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www.freedomandprosperity.org |
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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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Sunday, October 31, 2004 ~ 11:40 a.m., Dan Mitchell Wrote: Canada should launch new efforts to reduce effective taxation on businesses as a means of encouraging greater investment in physical capital, the Organization for Economic
Cooperation and Development said Oct. 28. Elimination of provincial sales taxes on capital goods and the abolition of capital taxes would lead to greater business investment and benefits across the economy,
according to the OECD's annual survey of Canadian economic performance. ...Other tax-related recommendations in the report suggest that Canada adjust policies that discourage people from working... Specifically,
the OECD suggested that Canada address the "welfare traps" created by high effective marginal tax rates faced by modest-income families. ...Tax disincentives to work in the Canada Pension Plan should
be removed, and new efforts should be taken to make the scheme actuarially fair for early and late retirement, the OECD said.
Sunday, October 31, 2004 ~ 10:15 a.m., Dan Mitchell Wrote: The controversial issue of sales tax was once again visited by the Japanese government yesterday after Finance Minister Sadakazu
Tanigaki indicated that an increase in the levy was likely as part of the country's package of long term fiscal reform. "I think it's important (for
the government) to have a debate asking for consumption tax (increases) from 2007," Tanigaki told a parliamentary fiscal affairs committee, adding that the government is hoping that tax revenues will match
expenditure by the early 2010s. The consumption tax is currently levied at a rate of 5%, although some, including the head of the governmental
tax reform panel, have controversially suggested hiking the tax up to between 15% and 20% to help pay for Japan's future social security costs.
Saturday, October 30, 2004 ~ 12:10 p.m., Dan Mitchell Wrote: Poll after poll has consistently shown that the American people like gridlock. They don't trust either party to run the entire government and
like having one in a position to check the other. The most recent poll in December 2002 by NBC News and The Wall Street Journal found 62 percent of Americans in favor of Congress and the White House being
controlled by different parties. Only 29 percent were not in favor. ...if most voters were as certain of Republican control of Congress today as
they were of Democratic control in the 1960s and 1970s, it might be enough to push the Democratic presidential candidate over the top. But it will probably take many more electoral cycles and years of Republican
control of Congress before that happens. For now, at least a few conservatives and libertarians who normally vote Republican are voting for John Kerry precisely in order to bring back gridlock. One is
well-known web blogger Andrew Sullivan, who thinks gridlock will keep government spending under control. "Divided government," he says, "is
perhaps the only real mechanism we have ... to restrain the politicians in D.C. from spending even more of our money." According to economist
Bill Niskanen of the Cato Institute, Sullivan has a point. His research shows that the rate of growth of federal spending is significantly lower when the White House and Congress are under control of different
parties than when they are unified.
Saturday, October 30, 2004 ~ 11:30 a.m., Andrew Quinlan Wrote: There was always something a little grandiloquent, a touch improbable, about the pledge made by the leaders of the European Union in Lisbon in
March 2000 to transform the EU into the "world's most competitive knowledge-based economy" by 2010. ...it is dangerous that the debate on
how to boost economic growth has become polarized, with opponents viewing structural economic reform as a threat to social progress, rather
than as a necessary catalyst for further progress. The truth is that the wider goals we all share -- from the eradication of poverty to the
creation of ever-more resource-efficient and environmentally sustainable economies -- are not attainable without the dynamism of economic
growth. It is crucial that the volatile public reaction to economic reform in Germany, France, the Netherlands and elsewhere evolves into a
broader consensus that inaction is simply not an option. The scar of high levels of long-term unemployment in many parts of the EU should not be tolerable to public opinion.
Friday, October 29, 2004 ~ 11:15 a.m., Dan Mitchell Wrote: The United Nations appears to have cast its vote in the U.S. Presidential election this week, and it wasn't exactly a secret ballot. It used 377 tons
of high-grade Iraqi explosives to announce its opposition to re-electing George W. Bush. At least we think that's a fair suspicion from the oh-so-convenient timing of the story of the explosives missing from the
Qaqaa munitions depot outside Baghdad. ...On October 10, a letter from the Iraqi Ministry of Science & Technology arrived at the International
Atomic Energy Agency's Vienna headquarters. The letter included a list of "high explosive materials" that "were lost" after April 9, 2003,
through "the theft and looting of the governmental installations due to lack of security." This is the ministry that worked with the IAEA before
the war and it's headed by a man who used to work for Saddam Hussein. The Iraqi ministry was responding, in what appears to be record time, to a U.N. request. IAEA Director-General Mohamed ElBaradei attaches the
Iraqi letter to his own October 25 letter to the U.N. Security Council, saying he had received it "consequent to [a] reminder" the IAEA had
sent on October 1. Somehow, information that was known for many months suddenly required urgent communication to New York.
Friday, October 29, 2004 ~ 10:54 a.m., Andrew Quinlan Wrote: Failure to regulate operators of "shell companies" that allow criminals to hide ill-gotten assets is making London a haven for money-launderers,
an influential report will warn on Friday. Many offshore jurisdictions have already clamped down on anonymous corporate entities and trusts that can be used as vehicles for fraud and money laundering. They have
introduced legislation to regulate the service providers that set them up. But Britain has left the sector unsupervised, opening the door to unscrupulous operators of shell or front companies, according to the
report from Transparency International, the anti- corruption campaign group. Official estimates suggest £25bn is laundered through the UK
every year. The report says: "It seems to us unconscionable that the UK crown dependencies and overseas territories have been pushed to
introduce legislation, yet the UK itself still lacks definitive plans to do so."
Friday, October 29, 2004 ~ 9:34 a.m., Dan Mitchell Wrote: A proposal put forward by some House Republicans for a national sales tax to replace the current system of federal income tax is being attacked
in a television commercial sponsored by the Democratic Congressional Campaign Committee. ...Democrats contend that the proposal will create a regressive tax system, shifting the burden onto low and middle
income taxpayers, who spend proportionally more of their income on goods likely to be subject to the tax. Emphasising this argument, the ad, which is running in South Carolina and parts of North Carolina, Texas,
Georgia, Indiana and Kansas, warns that the sales tax system will, for the average taxpayer, mean "a new big tax on every clothes purchase, our food, our cars and trucks, even our homes."
Friday, October 29, 2004 ~ 8:04 a.m., Dan Mitchell Wrote: No Republican president was elected in the 20th century without capturing the Buckeye state. Right now, it's neck-and-neck in the polls. If
Bush loses here, it will be due to the economy. ...Ohio, however, is one state for which Bush should probably take very little of the blame. The
real culprit is the Ohio GOP establishment headed up by Republican (In Name Only) Governor Bob Taft. Known among anti-tax activists as "Governor Tax," he has, with the aid of the Republican-controlled
legislature, boosted taxes over $900 million in the last three years. ...It is not just Taft's fault. The GOP has been in control of Ohio since 1994,
and previous governor and now senator George Voinovich raised taxes in 1997. As a result, Ohio has jumped in the rankings for state and local tax burden from 24th in 1994 to 3rd today, according to the Tax
Foundation. ...Not only is the tax burden affecting Ohio's job picture, it appears to be chasing away the future. From 2000 to 2003, the Census Bureau shows that the number of people ages 25 to 34 in Ohio has
declined by more than 54,000. ...Economics Professor Richard Vedder of the University of Ohio complains, "We have one-party rule that is tired
and corrupt. The special interests have inordinate control, and the legislature does its best to cater to them." ... From 1990-2001, per-capita general-fund spending in Ohio rose faster than in all other
states save Montana. With such explosive growth in expenditures, it is little wonder that the GOP establishment has felt the pressure to raise
taxes. ...if Bush doesn't win the Buckeye state, there is little question as to who is to blame. "If Bush loses Ohio," warns Vedder, "Ohio Republicans are largely responsible." |
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Thursday, October 28, 2004 ~ 4:40 p.m., Dan Mitchell Wrote: We've all heard about the Alternative Minimum Tax, or at least most of us will sooner or later. That convoluted scheme to ensure we can't use
deductions to avoid paying our "fair" share is predicted to ensnare a record 12.3 million taxpayers next year, and between one-quarter and
one-third of all filers by 2010. But the disclosure that Teresa Heinz Kerry paid a federal tax rate of only 12.4% on her income in 2003 has given us
a different idea. How about a Kerry Maximum Tax? That is, no taxpayer should have to pay a larger share of his income in taxes than John Kerry and his mega-millionaire spouse, who are after all bidding to become
role models as America's First Couple. Polls have long shown that when Americans are asked how much income people ought to pay in taxes, they typically say no more than 20%. This comports with Americans'
general sense of fairness that success shouldn't be punished with confiscatory tax rates. Millions of Americans pay far more than that, of course, and the Alternative Minimum Tax rates are 26% and 28%,
capturing those with enough deductions who imagine they can escape the 39.6% top marginal rate proposed by Senator Kerry.
Thursday, October 28, 2004 ~ 9:45 a.m., Dan Mitchell Wrote: Kerry's strongest and most consistent campaign message is the lament that the top income-earners benefitted from President Bush's
across-the-board tax cut, and that their money instead should have been spent on government programs. ...This is a true class warfare-style strategy: punishing the rich and rewarding the non-rich. It would be
terrible for our economy and hurt the rich, poor, and middle class alike. The reason America's standard of living is high - and why our poor
would be considered middle class in the majority of other countries - is because we produce so many goods and services per person. Monetary rewards, and/or a desire to break out of one's current economic class,
are largely what motivate us to produce those goods and services. ...The ill effects of slower economic growth particularly play out over the long
term. Europe, with its high marginal tax rates, serves as a good example. In 1973, per-capita income for the United States was about 26 percent
higher than that of Germany. After three decades of slower growth in Germany, the gap had widened to 37 percent. The numbers for France are similar. Per-capita income of Germany and France is about the same
as that of our least-wealthy state, Mississippi. A recent study by Edward Prescott of the Federal Reserve Bank of Minneapolis - and this year's co-winner of the Nobel Prize in Economics - concludes that Europe's
higher taxes account for almost all the difference in labor force participation rates between Europe and the United States. As taxes have risen over the past three decades, European workers have responded by
working less.
Thursday, October 28, 2004 ~ 8:25 a.m., Andrew Quinlan Wrote: Last week, the Columbus (Ohio) Dispatch reported that illegal alien Nuradin Abdi -- the suspected shopping mall bomb plotter from Somalia
-- was registered to vote in the battleground state of Ohio by the Association of Community Organizations for Reform Now (ACORN), a left-wing activist group. Also on the Ohio voting rolls: convicted al
Qaeda agent Iyman Faris, who planned to sabotage the Brooklyn Bridge and had entered the country fraudulently from Pakistan on a student visa. In the battleground state of Florida, indicted terror suspect Sami
Al-Arian illegally cast his ballot in a Tampa referendum in 1994 while his citizenship application was pending. He claimed the unlawful vote was
the result of a "misunderstanding." State officials declined to prosecute. ...at least eight of the 19 Sept. 11 hijackers were eligible to vote in
Virginia or Florida while they plotted to kill Americans. What's to stop the next foreign terrorist plotter from casting a tainted ballot in the
nation he has sworn to destroy? Not much. According to the Franklin County Board of Elections, the Dispatch reports, the office simply "takes
a person's word, that they're (sic) a U.S. citizen." ...Ethnic and racial grievance groups, with backing from the likes of Hillary Clinton and Ted
Kennedy, have forcefully opposed basic ID requirements at the polls. And they have armies of lawyers standing by to assist them. Responsible election officials who ask for proof of citizenship will be accused of
"harassment" and "intimidation." They will be accused of causing a "chilling effect" -- never mind the corrosive effect of unchecked illegal
alien voter fraud on law, order and the integrity of our electoral system.
