level in the EU. ...y countries - particularly the
UK and Ireland - implacably oppose such a move and any change to fiscal laws must be made by unanimity. French Finance Minister Nicolas Sarkozy has suggested that EU structural funds should be cut to member states with low rates of
corporate tax in an attempt to counteract so called 'fiscal dumping.' ('Fiscal dumping' is a term used by politicians when they really mean 'competition' but can't bring themselves to mouth the c-word.) ...
According to reports, Sarkozy would like to see development aid to the new member states cut back as long as their company tax rates remain
"significantly" below the Western European average of between 30% and 40%. However, the French minister's proposals have been shot down
by the EU's governing body, the European Commission, which sees the linking of taxation and the structural fund budget as a complex and politically sensitive issue.
Tuesday, September 7, 2004 ~ 8:13 a.m., Dan Mitchell Wrote: The individual account component in the public pension system was designed as a relatively small portion of the new system. The contribution
rate to the overall system is 18.5 percent: 16 percent is paid to the first tier, which is financed on a pay-as-you-go basis and pays a benefit
determined by a worker's lifetime earnings, while 2.5 percent is credited to a funded individual account. ...Individual accounts were introduced in
Sweden as part of a major pension reform in 1998. The plan offers investors broad choice; currently participants can choose between more than 650 funds. The first investment election took place in the fall of
2000, and at that time almost 70 percent of participants made an active investment choice. ...The Swedish experience with individual accounts
makes clear the importance of a well-designed default fund. The interest in the Premium Pension has declined dramatically since the plan's inception. In the most recent enrollment period, less than 10 percent of
new participants made an active investment choice. Furthermore, most participants have lost money in their accounts because of the fall in the
stock market and many are starting to question the reason for managing their own pension funds, in particular since the default fund has performed better than the average investor's portfolio.
Tuesday, September 7, 2004 ~ 6:21 a.m., Dan Mitchell Wrote: FRANCE and Germany should block the EU's next spending plan if the new member states do not hike corporate tax rates, Pervenche Beres, the
new chairwoman of the European Parliament's economic and monetary affairs committee, has told European Voice. Beres, a French Socialist, said resources in the rich member states will dry up if low taxes continue
in the new countries. ..."My answer is that some countries should not accept the new financial perspectives if they do not have a guarantee on
the corporate tax issue." ...Europe's new member states impose greatly reduced corporate tax rates. Poland and Slovakia have this year reduced
rates to 19% while Estonia has a zero corporate tax rate. Companies in Germany, meanwhile, have to pay 38.3% tax.
Monday, September 6, 2004 ~ 4:35 p.m., Dan Mitchell Wrote: TSA policies at Dulles often seem to do little more than improve the appearance of security. For example, the agency allows foot-long
knitting needles and bottles of wine and liquor to be carried aboard planes, but not scissors for clipping fingernails or nose hair. A broken
bourbon bottle can be a lethal weapon. How does a pair of tiny scissors become deadly? The TSA requires all laptop computers to be removed from their cases and X-rayed separately, but its policy is to allow DVD
players and other electronic devices to remain inside suitcases to be X-rayed. Why are laptops categorized as suspect while other electronic devices are not? It wasn't a laptop bomb that destroyed Pan Am Flight
103 over Lockerbie, Scotland. ...In my early days as a passenger screener, for example, we were forbidden to mention the word "shoe" to
the flying public. Now we are to tell passengers that removing their shoes before they walk through the metal detectors is "recommended." We
can't tell them to remove their shoes, however. We also can't tell them that if they don't remove their shoes -- even if they are wearing rubber
flip-flops -- they will be subject to "continued screening," which means being screened individually with a handheld metal detector. ...I have
seen six-inch muskets, bought in Williamsburg as souvenirs for children, confiscated because they were replicas of firearms. I have seen a gavel
nearly taken from a circuit judge because it fit the physical description of a hammer. These examples of overreaction by screeners have been fostered by the TSA's aversion to common sense.
Monday, September 6, 2004 ~ 1:02 p.m., Dan Mitchell Wrote: The European Parliament is hoping to kick-start a Europe-wide debate on the EU Constitution when it becomes the first parliament to vote on
the text at the end of this year. ..."By debating the issue of the new Constitution as soon as possible, we can kick-start a similar debate across the continent", said UK Labour MEP Richard Corbett on
Wednesday (1 September), a member of the Parliament's Constitutional Affairs Committee. He said he was convinced that the "overwhelming majority [of MEPs] will endorse the Constitution".
Monday, September 6, 2004 ~ 12:34 p.m., Andrew Quinlan Wrote: With the Australian election campaign now getting under way, new research suggests that many poorer people missed out on the
government's May budget tax cuts, handing an advantage to the ALP. The federal parliamentary library has matched the May tax cuts to new electoral constituencies, and says that hardly any marginal seats are big
winners from the Government's tax package. In 15 of the ruling Coalition's 20 most marginal seats, many more voters missed out on the May budget tax cuts than the national average, says the research. These
tax-sensitive seats are clustered mainly along the eastern seaboard, from the Townsville-based electorate of Herbert, in northern Queensland, to
Gippsland, east of Melbourne. ALP leader Mark Latham reaffirmed over the weekend his goal to provide tax cuts to those on less than $52,000 a
year. "People above $52,000 had tax relief in the last budget," he said. "We want to do something for the great bulk of the taxpayers - the 80%
or 90% who are under $52,000." Labour polls have indicated that 64% of marginal seat voters say they have received nothing from the government's largesse.
Monday, September 6, 2004 ~ 10:17 a.m., Dan Mitchell Wrote: Worried that even showing a starting pistol in a car ad might encourage gun crime in Britain, the British communications regulator has banned a
Ford Motor Co. television spot because in it a woman is pictured holding such a "weapon." According to a report by Bloomberg News, the ad was
said by regulators to "normalize" the use of guns and "must not be shown again." What's next? Toy guns? Actually, the British government
this year has been debating whether to ban toy guns. As a middle course, some unspecified number of imitation guns will be banned, and it will be
illegal to take imitation guns into public places. ...Crime was not supposed to rise after handguns were banned in 1997. Yet, since 1996 the serious violent crime rate has soared by 69%: robbery is up by 45% and
murders up by 54%. Before the law, armed robberies had fallen by 50% from 1993 to 1997, but as soon as handguns were banned the robbery rate shot back up, almost back to their 1993 levels. The 2000
International Crime Victimization Survey, the last survey done, shows the violent-crime rate in England and Wales was twice the rate in the U.S.
When the new survey for 2004 comes out, that gap will undoubtedly have widened even further as crimes reported to British police have since soared by 35%, while declining 6% in the U.S. ...During the 1990s, just
as Britain and Australia were more severely regulating guns, the U.S. was greatly liberalizing individuals' abilities to carry guns. Thirty-seven of the 50 states now have so-called right-to-carry laws that let
law-abiding adults carry concealed handguns once they pass a criminal background check and pay a fee. Only half the states require some training, usually around three to five hours' worth. Yet crime has fallen
even faster in these states than the national average. Overall, the states in the U.S. that have experienced the fastest growth rates in gun ownership during the 1990s have experienced the biggest drops in
murder rates and other violent crimes.
Sunday, September 5, 2004 ~ 12:24 p.m., Dan Mitchell Wrote: There is an ongoing debate in France about the legislation -- passed under a previous Socialist government -- that forcibly reduces the official
work week to 35 hours. The legislation is still in force but was somewhat loosened by the government of Jean-Pierre Raffarin. As I arrived in Paris
a while ago, I saw demonstrators (you are bound to meet some any time you are there) chanting slogans in relation to this issue. They were
walking in the street with a big sign showing a shark named "Profit" eating people. Intrigued, I approached a woman who seemed to be one of
their leaders. She explained that they were protesting to make sure the 35-hour law was maintained, because it was imperative to share work in
order to reduce the number of unemployed in France. Trying to sound as unsarcastic as I could, I asked, "Then, why not demand a 25-hour work week? That would reduce unemployment even more." The woman
seemed genuinely puzzled for a few seconds. She then answered, "Well, we have to be realistic!"
Saturday, September 4, 2004 ~ 1:52 p.m., Dan Mitchell Wrote: The Ministry of Taxation of the Russian Federation has reported the taxes and fees collected for the period January-June 2004. The data
show that the 13% flat tax on personal income continues to achieve very positive results. During January-June 2004, the Ministry of Taxation collected 252.4 billion rubles ($1 = R29.1) in personal income tax
receipts, an increase of 27.7% over the comparable period in 2003. After adjusting for annualized inflation of about 11-12% in the first half of
2003, personal income tax revenue rose at an annualized real rate of about 16% in the first half of 2004 as against the same period in 2003. This growth builds on real ruble revenue increases of 25.2% in 2001,
24.6% in 2002, and 15.2% in 2003. If real ruble revenues rise at about 16% for all of 2004, total real receipts from the personal income tax will
have more doubled over four years-despite a reduction in the top rate from 30% in 1999 to 13%.