Wednesday, October 27, 2004 ~ 5:17 p.m., Dan Mitchell Wrote: The economic efficiency scores don't paint a pretty picture about our elected representatives. The highest score held by a Democratic House
member (48) was jointly held by Barney Frank of Massachusetts, Earl Blumenauer of Oregon, Ron Kind of Wisconsin, and Ralph Hall and Charlie Stenholm of Texas, who all voted for efficiency-enhancing
legislation 48 percent of the time. The highest score for a Republican House member (87) was jointly held by John Shadegg of Arizona, John Sununu of New Hampshire, and Tom Petri and James Sensenbrenner,
both of Wisconsin. In the Senate, the highest score (64) held by a Democrat was held by Blanche Lincoln of Arkansas, and for a Republican, it was Richard Lugar of Indiana (91). The average Econ-E
Score was 20 for Democratic House members and was 54 for Republicans. The average for Senate Democrats was 40, and for Senate Republicans, it was 69. Congressional Econ-E Scores tend to confirm
what I suggested earlier that doing what's best for America is nowhere near as important to congressmen as doing what's best for special
interests within their constituencies. Doing what's best for the nation is a losing proposition and can cost them an election. But I don't blame
politicians for their efficiency-diminishing votes. After all, isn't it unreasonable to ask a politician to commit political suicide by upholding his oath of office and doing what's best for all Americans?
Wednesday, October 27, 2004 ~ 4:30 p.m., Dan Mitchell Wrote: ...the Democrats' most influential constituencies have interests and agendas with major negative impacts on blacks. No special interest
group within the Democratic party has as much influence -- domination might be a better word -- as the teachers' unions. The top priority of the National Education Association and the American Federation of
Teachers is their members' jobs. Even black Democrats in Congress seldom dare to cross these unions by supporting anything that would threaten unionized teachers' jobs, such as vouchers or any other form of
choice that would allow black parents to take their children out of failing and dangerous schools. Parents may think that public schools exist to
educate their children but, to the teachers' unions, these schools exist to provide their members with jobs, with iron-class tenure, and with pay
increases based on seniority, not performance. If maintaining that status quo means sacrificing the education of a whole generation of young blacks, the teachers' unions will do it.
Wednesday, October 27, 2004 ~ 2:45 p.m., Andrew Quinlan Wrote: ICT Ireland, the trade body representing the country's burgeoning information technology sector, has urged the Irish government not to
bow to pressure from tax harmonisation advocates within the EU and raise its corporate tax rate. "Any change in stated government policy to
retain a 12.5% corporate tax rate would be detrimental to our chances to retain and attract foreign direct investment to Ireland," said Peter
McManamon, chairman of ICT Ireland's taxation committee. He added that Ireland's low tax reputation has been "frequently cited by foreign-owned companies as the primary reason for which Ireland was
chosen as a location."
Wednesday, October 27, 2004 ~ 11:24 a.m., Andrew Quinlan Wrote: According to an analysis by the Argus Group, a well respected tax law and economics firm, the Kerrys' average tax rate would only increase by
1.8 percentage points to 15.2 percent under the senator's plan, while many small business people would see their average rate rise by 4.0 percentage points, resulting in effective rates as high as 35 to 40
percent... As Mr. Kerry's own tax situation shows, he is not proposing increased taxes on those who are already rich - through inheritance, hard work, luck or marrying a rich woman - but is proposing increasing
taxes on those who are trying to become rich. His plan proposes to make it more difficult for people to join his club of the very wealthy. If you are
already rich, you can tax shelter much of your income, but if you have little in the way of assets, it is almost impossible to shelter your earnings
from taxes. Mr. Kerry's running mate, Sen. John Edwards, also shares this tax hypocrisy. Last year, Mr. and Mrs. Edwards paid an average tax rate of only 5.1 percent on their reported $434,000 of income, or less
than one-third of what the average taxpayer pays.
Wednesday, October 27, 2004 ~ 10:45 a.m., Dan Mitchell Wrote: Just as U.S. states once did -- and still do -- national governments are increasingly forced to adopt policies that recognize the need to compete
with other governments. This competition among governing entities to make their jurisdictions good hosts to business is fostering global economic development in much the same way that it once fostered the
growth of the now-robust U.S. economy. As with other organizations, governments need competition to force greater efficiency. It also helps control the natural tendency -- dating back to the larcenous kings of
centuries ago -- to pry open the cash boxes of the private sector. That's why globalization is hated by socialists and other worshipers of state
ascendancy the world over. They don't like these constraints but know that the penalty for resisting them is severe.
Wednesday, October 27, 2004 ~ 9:30 a.m., Dan Mitchell Wrote: Reports indicated last week that the investment tax amnesty scheme currently underway in Belgium has failed to entice large numbers of
foreign account holders to repatriate their undeclared assets, and revenues are running way below government expectations. According to the reports, the Belgian authorities have collected just EUR47 million
under the amnesty scheme, which commenced in January and concludes at the end of the year, representing a paltry 5.5% of the targeted total.
...Under the scheme, individuals declaring hidden accounts are obliged to complete a form known as the declaration liberatoire unique (DLU), allowing immunity from prosecution and a reduced tax charge provided
the funds are repatriated to Belgium.
Wednesday, October 27, 2004 ~ 8:43 a.m., Dan Mitchell Wrote: No Republican president has devoted so much attention to this "right nation" within America. And no president has delivered so much red
meat to the various factions within the conservative coalition. Yet Mr. Bush has done more than just pay court to the right. He has actively
changed it. ...The most surprising change has been the rise of "big government conservatism." Ever since the Goldwater campaign of 1963-64, conservatism has defined itself as an antigovernment creed.
Barry Goldwater proclaimed that he had little interest in reforming government, "for I mean to reduce its size." Ronald Reagan proclaimed
that "government is the problem, not the solution." The Republican Class of '94 believed that "government is dumb while markets are
smart" (to borrow a phrase from Dick Armey)--and set about balancing the budget and cutting popular government programs. But Mr. Bush has
been different: an avowed conservative who is nevertheless willing to embrace big government. The massive growth in the state during this presidency (faster than under Bill Clinton, even if you exclude the
spending on the war on terror) owes a fair amount to opportunism... If the GOP's political machine puts Mr. Bush back into the White House on
Nov. 2, he could be on his way to creating a new kind of big-government Republicanism...
Wednesday, October 27, 2004 ~ 7:58 a.m., Dan Mitchell Wrote: The study says that the main success of Latin American pension reform has been to improve governments' finances. Expensive pay-as-you-go
pension schemes-paying for pensions out of current taxes-have been scaled back. Future generations will no longer be saddled with oppressive pension commitments. In several countries, the Bank finds,
reform has galvanised the development of capital markets and helped to modernise the financial system, both by improving the quality of regulation and by generating services such as risk-rating. Real returns in
the new pension funds have generally been impressive. In Chile, pension privatisation seems to have imparted a modest boost to economic growth by improving both capital and labour markets.
Wednesday, October 27, 2004 ~ 7:13 a.m., Dan Mitchell Wrote: Europe must focus on boosting sustainable growth if its social model is to survive, German Chancellor Gerhard Schröder has warned, as he today set out a seven-point plan for improving the EU's internal market. ...In a bid to reverse this trend, the German Chancellor's plan - entitled "seven chances for the single European market" - calls for complete liberalisation of Europe's energy markets by 2007, increased co-operation in defence industries and common standards for credit card operations and bank transfers. Mr Schröder also calls for a harmonisation in the way corporate tax is calculated, which may raise eyebrows in London, as the UK sees this as
the "first step" towards tax harmonisation, to which they are implacably opposed.
Tuesday, October 26, 2004 ~ 5:21 p.m., Andrew Quinlan Wrote: It would have been better to have had all the rate cuts in 2001, rather than phased in slowly. Better still to have combined the tax cuts with
effective control of future spending as the economy returned to full employment. But it's no coincidence that a moribund economy mired in an uneven, uncertain recovery took off exactly when the 2003 tax cuts
were passed. John Kerry wants to repeal the reduction in the top two tax rates, and the dividend and capital gains relief. He says it would have been better temporarily to provide larger rebates for lower- and
middle-income people. First, the evidence is that temporary tax rebates have very little stimulative effect. Second, the lower rates and dividend
and capital gains relief moved us closer to an economically desirable tax base by significantly reducing the double taxation of saving and investment. Indeed, if the concern is the potential long-run harm of
deficits crowding out private capital formation, it's strange to propose raising taxes on private capital formation.
Tuesday, October 26, 2004 ~ 4:15 p.m., Dan Mitchell Wrote: William J. Fox, director of the Treasury Department's Financial Crimes Enforcement Network, Oct. 25 highlighted "defensive filing" of
Suspicious Activity Reports (SARs) as a concern that has emerged following a recent series of high-profile actions against banks that have violated key provisions of the Bank Secrecy Act. We all know this
phenomenon is occurring--we have both empirical and anecdotal evidence we can cite," Fox said in addressing an American Bankers Association anti-money laundering conference. "We have seen financial
institutions file [SARs] in ever increasing numbers--often upon the recommendation of their lawyers or risk management teams" even when
circumstances do not justify such filings. ...SARs were intended simply to get information into the hands of law enforcement officials ...The process
of filing SARs involves subjective judgments on the part of bank officials and therefore "we're not that interested in focusing on isolated SAR
failures. What we are interested in is situations where the whole system doesn't work or where the bank doesn't have a program in place to
comply with the BSA." ...Following the panel presentations, John Byrne, director of the ABA's Center for Regulatory Compliance, drew applause
from the audience made up largely of compliance officers when he said he agreed with Joseph that the prosecutions were not the primary cause
of defensive SARs filings. "I don't think that's why it's happening," Byrne said. "Why it's happening is in part the examiners' overreacting to the
enforcement action and criticizing the banks. And that combination has led us to where we are today."
Tuesday, October 26, 2004 ~ 1:59 p.m., Dan Mitchell Wrote: I'm among those who believes George W. Bush doesn't merit re-election, though I supported and in fact actively advised his campaign the first
time around. ...the last thing I wanted was an administration combining aggressive social conservatism with uncontrolled spending and big new government programs. Some Bush strategists have seemed confident that
secular-minded supporters of small government and individual liberty -- a rather important constituency, historically, within the Republican Party
-- would have nowhere to go this fall, since it's not as if the record of Sen. John Kerry inspires confidence. But there are places to go, if not
especially attractive ones. Prof. Richard Epstein of the University of Chicago School of Law, whose scholarship has inspired so many of us, says he plans to vote for the Libertarian nominee... My favorite
syndicated columnist, Steve Chapman of the Chicago Tribune, is actually planning to cast a Democratic presidential ballot for apparently the first
time in his life. Chapman quotes Cato's Dave Boaz making perhaps the strongest argument that can be made for the Democrat on domestic policy: "Republicans wouldn't give Kerry every bad thing he wants, and
they do give Bush every bad thing he wants."
Tuesday, October 26, 2004 ~ 10:42 a.m., Dan Mitchell Wrote: ...Earlier this year, Mr. Kerry said, "I believe that the Constitution, our laws and our customs protect law-abiding American citizens' right to
own firearms." In September his campaign went as far as saying: "John Kerry's opponents are worried because he's the first Democratic candidate to support Second Amendment gun rights and to be an avid
hunter... But according to those on both sides of the gun debate--the Brady Campaign and the NRA--Mr. Kerry has voted for every gun-control bill before the Senate over the last 18 years. He has
consistently voted for restrictions, from banning semi-automatic guns to mandating storage rules. He refused to rein in the lawsuits against gun-makers. ...Polling may have convinced Mr. Kerry to change his
rhetoric, but his voting record and his refusal to "oppose an outright ban on handguns" show his constant endorsements of the Second Amendment mean little.
Tuesday, October 26, 2004 ~ 9:13 a.m., Andrew Quinlan Wrote: Romano Prodi, the outgoing European Commission president, has labelled Europe's efforts to overtake the US as the world's most
competitive economy "a big failure". ...His comments came as Wim Kok, the former Dutch prime minister, prepared to deliver a scathing
report on Europe's economic reforms... Mr Prodi said the widespread use of the national veto had allowed member states to block progress, in spite of Commission prompting. "You can't have unanimity in all
economic areas, or if you do, you must accept the failure of Lisbon," he told the FT. "Lisbon is a big failure."
Tuesday, October 26, 2004 ~ 8:30 a.m., Dan Mitchell Wrote: Europe would be plunged into "absolute crisis" in the event of a French "no" to the Constitution, Luxembourg's Prime Minister Jean-Claude
Juncker has warned. Mr Juncker told French television yesterday (24 October), "A French 'non' would lead Europe into an absolute crisis where there would be no more European dream, no more European ideal
to nurture: it would be total paralysis". And Mr Junker cast doubt on whether a country that said no to the Constitution could continue as a member of the European Union.
Monday, October 25, 2004 ~ 3:30 p.m., Dan Mitchell Wrote: The Sacramento Bee reported that the University of California system gave more to the Kerry campaign than any other single employee group,
and that Harvard was second, with only 15,000 employees to UC's 160,000. Campus bloggers computed the percentages of Kerry contributions over Bush: Cornell 93%, Dartmouth 97%, Yale 93%,
Brown 89%. ...Recently, I had two encounters with sobering implications for the academy. A junior professor told me that when she began teaching at Harvard she resigned from several organizations that would
have betrayed her conservative leanings. She hadn't wanted to give colleagues an easy excuse for voting her down when she came up for tenure; but now that the prospect of tenure was before her, she didn't
know whether she wanted to stay on in such a repressive community. My second conversation was with a rare pro-Israel Muslim whose contract
as lecturer hadn't been renewed, very probably because he was critical of the way his subject was being taught.
Monday, October 25, 2004 ~ 2:15 p.m., Dan Mitchell Wrote: The issues that exercised voters and politicians over the last several years have largely been resolved. In the 1992 and 1996 campaigns, the
major questions were: Should taxpayer money be used to fund cutting-edge art likely to offend a large segment of the community? And, should the National Endowment for the Arts continue to exist? ...look at
the NEA today. Not only is it still with us but in January President Bush boosted its budget by $18 million, to $139.4 million, the largest increase
in 20 years. ...Perhaps because it came from a Republican president, this particular gift horse has had its teeth picked over rather closely. The very people who would normally have lauded such an increase have
instead denounced it. For example, the theater critic for Minnesota's St. Paul Pioneer Press attacked it as a "cynical political maneuver." Maybe
it was. The point is, the NEA got more money and President Bush got the funding issue off the table, demonstrating once again the power of an incumbent to control a political agenda.
Monday, October 25, 2004 ~ 8:30 a.m., Andrew Quinlan Wrote: Sen. John Kerry hit a new low lately with campaign claims that President Bush is somehow responsible for contamination of flu vaccine at a plant
in England ...Unusually costly new U.S. regulations introduced in 1999 also compelled former vaccine producers to call it quits. The fact that
Medicare and other government agencies use their buying power to hold down the price of flu vaccine - a policy Mr. Kerry advocates for all drugs
- means there is plenty of downside risk when demand is weak, but no offsetting upside potential at times like this. De facto price controls for
flu vaccine artificially boost demand and discourage supply, resulting in shortages. If prices were allowed to move up during a shortage (which
economic illiterates call "gouging"), the market would quickly attract additional vaccine from abroad, the product would be moved from areas
with relative abundance to places of acute scarcity, and healthy adults would have an incentive to stay out of the waiting lines.
Monday, October 25, 2004 ~ 7:45 a.m., Dan Mitchell Wrote: ...since 1995, Philadelphia's population has declined 13 percent but registered voters have increased 24 percent. Are we sure we should we
be pleased? The unexamined belief that an ever-higher rate of voter registration is a Good Thing has met its limit in the center of the state
that this year is the center of the political universe -- Ohio. The U.S. Census Bureau's 2003 estimate is that in Franklin County -- Columbus --
there are approximately 815,000 people 18 or over. But 845,720 are now registered. ...What liberalized registration and voting procedures do
increase are opportunities for fraud, including the sort that Milwaukee television station WTMJ found in 2002. Fund says it ``filmed Democratic campaign workers handing out food and small sums of money to
residents of a home for the mentally ill in Kenosha, after which the patients were shepherded into a separate room and given absentee ballots.'' In 2000, in heavily Democratic St. Louis, at 6:30 p.m., a judge,
responding to a Democratic complaint filed in the name of a man the judge did not actually hear from (the man was dead), ordered polls to remain open until 10 p.m., three hours longer than the law allows, and
ordered one voting place downtown to be open until midnight. Before 7 p.m., all over the city, persons were receiving automated, prerecorded phone messages from Jesse Jackson saying, ``Tonight the polls in St.
Louis are staying open late until 10 p.m. in your neighborhood and until midnight downtown.'' Between 7 and 7:30 p.m., Al Gore was calling radio stations to announce the later voting hours. Apparently the entire
episode was orchestrated by the Democrats well in advance.
Sunday, October 24, 2004 ~ 11:45 a.m., Dan Mitchell Wrote: ...the vast majority of Canadian private schools are small, inexpensive, and are often subsidized by religious organizations. Children First grant
recipients attend a wide variety of schools, including Montessori, Waldorf, Christian, Islamic, Jewish, and small community schools. The average tuition of the 150 schools the families will attend in the 2004-05
school year is just under $5,000. This is far less than the $7,800 spent on average to educate a child in the Ontario public system. ...public schools
are often segregated due to the high costs of housing surrounding the "good" schools.
Saturday, October 23, 2004 ~ 1:30 p.m., Dan Mitchell Wrote: Germany's contribution to the EU's coffers is set to rise by billions of euro by 2013. According to a study by the French International Relations
Institute (IFRI), quoted by Die Welt, Berlin's net contribution to the EU could rise to 16bn euro a year by 2013. ...Meanwhile, the Financial
Times notes that Germany, Italy, Portugal and Greece are all at risk of breaching European Union ceilings on budget deficits in 2005.
Friday, October 22, 2004 ~ 2:22 p.m., Andrew Quinlan Wrote: The recent release of some of Teresa Heinz Kerry's tax records reveals as much about the confusion over this issue as it does about her financial
situation. The Kerrys are clearly rich, with several homes, a private jet, and millions of dollars in annual income. Yet they paid just 13 percent of
their income in taxes. That's less than most American pay -- and it is not due to "tax cuts for the rich." It is due to putting much of their wealth
into tax-free municipal bonds or other tax-exempt securities. So whether income tax rates are high or low, on rich or poor, makes little difference
to them. One of the major purposes of tax cuts is to get people to take their money out of tax-free securities and invest that money in something
that will increase economic activity and create jobs. Since our income tax system is steeply graduated, any across-the-board tax cut will immediately benefit most those who pay most of the taxes -- which is to
say, people with higher incomes. After Ronald Reagan's tax rate cuts in the 1980s first brought out anguished cries of "tax cuts for the rich," it
turned out that the federal government collected more tax revenue than ever and that people in upper income brackets not only paid a larger amount of taxes than before, but even paid a higher share of all taxes
than before. ...Much sloppy thinking about economic issues is based on reasoning as if there is a fixed amount of income, so that someone has to
lose whenever someone else gains. The real test of an economic policy is whether it can produce a rising tide that lifts all boats.
Friday, October 22, 2004 ~ 1:12 p.m., Dan Mitchell Wrote: Turkey should reform its complicated corporate tax system to help level the playing field between tax-compliant private sector firms and their
rivals in the informal sector, most of whom currently evade taxation, according to a report published Oct. 21 by the Organization for Economic Cooperation and Development. Turkey should also consider
cutting payroll taxes that finance the state-run welfare system as a means of boosting legitimate employment and reducing competitive advantages held by firms in the informal sector, which are estimated to
employ half of all Turkish workers, the OECD said. ...The OECD said it recognizes that Turkey has taken important steps over the past year toward simplifying and streamlining the corporate taxation system,
including moves to reduce the corporate income tax rate, from 33 percent to 30 percent...
Friday, October 22, 2004 ~ 8:35 a.m., Dan Mitchell Wrote: ICTU's economic advisor has said Ireland's low rate of corporate tax is unsustainable and is fuelling what he called a 'race to the bottom'. ...He
said the enlargement of the EU meant that Ireland was being pursued by new members in the tax competition race, citing Estonia, which has a
rate of zero for many firms. 'This is a race Ireland cannot win,' he said. ...He said the cuts in corporation tax were a huge subsidy to businesses in
the financial and non-trading sectors, with no quid pro quo requested in return.
Friday, October 22, 2004 ~ 8:00 a.m., Dan Mitchell Wrote: Japan's Finance Minister Sadakazu Tanigaki has warned that tax cuts legislated under a previous administration may soon be phased out now
that the country appears to be emerging from its long economic malaise. ...Tanigaki's comments came hot on the heels of a reference by Prime
Minister Junichiro Koizumi to the phasing out of 'proportional' tax cuts, possibly from 2005, as the country seeks to raise revenues to meet growing levels of debt and government spending. The tax cuts in
question, introduced under Prime Minister Keizo Obuchi, allow a 20% deduction of income tax, or up to Y250,000 per year ($2,300) and a 15% deduction in residential tax, or up to Y40,000 per year.
Friday, October 22, 2004 ~ 7:17 a.m., Andrew Quinlan Wrote: New Zealand's Finance Minister Michael Cullen has announced that the government is working towards delivering "significant tax reductions"
to help the business sector. Addressing the parliamentary finance and expenditure select committee, Dr Cullen indicated that a key tax reduction move would likely involve higher depreciation rates on
'short-lived assets'. ...According to Cullen, tax cuts would lead to a significant reduction in business tax revenues, although somewhat disappointingly for the business sector, he remarked that a reduction in
New Zealand's 33% general company tax rate is "not my priority."
Thursday, October 21, 2004 ~ 1:00 p.m., Andrew Quinlan Wrote: Here's a startling fact: Based on labor market statistics from the Organization for Economic Cooperation and Development, Americans
aged 15-64, on a per-person basis, work 50% more than the French. Comparisons between Americans and Germans or Italians are similar. What's going on here? What can possibly account for these large
differences in labor supply? It turns out that the answer is not related to cultural differences or institutional factors like unemployment benefits,
but that marginal tax rates explain virtually all of this difference. ...Let's take another look at the data. According to the OECD, from 1970-74
France's labor supply exceeded that of the U.S. Also, a review of other industrialized countries shows that their labor supplies either exceeded or
were comparable to the U.S. during this period. Jump ahead two decades and you will find that France's labor supply dropped significantly (as did
others), and that some countries improved and stayed in line with the U.S. Controlling for other factors, what stands out in these cross-country comparisons is that when European countries and U.S. tax rates are
comparable, labor supplies are comparable. ...I would add another data set for certain countries, especially Italy, and that is nontaxable market
time or the underground economy. Many Italians, for example, aren't necessarily working any less than Americans -- they are simply not being
taxed for some of their labor. Indeed, the Italian government increases its measured output by nearly 25% to capture the output of the underground sector. Change the tax laws and you will notice a change in
behavior: These people won't start working more, they will simply engage in more taxable market labor, and will produce more per hour worked. ...we should stop focusing our attention on the recent tax cuts
and, instead, start thinking about tax rates. And that means that we should roll back the 1993 tax rate increases and re-establish those from
the 1986 Tax Reform Act. Just as they did in the late 1980s, and just as they would in Europe, these lower rates would increase the labor supply,
output would grow and tax revenues would increase. ...The important thing to remember is that the labor supply is not fixed. People, be they European or American, respond to taxes on their income. Just one more
example: In 1998, Spain flattened its tax rates in similar fashion to the U.S. rate cuts of 1986, and the Spanish labor supply increased by 12%. In addition, Spanish tax revenues also increased by a few percent.