Friday, September 3, 2004 ~ 4:56 p.m., Dan Mitchell Wrote: Sens. John Kerry and Edward Kennedy, Massachusetts Democrats, claim they are the protectors of the little guy and the middle class. Yet their
proposals are designed to protect the elite like themselves who inherited rather than created wealth. ...Mr. Zoakos noted: "Opinion polls suggest
that Sen. John Kerry enjoys the overwhelming support of voters self-designated as 'upper class.' These comprise 4 percent of all voters."
...The very wealthy can be divided into two distinct groups - those who by their own skills, hard work and some luck created wealth and jobs, and
those who were lucky inheritors of wealth. The Kerrys and Kennedys of the world, who owe their inherited fortunes to the hard work and
risk-taking of others, tend to look down and fear the "noveau riche," forgetting that their own ancestors were once "noveau riche" or worse.
...Mr. Zoakos observed: "The middle class prefers fiscal, monetary and regulatory polices that favor wealth creation and competition. The upper
class prefers policies that favor wealth preservation and protection from competition."
Friday, September 3, 2004 ~ 3:21 p.m., Dan Mitchell Wrote: French Prime Minister Jean-Pierre Raffarin confirmed on Wednesday that the government intends to phase out the 3% business tax surcharge
over a two year period. The so-called "surtaxe Juppé", which was introduced in 1995 by Alain Juppé's RPR-UDF government, was originally levied at a rate of 10%, and was reduced to its current level
over a number of years.
Friday, September 3, 2004 ~ 9:44 a.m., Dan Mitchell Wrote: It is perfectly reasonable for the GOP to want to increase its support among minorities. But there is a right way and a wrong way to attract
nonwhite voters, and the wrong way is to engage in the bean-counting tokenism that has become such a Democratic Party hallmark. ("Diversity" at Democratic national conventions is achieved by a system
of quotas that govern the makeup of each state's delegation.) And the right way? The right way is to appoint well-qualified Americans, including those who happen to be minorities -- men and women like
Secretary of State Colin Powell, National Security Adviser Condoleezza Rice, Secretary of Labor Elaine Chao, or Judge Alberto Gonzales, the
White House counsel -- to positions of responsibility and influence. The right way is to recruit, groom, and support talented and attractive candidates for office, including those who happen to be nonwhite --
candidates like Michael Steele, now the lieutenant governor of Maryland, or Yvonne Brown, a delegate who is also the Republican mayor of
Tchula, Miss., a nearly all-black town in the Mississippi Delta. Above all, the right way to grow the ranks of black, Hispanic, and Asian Republicans is to promote a vision and a set of values that inspire and
resonate with voters of every color and ancestry.
Friday, September 3, 2004 ~ 9:00 a.m., Dan Mitchell Wrote: The idea is to put the consumer in charge of most routine and everyday spending decisions, returning insurance to its proper role as protection
against unpredictable, "catastrophic" expenses. The aim here, at long last, is to tackle the perverse tax incentive at the heart of our health-care
woes -- the massive tax handout to employer-provided health insurance. ...the tax code was the problem in the first place. Notice that the typical
family policy doled out by companies to their employees represents a total price-tag of about $9,086 a year. If you're in the top tax bracket,
the effective after-tax cost to you is about $5,500. If you're in the working-poor bracket (i.e. pay no federal income tax), it's $9,086. In
fact, it's doubtful that such an insurance product would even exist in the marketplace in the absence of a massive tax subsidy, given the built-in
incentives that naturally drive costs out of sight. Certainly you wouldn't buy gold-plated, first-dollar health insurance if you faced the full tab
alone. ...No serious person doubts that our overreliance on third-party payment is the problem that will be solved -- or will lead to a government-run, single-payer system that controls costs by denying care.
In our information-rich economy, the medical industry doesn't even publish price lists. Is this not downright weird and a sign change is desperately needed? (The exception is cosmetic surgery, where, as health
economist John Goodman points out, consumers pay out-of-pocket and competition has meant prices are flat or falling).