Thursday, October 21, 2004 ~ 12:21 p.m., Dan Mitchell Wrote: Predictably, so-called "consumer" groups with 20/20 hindsight have taken out their trusty retrospectroscopes -- the only medical instrument
guaranteed 100% accurate -- and condemned the FDA for not banning Vioxx three years ago, when a preliminary study indicated a possible increase in cardiovascular risk among patients taking the drug. But these
critics neglected to take into account the fact that Vioxx, as with the other COX-2 drugs (Pfizer's Celebrex and Bextra), was prescribed specifically to alleviate arthritis pain while posing less danger to the
stomach and GI tract. The older anti-arthritis drugs, known as NSAIDs, are notorious for irritating the gut, sometimes causing bleeding severe
enough to require hospitalization. Among all classes of drugs, these were among the most common causes of serious adverse drug reactions. Some
estimates attribute over 10,000 deaths annually to NSAID complications. How many such complications have been prevented by the use of Vioxx instead of one of the older NSAIDs? No one can be sure, but the number
is substantial. I practiced Rheumatology for twenty years, and had to care for many patients suffering the ill effects of NSAIDs -- there was no
COX-2 option at that time. Another valuable lesson gleaned from the Vioxx episode is the benefit to consumers of "me-too" drugs, whose
production and marketing has been condemned in recent attacks on the pharmaceutical industry. No matter how similar drugs may be in chemical structure, some patients will respond to one and not another,
while some will exhibit intolerance to one and not another. Indeed, Merck itself hopes to launch another COX-2 inhibitor within the next few months. Some editorials went so far as to call for restrictions on the
other COX-2 drugs, based on data from the Merck-Vioxx study alone. Yet, there is no solid evidence incriminating the others in cardiovascular risk, only suspicion. While those patients now on Celebrex and Bextra
are concerned about the potential risks to them as well, more studies should be done evaluating these risks before restrictions are added. No
other anti-arthritis drug, including aspirin and the older NSAIDs, have been studied over the length of time that Vioxx has been. Even aspirin would not be approved for human use if it had to pass FDA evaluation
today, due to its propensity for inducing GI bleeding, allergic reactions, and blood thinning. Indeed, while critics accuse the FDA of being lax, the
opposite is true: getting an innovative, life-saving pharmaceutical to market in the US is an incredibly daunting, time-consuming and expensive endeavor.
Thursday, October 21, 2004 ~ 11:15 a.m., Dan Mitchell Wrote: EU membership has so far been a disappointment to Eastern Europeans, with high upfront costs and slow-to-materialize benefits. Nor can the
citizens of Warsaw and Prague console themselves with the knowledge that they are joining, in the EU Commission's words, the world's "most
dynamic trade bloc." Since the early 1990s, European unemployment has averaged 11 percent, compared to 4 percent in the United States. According to the Organization for Economic Cooperation and
Development, EU countries have not created a single, net private sector job since 1970, compared to 50 million jobs added in the United States. The roots of Europe's malaise can be traced to protectionist trade
practices and heavy taxes that fuel government growth and impair private-sector job creation. By comparison, the new members - who spent the past 15 years dismantling socialism - have pioneered
innovative pro-growth policies... Thanks to their willingness to liberalize, the Eastern countries are outperforming the original EU-15 at every turn: The average Eastern European growth rate in 2003 was 3.9
percent of GDP - more than double the 1.6 percent average in Western Europe and significantly higher than the 2.4 percent growth in the United States. The largest Eastern member ( Poland) has enjoyed higher
growth rates than the largest Western member ( Germany) for each of the past nine years, averaging 3.8 percent annually. Hungary 's growth has averaged 5 percent, with unemployment at 3 percent and wages up
17 percent in 2003. And the star performers among the accession countries - the flat-taxers - have enjoyed average GDP growth of 6.1 percent. ...Faced with a choice between economic growth and EU
subsidies, Eastern Europeans have - at least for the moment - chosen the former. If they are able to withstand Western pressure, their success may
provide a model for the rest of the EU and help breathe new life into an ailing continent. Herein lies the ultimate irony: countries where minimalist government and free enterprise have existed for so short a
time may be instrumental in returning those concepts to countries where they originated but have lately fallen out of fashion.
Thursday, October 21, 2004 ~ 10:09 a.m., Dan Mitchell Wrote: Kofi Annan, secretary-general of the United Nations, finds it "inconceivable" that Russia, France or China might have been
influenced in Security Council debates by Saddam Hussein's Oil for Food business and bribes. "These are very serious and important
governments," Mr. Annan told Britain's ITV News Sunday. "You are not dealing with banana republics." This has been Mr. Annan's chief
response so far to the extensive documentation cited in the recent Iraq Survey Group report, from the CIA's Charles Duelfer, that under cover of the U.N.'s Oil for Food relief program Saddam was trying to buy up
pals on the U.N. Security Council. ...To be fair, maybe that's how the world would appear to anyone dulled for decades by U.N. diplo-speak--and Mr. Annan has toiled there for 42 years. But in the
modern world, the notion that Russia and China in no way qualify as banana republics might be news to the state-muffled media of both countries. It might also surprise readers of the Berlin-based
Transparency International Corruption Perceptions Index, which ranks 133 countries by levels of corruption, from best to worst. On that list, China ranks about halfway down, worse than Colombia or Peru and tied
for 66th place with Panama, Sri Lanka and Syria. Russia does worse yet, ranked between Romania and Algeria, and tied for 86th place with Mozambique. France does much better. Though it ranks as more corrupt
than the U.S., Israel or Japan, it ties with Spain for a still respectable 23rd place. That makes France one of the most corrupt countries not in
the entire world, but merely in Western Europe. Alas, such dignity may come as cold comfort to the French, given that Mr. Annan did not actually deny that the Chinese, Russians and French had taken big
payoffs from Saddam. Mr. Annan merely disputed that the Chinese, Russians and French would have delivered anything in return for the bribes. In other words, they may be corrupt, but at least they weren't
honest about it.
Thursday, October 21, 2004 ~ 9:45 a.m., Dan Mitchell Wrote: The Boston Globe ran an article entitled "Kerry Opposes Role in Tribunal/U.S. Concerns Not Yet Met, He Says." It quoted Kerry
spokesman Mark Kitchens: "George W. Bush once again chose to mislead the American people about John Kerry's position [on the ICC]."
So, what precisely is Kerry's position? The Globe conceded it had a hard time prying it out of him. "Kerry's statement on the court, e-mailed to a
Globe reporter Saturday night," the paper said, "came after repeated inquiries over the past six weeks and two days after another request the
morning of the [first] debate." "My number one priority is to protect the servicemen and women who protect America from harm," Kerry told the
Globe. "Therefore, I don't believe the United States should join the International Criminal Court until our concerns are addressed and the
Court develops a solid track record of fair prosecutions of the world's worst criminals." However, the Globe said, Kerry added (with ellipses
inserted by the Globe): "I will not continue the obsessive and self-defeating campaign President Bush has waged against the ICC and
the close American allies that support it. . . . All he's done is to alienate our closest allies and diminish his own authority in the world."
Thursday, October 21, 2004 ~ 8:24 a.m., Dan Mitchell Wrote: France must undertake a radical overhaul of its labor market or face irreversible economic stagnation, Michel Camdessus, former head of the
International Monetary Fund, said in a report published Tuesday. The 200-page document, which was commissioned by the French finance minister, Nicolas Sarkozy, in May, touches on everything from the
national education system to the need for more technological innovation. But the key to unlocking faster expansion is allowing people to work harder, it says. ...Attacking his country's 35-hour workweek and high
minimum wages, the former IMF chief warned that if the government did not act, the effects of an aging population would be enough to trim the
economy's growth potential from an annual 2.25 percent to 1.75 percent over the next decade. France, Camdessus said, must cut its "work
deficit."...Economic growth in France has lagged that of the United States on average by 1 percentage point every year over the past decade as a combination of the shortened workweek, high unemployment and
early retirement curbed the amount of time the French spend at work. And as people live longer, the state-funded health and retirement systems
are coming under increasing strain. ..."We've had reports like that for 20 years, and for 20 years they've been put in the drawer," said Marc
Touati, chief economist at Natexis Banque Populaire in Paris. "The problem is that politicians want to win elections in the short term and real reform takes longer than that." France must implement a series of urgent fiscal and labor market reforms if it hopes to avoid an irreversible period of high unemployment,
low economic growth, and dwindling international competitiveness, a government commission led by former International Monetary Fund General Director Michel Camdessus said Oct. 19. Tax reforms figure
prominently in recommendations made by the Camdessus Commission, a 20-member body led by the former IMF chief, and including several top economists, government officials, and representatives of labor unions
and the private sector. The Camdessus Commission report, A Wakeup Call: Towards New Growth for France, lays out a wide-ranging battle plan for promoting innovation, increasing job growth and employment,
cleaning up government finances, and deregulating the economy. A massive reform program is necessary, Camdessus said, if France hopes to stem the steady and ongoing decline of economic growth rates and
drive down "unacceptable" levels of unemployment, which has been hovering between 8 percent and 10 percent over the past two decades.
...The Camdessus Commission also suggested a radical series of solutions to long-standing debate over reforming a locally assessed professional
tax (Taxe Professionelle) and a controversial wealth tax (the Impot de Solidarite sur la Fortune, or ISF). Rather than continuing with piecemeal reforms to the two taxes, the Camdessus report suggested that the
government incorporate the professional tax--expected to raise upwards of 23 billion euros ($28.8 billion) in 2004--into France's corporate
income tax system (the Impot sur les Societes, or IS). Similarly, the report suggested that ISF levies--expected to raise about 2.5 billion euros ($3.1
billion) in 2004 from France's 300,000 wealthiest tax homes--be incorporated into personal income tax levies. ...Finally, the Camdessus
Commission suggested that France undertake a "rigorous" revision of tax loopholes that allow high-income taxpayers and companies to avoid
paying their fair share of tax, and consider immediate implementation of tax withholding at the source to improve efficiency and lower collection costs.
Wednesday, October 20, 2004 ~ 1:36 p.m., Dan Mitchell Wrote: The Vancouver-based Fraser Institute yesterday published its 14th annual report on hospital waiting times in Canada. In medical terms, the
patient is not responding to increasing doses of dollars -- and the prognosis is not good. Under Canada's government-run health-care monopoly, Fraser reports that the average wait for hospital treatment is
17.9 weeks. That's the average over 12 specialties and 10 provinces. To take just one example, the projected wait for hip-replacement surgery in
British Columbia is 52 weeks. ...The government itself uses private clinics for Royal Canadian Mounted Police, provincial workman's compensation
cases and prison inmates. Thus the Canadian joke about the prisoner who asks his cellmate, "What are you in for?" Answer: "Hip
replacement." If all else fails, there's always the American option. Timely Medical Alternatives, a private company in Vancouver, contracts with hospitals south of the border to care for Canadian patients.
Wednesday, October 20, 2004 ~ 12:26 p.m., Dan Mitchell Wrote: Some readers wondered how she could be worth nearly $1 billion (as the Los Angeles Times has estimated) and earn only $5.07 million in 2003.
Good question, that. It's impossible to tell given that Mrs. Kerry has disclosed only two pages of her 1040 form and declines to explain how her assets are deployed. But we agree with those readers who suggest
that much of her wealth must be tied up in trusts and estates that don't require a declaration of income. Like many of the super-rich, Mrs. Kerry
can afford to hire lawyers and accountants to create these shelters for her and her heirs. The late, great Wall Street Journal editor Barney Kilgore used to say that the rich don't mind high taxes because they
already have their money. Mrs. Kerry and her husband are cases in point.
Wednesday, October 20, 2004 ~ 11:55 a.m., Andrew Quinlan Wrote: Speaking of jobs, let's look at the numbers. Our unemployment rate, which the U.S. Bureau of Labor Statistics put at 5.4 percent in
September, is one of the lowest in the world and in our history. France's unemployment rate is 9.4 percent, Germany's 9.9 percent and Italy's 8.6
percent. Our Canadian neighbor's is 6.6 percent. The only reason for today's hysteria over jobs is because it is an election year, and one of the
ways politicians gain power is to create fear among the electorate. The next time you hear a politician whining about our "awful" job climate,
ask him which European country we should look to for guidance in job creation.
Wednesday, October 20, 2004 ~ 10:20 a.m., Dan Mitchell Wrote: ...on the economic front, especially when it comes to taxes and economic growth, the president's policies are more likely to bear fruit, according to
Arizona's new Nobel Prize laureate. "That's an easy one," said Edward Prescott, the Arizona State University professor who shared the 2004
Nobel Prize for economics. "When you cut tax rates, employment always goes up," he said in a phone interview Monday with The Arizona Republic. Prescott, speaking from Minnesota, where he advises the
Federal Reserve Bank of Minneapolis, described Kerry's plan to roll back tax cuts for top wage-earners as counterproductive. "The idea that you
can increase taxes and stimulate the economy is pretty damn stupid," he said. ...Prescott also backed the idea, espoused by Bush, to reform Social
Security by allowing some workers to place a portion of their payroll taxes into private savings accounts. Such an arrangement would give people greater incentive to work, thus leading eventually to higher tax
revenue, Prescott said.
Wednesday, October 20, 2004 ~ 10:00 a.m., Dan Mitchell Wrote: A proposed $500 million tax increase to put more police on the streets of Los Angeles has drawn fire from opponents who say top
law-enforcement officials are trying to scare voters into approving it with commercials that raise the specter of a suburban crime nightmare.
...The measure would raise the sales tax in Los Angeles to 8.75 percent, among the highest rates in the nation. It is intended to pay for the
addition of 5,000 new police officers to the 22,000 who now work for the city police and county sheriff's departments. Opponents of the initiative
argue that local leaders are pushing it as a quick fix and lack the political will to deal with larger and more divisive issues facing the region, including an overwhelming wave of illegal immigrants and nearly
broken-health care system. But most galling to the opponents is a commercial that shows a woman and her daughter cowering next to a bed in a suburban home, screaming helplessly for police who are too late
to save them from a shadowy intruder slowly climbing the stairs. ..."It's extortion. That's what an extortionist does, try to scare people into
giving up their money," Kris Vosburgh, executive director of the anti-tax Howard Jarvis Taxpayers Association, said of the ad. "When somebody
puts a gun in your ribs and asks for money you give it to them because you are frightened." Foes of the initiative, known as Measure A, also
point out that the city's real crime problems are not in the leafy suburbs shown in the ad, but in gritty south Los Angeles neighborhoods ruled by street gangs.
Wednesday, October 20, 2004 ~ 9:30 a.m., Andrew Quinlan Wrote: In addition to cuts in income tax, the Portuguese government has proposed draconian new laws aimed at clamping down on tax evasion by
wealthy individuals and companies. ...In essence, the tough new regime will see the creation of an elite fiscal fraud squad, the watering down of
banking secrecy laws and more frequent investigations into the tax affairs of the wealthy, whilst the burden of proof in tax disputes will shift
from the taxman to the taxpayer. On a more positive note, companies will benefit from a 5% reduction in corporate tax to 25%.
Wednesday, October 20, 2004 ~ 8:45 a.m., Dan Mitchell Wrote: The Association of Chartered Certified Accountants is calling on the Australian government to address structural problems in the country's
economy, particularly high rates of taxation, to remedy a growing shortage of qualified accountants. ...Richard Francis, Head of ACCA's Australia and New Zealand Centre asked: "Why is there a skill shortage
for accountants? There should be plenty of trained accountants in Australia, given the thousands of accounting graduates universities produce each year." Francis believes that the answer lies in the
unattractiveness of Australia in terms of pay and tax rates compared to other countries. The ACCA regional chief went on to urge the government to reconsider the country's top marginal tax rate before the
quality of the Australian work force is "seriously compromised."
Wednesday, October 20, 2004 ~ 7:30 a.m., Dan Mitchell Wrote: The EU's economic targets for 2010 are set to be seriously missed, according to a draft of a long awaited competitiveness report, obtained
by the EUobserver. The hard-hitting document, which assesses the EU's position in its bid to become the most competitive, knowledge-based economy in the world by 2010 (known as the Lisbon Agenda) warns that
"too many targets promise to be seriously missed". To be officially presented to EU leaders next month, the draft report foresees
devastating effects if the Lisbon process is not invigorated. "What is at risk ... is nothing less than the sustainability of the society Europe has
built and to that extent, the viability of its civilisation", says the paper, drawn up by 13 experts led by former Dutch Prime Minister Wim Kok.
..."In sum, Europe has lost ground to both the US and Asia; its societies are under strain; and some ugly political forces are beginning to manifest
themselves", is the gloomy conclusion of the 37 page draft. ...Although the EU is aiming to catch up with the US, it should not aim to "become a
copy-cat US - far from it", recommends the report. "Europe has made its own distinctive choices about the social model that it wants to retain;
whether life expectancy, infant mortality rates, income inequality or poverty, Europe has a better record than the US and wants to preserve and improve".
Tuesday, October 19, 2004 ~ 4:11 p.m., Dan Mitchell Wrote: Americans have been shocked to learn a flu-vaccine shortage will keep many of them from getting their flu shots this year. They shouldn't be.
What they are experiencing is the effect of the most basic law of economics. Guess what? When it ceases to be profitable to make a vaccine (or a prescription drug, or anything else), companies stop
making it. Litigation, regulation and government pricing have hammered vaccine makers during the past two decades, chasing them out of business.
Tuesday, October 19, 2004 ~ 1:00 p.m., Dan Mitchell Wrote: A Zogby poll last year asked people what a fair tax rate would be for a person making $1 million per year -- an income that would put someone
in the top tenth of the top 1 percent of taxpayers. Seventeen percent of Americans said that 10 percent was the most he should pay and 29 percent said that 20 percent was the maximum. ...there are other polls
with similar findings. A 2001 Fox News poll asked people what the highest percentage of taxes anyone should have to pay is. Fifty-two percent said 20 percent was the most anyone should pay. Only 9 percent
of people favored rates above 30 percent. Another Fox News poll in 1999 found 65 percent of people saying that 20 percent should be the maximum tax rate. ...For this reason, even sophisticated leftists
recognize that class warfare is a non-starter in American politics. As columnist Bob Kuttner recently put it, "Because nearly everyone identifies upward, you don't gain traction in American progressive
politics by baiting the rich." Mark Penn, Bill Clinton's pollster, put it this way: "The more government tries to monkey with income distribution, the more people dislike it."
Tuesday, October 19, 2004 ~ 12:30 p.m., Dan Mitchell Wrote: No matter how sad it is, genuine democracy is not necessarily the best option anywhere and at all costs. In the version involving strong Islamic
fundamentalists it can hardly facilitate freedom and development -- both social and economic. Freedom and development come with the slow evolvement of social capital, and this is how they may be sustainable and
not fall victim to radical religion. This is what the West should promote, not only in Turkey, but also in the areas south-east of that country. And
this takes generations. So, what to do about Turkey now? Certainly stop pushing it towards further democratization. Even though the Europeans
will not formally welcome Turkey to their club, they should let Turkish companies enjoy the benefits of the common market, since it is economic freedom and prosperity that can beat Islamic fundamentalism and
eventually build democracy from the bottom up.
Tuesday, October 19, 2004 ~ 11:10 a.m., Andrew Quinlan Wrote: A French initiative to harmonize direct taxes can be viewed as a clear manifestation of economic terrorism. ...Why do high tax countries have a
relentless itch to put an end to the so-called "harmful" tax competition, or to be more precise - to end tax competition as such? The most
conceivable explanation is that countries with high taxes are simply frightened at any form of competition as they are almost sure they will lose the battle. Taxes directly affect production costs. High taxes
increase these costs. As a result, it becomes more expensive to produce, and more difficult to sell, goods and services. Add lower labor costs and
cheaper energy resources in the new member states and you will be facing a rather strong competitor. Fears of losing investments along with
all the resulting effects are the main reason why high tax countries are so conspicuously afraid of countries new to Europe which are economically
still weak today - weak, but with huge potential for growth. ...If taxes are raised, growth will undoubtedly be arrested, and the new member states
will remain the poor outskirts of the rich Europe for much longer than under the current tax rates. The question is whether the "old European"
countries are interested in having poor sisters and brothers. Or are they simply short-sighted in their goals? ...A state cartel is much more
harmful than the allegedly harmful tax competition itself. It limits an individual's right to choose and damages private finances. I doubt if
there's someone courageous enough to say that private finances are not important and that they should fall victim to state finances.
Tuesday, October 19, 2004 ~ 10:08 a.m., Dan Mitchell Wrote: European finance ministers clashed over Franco-German proposals to harmonise EU corporate taxes to prevent lower-tax member states
luring away investments from higher-tax members. More particularly, the French and German governments are pushing for minimum tax bands throughout the EU. ...these statements have provoked a fierce
rebuttal from new members including Poland, Hungary, the Czech Republic, Slovakia and Estonia. ...The new member countries are keen to replicate Ireland's economic miracle. When Ireland joined Europe in
1973, its per capita income was just 62% of the EU average; by 2002 it was 121%. By slashing taxes and the state's share of the economy, the
Irish were able to exploit their access to the EU market and encourage a massive influx of foreign direct investment. By 1998 American multinationals accounted for 70% of Irish exports. The top corporate tax
rate, once over 40%, now stands at 12.5%; the state's share of GDP, which hit 54% in the 1980s, is now down to 33%. Unemployment is less than 5%. ...It was Estonia which set the ball rolling with a flat-rate 26
per cent income tax. The philosophy behind the flat-rate tax is simple. People that work more and earn more should not be punished for it. Progressive taxes act as a disincentive. In Estonia, the flat-rate tax
fostered capital formation, lead to higher productivity levels, higher wages, and job creation. Moreover, a flat income tax rate is easy to collect and control. Today Estonia is even considering a further
reduction in tax rate, to 20%. Moreover, Estonia abolished all import tariffs, it introduced a balanced budget required by law, massive deregulation and so on. Estonia also abolished it corporate tax on
reinvested profits. These lessons have subsequently been eagerly absorbed in other new member states. Now Poland, Hungary and Latvia have all cut corporation tax to below 20%. Slovakia has introduced a
19% flat tax for both corporate and personal income...
Tuesday, October 19, 2004 ~ 9:34 a.m., Dan Mitchell Wrote: The reasons why informal economies grow -- and keep growing -- are not hard to uncover: high corporate tax rates and the enormous cost of
doing business legally. It takes 89 days to register a business in India, compared with eight days in Singapore. It takes 33 days to register a
property in the Philippines, compared with 12 in the U.S. It takes five and a half years to close an insolvent business in Vietnam. All in all,
emerging-market businesses face administrative costs three times as high as their counterparts in developed economies. No wonder so many choose to operate in the gray. ...Reducing the tax burden on businesses is
perhaps the most critical step to reducing informality, since high taxes increase the incentives for companies to operate informally. For many Asian governments, one path to lower taxes is through broadening the
tax net: collecting taxes from more companies can enable governments to cut tax rates without reducing tax revenue, while simultaneously breaking the tax-evasion cycle. Many Asian countries also have large
governments and generous social programs similar to those in rich countries, and this poses a heavy burden on business. The Indian government, for instance, spends over 30% of the country's GDP, about
the same as the Japanese government. But in the early 1950s, when Japan had the same level of per-capita income as India does today, Japanese government consumption accounted for only 20-22% of GDP.
When the U.S. had the same level of per-capita income, in the early 1900s, its government spent just 7% of GDP.
Tuesday, October 19, 2004 ~ 7:12 a.m., Dan Mitchell Wrote: Chairman of the free market think tank the Centre for Policy Studies, Lord Blackwell, has accused Britain's main political parties of being too
negative on the issue of tax, and has put forward a moral and economic argument for bold tax cuts. In a critique written for the CPS published
last Friday, Blackwell, a Tory peer, suggests that politicians, in worrying about levels of public spending, are asking the wrong questions about
tax. "The right question is: 'can we afford not to cut taxes?'" argues Blackwell. "Polling evidence suggests that the electorate is beginning to
recognise that big government tends to lead to waste and inefficiency rather than to a better society," he noted.