Thursday, September 2, 2004 ~ 11:45 a.m., Dan Mitchell Wrote: ...despite slavery, Jim Crow and racism, the progress of American blacks is simply astounding. Black America, if divided into a separate country,
ranks No. 16 in Gross Domestic Product, ahead of Australia, Turkey, Thailand, Argentina, the Netherlands, Taiwan and South Africa. Black economic progress increased tremendously, says economist Thomas
Sowell, well before so-called "level the playing field" government policies and programs. In fact, on this 40th anniversary of Lyndon Johnson's
"War on Poverty," Sowell says the income gap between blacks and whites closed faster "pre-war" than "post-war." "The economic rise of
blacks began decades earlier," Sowell stated, "before any of the legislation and policies that are credited with producing that rise. The
continuation of the rise of blacks out of poverty did not -- repeat, did not -- accelerate during the 1960s. ...Under Ronald Reagan -- who cut the top
tax rate from 70 percent to 28 percent -- black income, business development and business growth exploded. According to National Review, "From the end of 1982 to 1989, black unemployment dropped 9
percentage points (from 20.4 percent to 11.4 percent), Hispanic unemployment dropped 7.3 percentage points (from 15.3 percent to 8.0 percent), while white unemployment dropped by only 4.0 percentage
points. . . . A black entrepreneurial class flourished. According to the Census Bureau, the number of black-owned businesses increased from
308,000 in 1982 to 424,000 in 1987, a 38 percent rise. At the same time, the total number of firms in the U.S. rose by only 14 percent. Receipts by
black-owned firms more than doubled, from $9.6 billion to $19.8 billion. . . . From 1980 to 1990, the median income of black households grew 31 percent above inflation, compared to 19 percent growth for white
households."
Thursday, September 2, 2004 ~ 10:54 a.m., Andrew Quinlan Wrote: The European Union pushed by the French and the Germans, is moving toward becoming a tax cartel. Old Europe's bureaucrats want the
elimination of tax competition and the creation of laws to exploit entrepreneurs. A cartel is an organization created to eliminate competitors by market regulation and secure profits under the level
calculated by the competition. ...To constitute the new cartel, they have created a new term called "tax dumping". In economics, dumping is the
lowering of prices for sale to foreign markets. Producers sell for prices lower than on national markets to eliminate competition. "Tax dumping"
- the term coined by finance ministers from Germany and France - means that Poland and other Central European countries have lower tax levels
than other EU members. "Dumping", according to Hans Eichel and Nicolas Sarcozy, is what everybody else calls...competition! ...French and
Germans do not know what is best for Poles or Estonians. ...If Germany and France want to attract foreign investors they should lower their taxes rather than force other countries to raise them. The goal of this
"intellectual dumping" by the Sarcozy & Eichel duo is to turn the public's attention away from the real problems of the EU. It isn't lower taxes in
the Central European countries but rather high taxes in Old EU 15, with their onerous market regulations and bureaucracy.
Thursday, September 2, 2004 ~ 7:14 a.m., Dan Mitchell Wrote: American consumers of everything from shrimp and pasta to candles, ball bearings and steel already bear the high price of anti-dumping tariffs
slapped by Washington on hundreds of imports. Now Americans are about to pay again for an anti-dumping policy that is akin to letting the inmates run the asylum. The World Trade Organization ruled this week
that the U.S. could be hit with retaliatory duties if it doesn't do away with the Byrd Amendment. This nasty little rule rewards domestic producers
that support dumping petitions with the proceeds of anti-dumping duties. Talk about perverse incentives. ...To their credit the Europeans don't
seem eager to retaliate. "The legal victory has been won and the preference would be that the U.S. would simply...withdraw the law," an unnamed diplomatic source in Brussels told Reuters. He might have
added -- for the sake of Americans as much as for their global trading partners.
Wednesday, September 1, 2004 ~ 10:30 p.m., Dan Mitchell Wrote: Both parties have changed a lot. The Democrats under Bill Clinton rediscovered a centrist philosophy they had abandoned. They became
more attentive to public safety and more friendly to free enterprise. The Republican Party also shifted-not to the center, but to the right. If you
liked where Nixon stood in the late 1960s and early 1970s, you're more likely to find similar policies 30 years later not in the administration of
George W. Bush, but in the administration of Bill Clinton and possibly the administration of John Kerry. Another well-know blogger, Andrew Sullivan of the Daily Dish, correctly notes that Republicans now act like Democrats by promising to let more interest groups feed at the public trough. In a blog entry entitled "The spectacular incoherence," he wonders what happened to the GOP's belief in limited government. This is a very good question. Lower taxes are about the only core economic principle that the GOP has not abandoned, though optimists hope that a second term will produce social security reform and a newfound commitment to spending restraint: The evening began with a series of speeches trumpeting vast increases in federal spending: on education, healthcare, AIDS, medical research, and
on and on. No, these were not Democrats. They were Bush Republicans, extolling the capacity of government to help people, to cure the sick,
educate the young, save Africans from HIV, subsidize religious charities, prevent or cure breast cancer, and any other number of worthy causes.
The speakers were designed to target certain demographic and interest groups, just as the Democrats used to. The notion that these things are
best left to the private sector, or that spending needs to be slashed in the wake of rising debt, or that the race of a speaker is irrelevant: all these are now Republican heterodoxy.