Monday, October 18, 2004 ~ 12:27 p.m., Andrew Quinlan Wrote: The good news is 63 percent of Americans believe they are presently living the American Dream. Moreover, 62 percent believe it is achievable
for most Americans and 65 percent think their children have a good shot at it. Even among those who those who say they are not living the American Dream, 42 percent are fairly confident they will achieve it
some day. Of course, the American Dream means different things to different people. For the bulk of people, it means a good job and financial security. But, somewhat surprisingly, living in freedom was the
second most important factor. And when people were given a chance to mention the two most important factors to them, living in freedom was the most frequently mentioned thing that defined the American Dream
for them. ...Politically, 44 percent of Republicans but only 29 percent of Democrats say freedom defines the American Dream. ...a rising number
see government as the main barrier to achieving it. In 2001, 34 percent of people thought government programs did more to hinder than help them in achieving the American Dream. This year, 45 percent saw
government as more a hindrance than a helper.
Monday, October 18, 2004 ~ 11:53 a.m., Dan Mitchell Wrote: Mrs. Kerry paid $627,150 in taxes, for an overall average federal tax rate of only 12.4% on her $5.07 million in total income. ...this puts Mrs.
Kerry's tax rate at well below that of other filers in her super-rich neighborhood. But it also means she is paying a lower average rate than
nearly all middle-class taxpayers paid in 2001, the last year for which the IRS has published the data. The top 50% of all federal filers contributed
96.1% of all federal income taxes in 2001, and they paid an average income-tax rate of 15.9%. That's 3.5-percentage points more than Mrs. Kerry paid in 2003. ...Mega-millionaires such as Mrs. Kerry who can
invest in tax-shelters will be able to dodge the new higher two top marginal tax rates on dividends and other income that Senator Kerry is proposing for anyone making more than $200,000. The top rate would
go back up to 39.6% from 35% -- or to nearly 41% if you include the phase-out of deductions that remains part of the tax code. The people who won't be able to escape these higher rates are two-earner couples on
mid-career salaries, or small-business owners who pay taxes as subchapter S companies at individual rates, or pensioners who've saved all their lives to build a nest egg and are now living off dividends. Mr.
Kerry calls these people "the rich," but we know a lot of them who are decidedly middle-class and who certainly can't afford the five homes that the Kerrys own.
Monday, October 18, 2004 ~ 10:32 a.m., Dan Mitchell Wrote: The International Monetary Fund in its latest review of the Philippines said the Southeast Asian country needs to implement bold fiscal reforms,
including imposition of new taxes, if it is to keep investor confidence and reduce poverty. ...In particular, the IMF supported a measure seeking an
increase in the value-added tax rate from the current 10 percent, which is viewed by the IMF as "relatively low." The fund said an increase in the
VAT rate to 14 percent would significantly increase revenues for Manila. The fund said it also supports a plan to increase excise taxes on tobacco
products and alcoholic beverages and the upward adjustment of excise taxes on petroleum products.
Monday, October 18, 2004 ~ 9:08 a.m., Dan Mitchell Wrote: Safety laws and regulations all have costs -- not just money outlays but other restrictions that reduce the rate of production of wealth. If wealth
is itself one of the biggest lifesavers, costly safety devices cannot automatically be considered justified "if it saves just one human life"
when the wealth it forfeits could have saved many lives. Everything depends on the particular safety rule or device. Some save many lives at
small costs and others save few, if any, lives at huge costs. ...Many of the most extreme safety and environmental crusaders are rich busybodies or
academics and their students, and they are often helped by judges whose rulings allow them to violate other people's rights while pursuing their own vision.
Sunday, October 17, 2004 ~ 11:39 a.m., Dan Mitchell Wrote: Homeland security has not been a major issue in this presidential campaign, but it should be. There is a real debate going on below the
radar, and the stakes could hardly be higher. The nation is not endangered when politicians misallocate highway funds, but there can be deadly consequences if cost-benefit analysis and risk assessment take a
back seat to pork-barrel antics in the allocation of anti-terrorism funds. ...What are lawmakers fighting about? The biggest source of conflict
appears to be the desire of some lawmakers to make sure that their state gets its "fair share" of spending, even though smooth spending across
states might not be the most rational pattern of expenditure. ...Sadly, spreading pork, opposing rational cost-benefit analysis, and creating unionized federal employees seems to be the main Democratic
homeland-security goal. Two years ago, they opposed the creation of the Department of Homeland Security because the president sought the authority to fire incompetent workers. Now they want the federal
government to hire 100,000 police officers and 100,000 firefighters.
Sunday, October 17, 2004 ~ 11:00 a.m., Dan Mitchell Wrote: Switzerland has slipped down another place in the global league of "most competitive nations", but still ranks in the top ten. In its latest Global
Competitiveness Report, the Geneva-based World Economic Forum noted that the country's "inefficient bureaucracy" was stifling economic progress. The 2004-2005 report, published on Wednesday, saw
Switzerland drop one place to eighth - after slipping from sixth the previous year. Finland headed the rankings for the second year in a row,
with the United States in second place. ...But the report found there were still many areas where Switzerland fell down. "The principal brake on
Swiss commerce comes from an inefficient bureaucracy," said Augusto Lopez-Claros, director of the WEF report. "The high costs of its agricultural policy, the negative impact of customs barriers and the
inequality of salaries between men and women [are also factors]," he added. Other criticisms included insufficient access to capital markets
and "restrictive" employment legislation. ...But other commentators went even further. Beat Kappeler, a journalist at the Zurich-based "Neue
Zürcher Zeitung" newspaper, said that while he was not surprised by the findings, he was worried by them. He said one of the big problems facing
the country was that taxation had not risen, unlike in other countries such as Ireland. Other EU countries performing well include the UK (which jumped from 15th to 11th) and Estonia, which was ranked 20th, well ahead of many
"old" EU states, including France (27th). The report singles out this small baltic country for its "stellar performance".
Sunday, October 17, 2004 ~ 9:47 a.m., Dan Mitchell Wrote: An annual report issued by the French Tax Council, an influential division of the government's Court of Accounts, cast doubts on the
effectiveness of fighting offshore outsourcing with tax breaks. The Sept. 28 report, Tax Competition and Companies, suggested that the overall
weight of French taxation is only playing a "marginal" role in firms' decision to move operations offshore. Similarly, the Tax Council report
suggested that neither personal income tax rates nor wealth tax levies play a major role in foreign investors' views on French competitiveness,
investment decisions, or plans to move out of France. Reducing ISF rates will have a "negligible" impact on the delocalization question, the Tax Council said.
Sunday, October 17, 2004 ~ 8:21 a.m., Dan Mitchell Wrote: A senior Treasury official Oct. 14 said the Bush administration will continue to work for higher funding for its foreign aid initiative, the
Millennium Challenge Account, which appropriators reduced by half earlier this year. "We're very much hoping additional funding goes into the Millennium Challenge Account and other parts of the 150 account,
such as IDA and debt relief," Treasury Undersecretary John Taylor told reporters.
Saturday, October 16, 2004 ~ 9:10 a.m., Andrew Quinlan Wrote: California has long had more than its fair share of busybodies with a vision of the world in which it is necessary for them to force other people
to do Good Things. That is not just a vision of the world, it is a vision of themselves -- a very flattering vision that they are not likely to give up
for anything so mundane as facts or logic. One of the latest examples is a recent ruling by one of the many busybody commissions in California
that people who build houses, or just remodel their homes, will in the future have to have more fluorescent lights and even install motion sensors to control lights -- all in the name of saving energy. Motion
sensors? Yes. If you are in a room where motion sensors control the lights, sitting still for a while will cause the lights to go off automatically.
The idea of the anointed busybodies is that we lesser people often leave the lights on when we walk out of a room, thereby wasting energy. The
answer, as in so many other cases, is to impose their superior wisdom and virtue by forcing us to do a Good Thing -- in this case install motion
sensors to turn out the lights automatically when there is no one moving in the room. If you are one of those people who just likes to sit still and
think for a while, or perhaps listen to music or watch television, look for the lights to start going off if you are in California -- and get used to
having to wave your arms or shake your legs in order to get them to come back on again. ...The whole environmental extremist movement is based on doing Good Things, in utter disregard of costs or diminishing
returns. The idea that DDT might leave residues with harmful effects on the eggs of some birds was enough to set off a worldwide environmental
crusade to ban the use of that insecticide. The resurgence of malaria after that ban has cost millions of human lives.
Saturday, October 16, 2004 ~ 8:45 a.m., Dan Mitchell Wrote: Should men pay an extra tax, just for being men? The Swedish post-communist Left Party thinks so. The extra tax is meant to
compensate women, all of whom are thought structurally oppressed by the male collective. ...A few days ago, the idea resulted in a bill to Parliament. Its main sponsor is Gudrun Schyman, the former leader of
the Left Party. Ironically, she had to step down from the party leadership last year after a tax scandal. She tried to make large deductions for trips,
car rentals and such that had been paid in the first place by Parliament or her party. She was convicted of tax evasion... She is now talking
about starting a new party, a one-issue party that would only deal with feminist issues. The tax on men might be a step in that direction, as was a speech a while ago, where she compared Swedish men with the
Taliban.
Saturday, October 16, 2004 ~ 7:17 a.m., Dan Mitchell Wrote: ...after tenures working for the party and a couple of Republican members on Capitol Hill (including a speaker named Newt Gingrich) and
becoming an earnest fellow traveler of the conservative movement, I find it impossible to support the current George Bush--whom his party sees as the ideological extension of Ronald Reagan--as he faces his own
showdown with a Democrat from Massachusetts and oversees a war centered in the Middle East. At the Republican National Convention, George W. Bush mocked John Kerry's claim of having "conservative
values." But what are conservative values? Two of the core principles at the heart of modern conservatism are a belief in the virtue of smaller
government and a conviction that government must be accountable to the public. Those principles were enunciated ten years ago in the Contract with America, which helped Republicans take full control of
Congress for the first time in four decades. That document sought "the end of government that is too big, too intrusive, and too easy with the
public's money." In this context, Bush's first term has represented a betrayal of conservative values. ...the Bush administration's free-spending fiscal record only hints at its larger rejection of
conservative principles. The more fundamental betrayal arises from the administration's central focus: an ill-defined "war on terror" that has no
determinable endpoint and that is used to justify an unprecedented expansion of executive power. To make matters worse, this administration shows little inclination to demand accountability from
those who serve within it. In turn, the Republican Congress--ignoring its 1994 vow to "restore the bonds of trust between the people and their
elected representatives"--appears disinclined to check the powers of the executive. Together, these factors endanger the long-term health of the republic. It is not surprising that Senator Kerry would open the fiscal spigots, but President Bush joined in, too. Wednesday night he said: "We've increased
Pell Grants by a million students." "We've increased VA funding by $22 billion." "We've expanded trade adjustment assistance." "The No Child
Left Behind Act says, `We'll raise standards. We'll increase federal spending.'" And so on. For fiscal conservatives, it is disappointing to see
both candidates favor increases over cuts. We believe in leaner government, which is rather hard to achieve when budgets keep fattening it.
Friday, October 15, 2004 ~ 2:45 p.m., Dan Mitchell Wrote: During the debate, Sen. Kerry also said that he would adopt a "pay-as-you-go" approach to ensuring financial solvency to Social
Security. ...the pay-as-you-go approach has proved ineffective in imposing fiscal discipline in our entitlement programs. Pay-as-you-go in this context usually implies benefit increases -- for which retirees
obviously don't pay -- and tax increases for workers and future generations. The taxpayers' higher future benefits never make up for their earlier payroll tax hikes in present value -- and future benefits
remain subject to changes. Consequently, today's retirees (who vote in larger numbers) receive windfalls, but workers and future generations lose out. Pay-as-you-go, therefore, is precisely the approach that has
created a financial mess in Social Security and Medicare. Our future benefit commitments now far exceed our ability to pay. The financial imbalance is now estimated by Social Security's independent actuary to
equal $10.4 trillion. For Medicare, the overall shortfall is even larger -- $62 trillion. Using the official numbers, we estimate that rejecting an
attempt to control the growth rate of costs implies an immediate and permanent tax hike of 17.4 percentage points. That would more than double the current payroll tax rate of 15.3%. Inaction over another four
years will increase the required hike to 19.7 percentage points. A recent study by the latest Nobel laureate for economics, Ed Prescott, points out that higher tax rates will slow economic growth.
Friday, October 15, 2004 ~ 2:04 p.m., Dan Mitchell Wrote: Inez Tenenbaum, the Democratic party's choice for the open Senate seat for South Carolina, has chosen to make tax reform, specifically her
opposition to it, the centerpiece issue of her candidacy. At every opportunity she has attacked her Republican opponent, congressman Jim DeMint, and his plan to eliminate the IRS and replace the current system
with a national retail sales tax. A recent Tenenbaum ad accused DeMint of "supporting a new 23 percent tax on middle class families" that would
"bankrupt Medicare by 2009." To date, however, she has offered no alternatives of her own. ...abolishing the IRS and eliminating the current
tax code will provide significant economic and time benefits to taxpayers. The overall IRS-induced paperwork burden is currently estimated at a staggering 6.7 billion hours per year with annual costs of
$225 billion for tax filing, record keeping, and tax-accounting advice (the equivalent of about $850 for every man, woman, and child in America). By abolishing the current tax code, the FairTax would lower
total compliance costs by an estimated 95 percent. Thus, the immediate impact of implementing the FairTax will be an improved standard of
living for all Americans and, with a lot of paper-shuffling out of the way, will mean that people will have more time to spend with family and in productive work.
Friday, October 15, 2004 ~ 1:33 p.m., Andrew Quinlan Wrote: The ten states that began 2004 with the most business-friendly tax systems are: South Dakota, Florida, Alaska, Texas, New Hampshire, Nevada, Wyoming, Colorado, Washington and Oregon. "Nearly all of the best states raise sufficient revenue without imposing at least one of the three major state taxes-sales taxes, personal income taxes and corporate income taxes," said Hodge. Four of the top 10-Alaska, South Dakota, Washington and Wyoming-have only one of the three. The ten states with the least hospitable business tax climates are: Hawaii, New York, Minnesota, West Virginia, Rhode Island, Vermont, Kentucky, Arkansas, Maine and Wisconsin. The worst state tax codes tend to have: complex, multi-rate corporate and individual income taxes with above-average tax rates;
above-average sales tax rates that don't exempt business-to-business purchases; complex, high-rate unemployment tax systems; and high overall state tax collections with few tax or expenditure controls.
Friday, October 15, 2004 ~ 12:14 p.m., Dan Mitchell Wrote: Many member states believe that the rebate - famously won by the then Prime Minister Margaret Thatcher in 1984 - should no longer apply because the UK is economically much stronger now than during previous negotiations. But Mr Grant said that the amount member states still pay out remains unbalanced and recalled that if the rebate had not been in place, the UK would have paid 14 times more into EU coffers than France - a country of similar population and economic weight. Even with the rebate, said the Ambassador, the UK pays over 2.5 times more than France. ...The battle over the rebate is just one aspect of a wider war over how the EU should be funded from the period 2007-2013 - or the next "financial perspective" in EU jargon. Brussels has asked member states to spend just over 900 billion euro over the seven-year period, rising from 124 billion in 2007 to 143 billion
in 2013. But this caused uproar amongst six net contributors (the UK, France, Germany, Austria, Sweden and the Netherlands), who demanded that the budget be capped at one percent of gross national income (GNI).
The current ceiling is 1.24 percent of GNI.
Friday, October 15, 2004 ~ 10:14 a.m., Dan Mitchell Wrote: There were many moments of high entertainment during last week's House hearings on Fannie Mae's creative accounting. But our favorite
was the Mister Magoo performance given by Barney Frank (D., Massachusetts) after learning that Fannie had handed out $245 million in bonuses over five years. Mr. Frank chided Fannie CEO Frank Raines
and CFO Tim Howard, saying, "At the level of compensation you get, we ought to be able to count on you to do your very best without additional
incentives." Here's a case of misplaced moral outrage if we've ever seen one. Mr. Franks is mad about the salaries when he really should be mad
at the rigged political game that has made them possible. Fannie's regulator, the Office of Federal Housing Enterprise Oversight, has reported that Fannie has been cooking its books. ...The Federal Reserve
found that about half of the government subsidy going to Fannie and Freddie is retained by the company. The half that goes to homeowners amounts to seven basis points on mortgages. The Congressional Budget
Office has calculated that Fannie and Freddie pass through 25 basis points to mortgage buyers, or about 60% of its estimate of the total subsidy. Both studies conclude that the tiny amount of subsidy that
actually reaches borrowers does not increase homeownership. ...To be sure, Mr. Franks is right that Fannie's executive compensation is rich by any standards. When a government-sponsored company pays its top 21
executives more than $1 million each in 2002 (and three of them are lobbyists), that fact does bear some reflection.
Friday, October 15, 2004 ~ 9:01 a.m., Dan Mitchell Wrote: Governor of the Bank of Italy, Antonio Fazio, has warned Italian Prime Minister Silvio Berlusconi that all tax cuts must be properly funded after
it emerged that government spending outstripped revenues in the first half of the year. ...Berlusconi has been determined to force through
EUR6 billion worth of tax cuts beginning next year in a bid to jump-start the stagnant economy. Chief among his proposals is a plan to reduce the
number of tax brackets from five to three, cutting the top rate of income tax to 39% from 45%.
Friday, October 15, 2004 ~ 7:32 a.m., Andrew Quinlan Wrote: Everyone has visions but everyone is not in a position to indulge those visions, or to impose them on other people, without suffering any
consequences for being wrong. Even the biggest businesses can find themselves looking red ink in the face if their idea of what the public wants turns out to be different from what the public will buy. Federal
judges, however, pay no price for being wrong, even if the costs to others -- sometimes the whole society -- turn out to be catastrophic. When
murder rates skyrocketed after 1960s judges started conjuring up new "rights" out of thin air for criminals, there were no consequences for
those judges, who had lifetime appointments and were not likely to be living in high-crime neighborhoods. The political left has long favored
putting more and more decisions in the hands of people who pay no price for being wrong -- not only judges but zoning boards, environmental commissions and, internationally, the United Nations and the World
Court. This is a vision of the wise and the virtuous imposing their wisdom and virtue on the lesser people who make up the rest of humanity.
Thursday, October 14, 2004 ~ 2:10 p.m., Dan Mitchell Wrote: I am on a US Airways list of some type that apparently requires airline employees to take my driver's license behind closed doors, have a
conference and then stamp my ticket with a code that mandates my person and my carry-on bag be searched. Every time I fly, which is sometimes several times a week. I especially appreciate the crotch grab
to make sure I'm not hiding any weapons of mass destruction. How would you like to be the trainer for this procedure? The idiocy virus is now spreading to other airlines. It seems someone who shares my name
is wanted by authorities. I hope he is getting some of my hate mail. Logic should dictate that once I prove I am not the guy they are looking for, they would take me off the suspect list. But, no, our misnamed
Transportation Security Administration (TSA) is anything but logical. ...US Airways gives me a TSA phone number to call. I am not surprised
when a machine answers. The machine promises a "prompt" response. I leave a message. There is no response. A few days later, I call again.
Same recording, same message, same non-response. I send an e-mail to TSA. This time I receive an "automated reply," assuring me of a prompt
response. Two days later, I receive another e-mail informing me I will have to fill out a form to prove I am not a terrorist. This is an interesting
twist on the "innocent until proven guilty" standard in law. ...Two weeks ago, TSA approved my application for "registered traveler" status as
part of an experimental program at some airports for frequent travelers. I recorded my "eye print" and fingerprint, and now a machine can
identify me and allow me to go to the head of the security line, but only at the airport where I applied. Other participating airports require applications to be made at each of those airports, even though the
paperwork presumably goes to TSA headquarters. Why can't TSA look at that one application that has been approved and take me off their
"watch list," or whatever they call it? Is "logic" not in government dictionaries?...Thanks to Transportation Secretary Norman Mineta's
misguided policy of refusing to profile travelers, we get equal opportunity inconvenience and stupidity. Imagine if cops were prohibited from describing gender, race or other physical characteristics when
broadcasting an all-points bulletin for a suspect. The government agency in charge of airport security spent nearly a half-million dollars on an awards ceremony at a lavish hotel, including
$81,000 for plaques and $500 for cheese displays, according to an internal report obtained by The Associated Press. Awards were presented to 543 Transportation Security Administration employees and 30
organizations, including a "lifetime achievement award" for one worker with the 2-year-old agency. Almost $200,000 was spent on travel and lodging for attendees.
Thursday, October 14, 2004 ~ 1:30 p.m., Dan Mitchell Wrote: Bill Clinton believes that advocating gun control cost Democrats 20 of the 52 House seats they lost in the 1994 elections that ended 40 years of
Democratic control of the House. And appearing June 23 on ``The Charlie Rose Show,'' he said this about the defeat of Al Gore in 2000: ``The NRA beat him in Arkansas. The NRA and Ralph Nader stand right
behind the Supreme Court in their ability to claim that they put George Bush in the White House. ... If I had known how big the NRA problem was, could I have gone down there and spent three days calling people
on the phone and hollering people in and talking to them and turned it? Probably. ... I think the NRA had enough votes in New Hampshire, in Arkansas, maybe in Tennessee and in Missouri to beat us. And they
nearly whipped us in two or three other places.''
Thursday, October 14, 2004 ~ 12:13 p.m., Dan Mitchell Wrote: First, whatever the political motives on both sides, the United States is correct in arguing that the competitive conditions in manufacturing
large-body commercial aircraft have changed dramatically since 1992 when the original U.S.-European Union agreement was constructed. At the time Airbus had about 30 percent of the world market and Boeing
and McDonnell-Douglas 70 percent. Today Airbus has more than 50 percent of worldwide sales and 60 percent of future orders. There are no
"infant" industries involved here. Second, the most direct and egregious government intervention is the direct launch aid granted by the EU for
new aircraft. Whether Boeing is correct in the exact amount (alleged Dollars 15bn) remains to be determined; but the total is substantial and
has direct bearing on price competitiveness. ...The aim should be to end subsidies from whatever source. It is true, however, that from an economic welfare perspective the clearest case is against the direct
launch subsidies and other targeted subsidies from provincial, state or local government (including those of sub-contractors from other
countries). ...For both companies there are potential hard lessons: for Airbus, it is time finally to kick away the "infant" industry crutch; for
Boeing, it is time to agree that all subsidies should be open for negotiation and elimination.
Thursday, October 14, 2004 ~ 11:30 a.m., Andrew Quinlan Wrote: The Italian government announced Oct. 8 that, beginning in 2005, it will charge a supplementary tax on the ownership of large personal vehicles
like sport utility vehicles, an initiative that would help subsidize purchases of smaller and cleaner automobiles. ...An official with the Ministry of Environment--the ministry that sponsored the proposal--told
BNA that the tax would likely take the form of an extra fee on license plates for personal use vehicles that surpass a minimum established horsepower and length. Local media reported that the tax could add as
much as 5 percent to the cost of such vehicles.
Thursday, October 14, 2004 ~ 10:45 a.m., Dan Mitchell Wrote: ...the enormous benefits of the market network cannot be achieved without a sound legal system. People who live in countries where
property rights are insecure, contracts poorly enforced, and legal and regulatory verdicts auctioned off to the highest bidder will not be integrated into the worldwide market network. Without the rule of law,
the benefits from trade are limited to only those derived from personalized exchange, trade among family members and persons in the local neighborhood or village who know each other, or at least know
about each other. ...Among the approximately 100 countries for which data were available throughout the 1980-2000 period, 24 countries had an average Legal System Area rating of 7 or higher out of 10. Countries
on this list had reasonably good protection of private property, contract enforcement, and rule of law-at least throughout the last couple of
decades. ...these 24 countries had an average per capita GDP in 2000 of $25,716 and an average annual real growth rate of 2.5 percent over the
two-decade period. ...None of the 21 countries with low quality legal systems were able to achieve both a 2000 per capita income of more than $3,400 and a growth rate during 1980-2000 of more than 1.1
percent. Thus, none of the countries with unsound legal systems were able to sustain a solid growth rate once income levels rose above the $3,400 range.. European countries have jumped up the list of the most attractive places to invest in, according to a survey published on Tuesday (12 October).