Wednesday, September 1, 2004 ~ 4:02 p.m., Dan Mitchell Wrote: Hayek recognized that the problem of compassion is that it can be aroused in voters and then abused by socialist opportunists to increase
the size of government without restraint. Since life will always deliver pain and injustice, one can always find problems that the government can in principle cure. This dynamic path will lead, he argues, to a
government that is anything but compassionate in effect. Citizens will be so bound to the whims of bureaucrats and so heavily taxed that effort
will wane, as will welfare [as defined by society's overall well-being]. One need not look much farther than France or Germany today to see how desperate the economic circumstances can become when a society
becomes too "compassionate." ... [Kerry's] claim is that higher taxes on the wealthy can finance generous improvements in government programs
for the middle class. The philosophy of this view is quite radical, as it empowers government to seize without limit the property of individuals
higher up in the income distribution if the resources are used to benefit those lower down. At a recent event at the American Enterprise Institute,
I pushed one Democratic economist on this point. If marginal tax rates of 39.6 percent are acceptable because of social justice, why not go higher?
The individual responded that Wesley Clark had recently remarked favorably on the seventy percent tax rates of a few decades ago. Senator Kerry's philosophy appears to admit the same slippery slope. This
confiscatory power is exactly what those wary of the road to serfdom are afraid of. They argue against such policies for two reasons. The high marginal tax rates will encourage capitalists to take their business
abroad, reducing the welfare of those who government was attempting to assist. Second, the coercive seizure of too much of an individual's property conflicts with his very freedom.
Wednesday, September 1, 2004 ~ 10:48 a.m., Dan Mitchell Wrote: It was only when the 2003 tax cuts passed Congress in mid-year that the expansion really gained steam. Those tax cuts are criticized for favoring
the rich. In fact, they lowered the burden for all, although because the rich pay the most taxes it is inevitable that in dollar terms they enjoyed
the biggest break. The child tax credit took many lower-income workers off the tax rolls entirely. The elimination of the marriage penalty, increased college tuition deductions and higher retirement contribution
limits all helped the middle class. But in retrospect, it's clear that the largest economic boost came from cutting the tax on capital. By reducing
the bite on dividends and capital gains to 15% from as high as 38.6%, investors' calculations of the return necessary to justify any given level of
risk was immediately reduced. Accelerating the marginal rate cuts to take place immediately also lifted the incentive to invest. The stock
market rose and balance sheets improved. Not surprisingly, all of this has led to more investment. It's scary to think what the economy would look
like now without the tax cut. ...Mr. Bush's economic choices have not been perfect. He has failed to expend any political capital to restrain the
spending impulses of Congress. Sarbanes-Oxley may also have swung the regulation pendulum too far, and tardy telecom reform prolonged the
slump in that industry. The steel tariffs were a blunder of the first order...
Wednesday, September 1, 2004 ~ 9:18 a.m., Dan Mitchell Wrote: The 99 percent plus of the rest of us can safely ignore the truly rich. ...Even if Gates, Buffett, Allen and the 272 other billionaires pooled their
assets, what could they make you and me do? Could they force you to bus your kid to a school across town? Could they force you to abandon use of your property so as to provide an abode for some endangered
species? Could they force you to wear a seat belt when you drive? Or could they force you into the government's retirement program? All by themselves, billionaires and millionaires have little power over us
compared to the awesome power that politicians and midlevel government bureaucrats have over us. They can force us to do many things that we otherwise wouldn't do. "All by themselves" is the
operative phrase. The rich can get power over us, but they must first spend their resources to get permission from our elected representatives to rip us off. Wealthy corporate executives can use their wealth and
influence to get politicians to rig markets in their favor -- like keeping foreign sugar out so they can charge us higher prices and earn more
profit. They can convince politicians to enact laws and regulations and create special privileges that benefit them and their allies at the expense
of the rest of us. Donald Trump got politicians to use laws of eminent domain to throw Vera Coking, an elderly widow, out of her Atlantic City,
N.J., home to make room for expansion of his casino. Had it not been for the Washington, D.C.-based Institute for Justice, Atlantic City officials would have succeeded.
Wednesday, September 1, 2004 ~ 8:32 a.m., Dan Mitchell Wrote: The Olympics may be over, but the games seem to have inspired Greece to join a new competition: Tax cutting. By announcing that the corporate
tax rate will be cut by almost a third to 25% over the next three years, the Greeks have signaled their intent to join the race to become Europe's
most dynamic economy. And the Olympic spirit appears to be contagious. Just after the Greeks, the Dutch announced their intention to take part
as well -- although it's not clear they fully understand the rules of the game. Their corporate tax rate will be reduced to 30% by 2007 so they "remain competitive."
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