The report - by global consultancy firm ATKearney - measures how confident executives of the world's largest companies are in various investment locations. The UK tops the European list, as the fourth most
attractive destination in the world for Foreign Direct Investment (FDI), ranking behind China, the US and India. Germany follows the UK in
fifth place and both France and Italy re-enter the World top ten (6th and 9th respectively) after dropping out of the premier league last year.
Thursday, October 14, 2004 ~ 9:27 a.m., Dan Mitchell Wrote: John Gilmore, a tech-industry millionaire and privacy advocate, set out two years ago to challenge a basic element of airline security. On July 4,
2002, he refused to show a photo identification when checking in at Oakland, Calif., for a flight to Baltimore on Southwest Airlines. The same day, he declined United Airline's demand to present an ID for a
flight from San Francisco to Washington. In both instances, Gilmore, 49, was prohibited from boarding and was informed by the airlines that a
federal security rule required passengers to show an ID in order to fly. However, no airline employee could cite the rule. Gilmore sued several government agencies and the airlines, claiming the ID requirement
infringes on Americans' right to travel freely. The lawsuit, Gilmore v. Ashcroft, has forced the government to defend the existence of secret
security rules that apply to millions of travelers. ...If Gilmore succeeds in forcing the government to disclose what its secret law says, other attorneys worry it would set a dangerous precedent that could harm
efforts to combat terrorism.
Wednesday, October 13, 2004 ~ 10:35 a.m., Dan Mitchell Wrote: ...economist Martin N. Baily, chairman of the Council of Economic Advisers under President Clinton, looked at who benefits from
outsourcing. He found that for every $1 spent by a U.S. corporation on outsourcing to India, only 33 cents stayed in India. The other 67 cents
came back to the United States in the form of cost savings, new exports and repatriated profits. However, productivity gains add another 45 cents to 47 cents of value to the U.S. economy. Thus, on balance, the
U.S. economy gains $1.12 to $1.14 for every $1 invested in outsourcing. In August, economist Charles Schultze, chairman of the CEA under President Carter, looked at the number of jobs lost to outsourcing. He
found that between the end of 2000 and the end of 2003, at most 215,000 jobs service sector jobs were lost. This is a minuscule amount in a working population of close to 150 million. Moreover, Schultze says,
the productivity gains produced by outsourcing raised real incomes and living standards in the United States. He concluded that outsourcing
cannot be blamed for the "jobless recovery." ...Contrary to popular belief, the United States is a large recipient of outsourcing from other
countries -- i.e., insourcing. In 2002, the United States was the world's largest exporter of computer services, which added almost $60 billion to
our exports. By contrast, India's total exports in this area came to less than $20 billion and China's were just over $10 billion. In 2002, the
United States ran a healthy trade surplus in the area of outsourcing -- receiving $22 billion more in outsourcing from other countries than it paid in outsourcing to other countries.
Wednesday, October 13, 2004 ~ 9:43 a.m., Dan Mitchell Wrote: A leading economist has called upon the Irish government to levy a 15% flat tax on individuals with substantial incomes. Addressing an audience
at a conference of Ireland's largest union, the Services, Industrial, Professional and Technical Union (SIPTU), Paul Tansey of financial consultants Tansey Webster Stewart argued that the tax code was
unfairly weighted towards the wealthy and contributed towards a growing inequality of wealth. Noting that the tax code allows wealthy individuals to reduce their tax bills by taking advantage of various
deductions, write-offs and investment schemes, Tansey urged the government to levy a 15% flat tax on those earning more than EUR250,000 per year.
Wednesday, October 13, 2004 ~ 8:02 a.m., Andrew Quinlan Wrote: Unbowed by recent statements from the European Commission to the effect that tax competition in the EU is apparently here to stay, French
Finance Minister Nicolas Sarkozy once again suggested that the new member states should be stopped from slashing their corporate tax rates... Sarkozy, supported by his counterparts in the German
government, wants the EU to consider linking the amount of infrastructure aid received from the EU's structural budget to corporate tax rates. However, the European Commission has dismissed the idea as
too complex to administer and incoming Industry Commissioner Guenter Verheugen recently called Sarkozy's proposal "not realistic." Meanwhile,
incoming Taxation Commissioner, Ingrida Udre, has also rejected the idea of fixing company tax rates, asserting last week that tax competition "is normal in a free market".
Wednesday, October 13, 2004 ~ 7:21 a.m., Dan Mitchell Wrote: There is a way that Canadians could choose their art and cultural experiences, and that is through the voluntary exchange of art by
suppliers and those choosing to purchase it-in other words, through the market. We do this every day when we buy CDs or purchase a ticket to see a film or support a local and independent summer stock theatre or
buy a Tom Thomson calendar. ...There is no guarantee that the market will always recognize artistic talent (it rewarded Shakespeare during his
lifetime, but not Shelley), but there is still less of a guarantee that a committee of culturecrats will recognize excellence when it appears. When you allow 30 million Canadians to vote with their dollars and
support the culture they want, you spread decision making over 30 million independent minds, all judging for themselves. Not only is this morally right, but it also brings freedom, fluidity, and diversity to the
process of choosing. ...H.L. Mencken said that a Puritan is a person who fears that someone, somewhere, is having a good time. Is it possible that
a culturecrat is a person who fears that someone, somewhere, is buying and enjoying cultural experiences that the elite did not formally approve
in a committee meeting? What it comes down to is that the culturecrats believe that we, as private individuals in the marketplace, will make the
wrong decisions with our money. Instead of paying for a ticket to see a film by Atom Egoyan on the Armenian genocide, we might buy a ticket to
see Spielberg's Catch Me If You Can. Instead of tuning into CBC Radio, we may choose to listen to a local commercial station that plays Pink Floyd. Instead of attending a performance of Shakespeare's Macbeth, we
may choose to see Norm Foster's Here on the Flight Path. Instead of attending a poetry slam, we may prefer to see The Cowboy Junkies, Leonard Cohen, or Sting in concert. Or we may choose to sit at home
with a cold drink watching Seinfeld reruns. ...If government stopped funding culture, not only would people have more money to invest, but they would also feel a greater sense of involvement and commitment to
what they were supporting. There would be an added incentive to volunteer, to get involved at a community level and to support the arts through local clubs and organizations. It isn't true that poetry slams or
jazz singers or theatre festivals would vanish if government funding stopped... What we really need is a large reduction in the level of cultural
spending by government, and a concurrent reduction in the related civil service-there are 209 government departments dispensing cultural dollars.
Tuesday, October 12, 2004 ~ 4:15 p.m., Dan Mitchell Wrote: Edward Prescott, who picked up the Nobel Prize for Economics, said President George W. Bush's tax rate cuts were "pretty small" and should
have been bigger. "What Bush has done has been not very big, it's pretty small," Prescott told CNBC financial news television. "Tax rates were
not cut enough," he said. Lower tax rates provided an incentive to work, Prescott said.
Tuesday, October 12, 2004 ~ 3:00 p.m., Andrew Quinlan Wrote: The real scandal, then, is that these bank officials and their customers would have to resort to potentially criminal activity to get around an
oppressive and counterproductive tax regime -- one that hurts the Belgian economy and keeps its citizens from improving their lives. Investing and saving can be tough in Belgium. Want to buy a house?
You've got to pay a tax of as much as 17 percent of the purchase price up front. This isn't a down payment. It's money that goes straight to the
government, never to return. Want to save money in the hope of, say, coming up with that ludicrous front-end tax on a home purchase? Your interest earnings on a savings account, if you have any money left after
social security and income taxes, etc., is also taxed. It's no wonder people are socking their cash away in Luxembourg, the Channel Islands or just
about anywhere else with less onerous fiscal constraints (Germans were famous for stashing it at home, foregoing any interest but a least avoiding the tax). The EU, hoping to do something about what it
maddeningly insists on calling "harmful tax competition" between national savings-tax rates, is "harmonizing" them across the Union, with
new rules to take effect in 2005 that will require banks abroad to report interest earnings to depositors' home tax authorities. Harmonizing is a misnomer -- a pleasant-sounding word that disguises an economic
cacophony. Tax competition is "harmful" only to ministries of finance. Everyone else benefits. And, in fact, competition needn't be harmful even
to them. Eastern European governments have shown that by lowering tax rates, and especially by going to flat-tax schemes, they can actually
increase revenue. It can foster growth, expand the tax base and there is less incentive to cheat.
Tuesday, October 12, 2004 ~ 1:30 p.m., Dan Mitchell Wrote: Government meddling and managed care awkwardly attempt to compensate for the central problem: Americans don't directly pay for the
health care they receive. Out-of-pocket expenses -- that is, the amount not covered by public and private insurance -- account for just 14 cents on every health dollar spent in the U.S. American health care is
dominated by third-party payment. Nelson Sabatini, Maryland's secretary of health, observes: "Using health care in this country is like shopping
with someone else's credit card." If the last decade seems to have done so little to address the woes of the system, no wonder: Consumers were
never brought into the equation. Sen. Kerry looks at today's woes and promises something statist for everyone. For employers struggling with rising premiums, he promises that Washington will pay 75% of
extraordinary health bills and then subsidize the remaining insurance cost. He promises to create huge purchasing pools, heavy in regulations
and mandates, so that employers and individuals can join together to buy insurance. He offers a massive expansion of public programs, like Medicaid, to cover most of America's kids. And for anyone taking
prescription drugs -- which is to say most of the country -- he promises lower prices by allowing importation of Canadian drugs (and thus Canadian price controls). ...In contrast, President Bush promotes a
completely different approach: health savings accounts. Rather than ignore consumers, HSAs place people in charge of their own health care,
"a plan that you own," as Mr. Bush observed in Ohio last week. And that ownership has the potential to tame health spending in its wake. ...HSAs
are personal medical savings accounts used in conjunction with a high-deductible health insurance plan. For smaller expenses, then, individuals pay out of their HSA -- money that can follow them from
employer to employer and can accrue from year to year. Catastrophic insurance covers larger expenses. Right now America spends about 45% of its health care dollars via government, mainly Medicare, Medicaid and the Veterans
Administration. But the bare majority of health spending that remains in the private sector is a far cry from what a real free market might look
like. That's because most Americans get their health coverage from their employers, a relic of World War II when companies got around wage and
price controls by offering it as a tax-free benefit. That tax exemption -- $603 billion over the next five years, by one new estimate -- has created
a system that is unsustainable. The root of the problem is that most of us don't really have health "insurance" -- in the sense of protection against
high and unexpected expenses. Rather our tax subsidized policies are most often a form of prepayment for such routine and predictable events
as an annual physical. With five of every six health care dollars paid by third parties, patients have little or no incentive to make cost-conscious
decisions, and neither do physicians -- especially since our out-of-control tort system places them in jeopardy of getting sued if they haven't
prescribed every conceivable test. Doctors practice an estimated $50 billion worth of "defensive" medicine every year. ...HSAs marry real
insurance (that is, coverage for high and unpredictable costs) with contributions to a savings account that can be "rolled over" from year to
year. In other words, individuals, not insurance companies, "ration" most of their own health care, and young people get a chance to save
tax-free for the higher medical bills that kick in later in life. ...And since a number of states regulate their insurance markets so heavily as to
prevent the sale of high-deductible policies, Mr. Bush wants to take the long overdue step of creating a national market for coverage. In the Internet age especially, it is crazy to block individuals from buying
insurance policies across state lines wherever they can get the best deal.
Tuesday, October 12, 2004 ~ 9:57 a.m., Andrew Quinlan Wrote: This study examines the impact of the dividend tax cut after one year. We gathered data on dividend payouts before and after the 2003 tax cut
for all Standard & Poor's 500 companies. We found a highly positive response to the tax cut: Annual dividends paid by S&P 500 companies
rose from $146 billion to $172 billion, an increase of $26 billion. In addition, special dividends of $7 billion have been paid, raising the total
first-year dividend increase to $33 billion. Thus, dividends increased 18 percent without special dividends and 23 percent with special dividends. Twenty-two companies that did not previously pay dividends have
initiated regular dividends. Equity values rose more than $2 trillion after the tax cut.
Tuesday, October 12, 2004 ~ 9:22 a.m., Dan Mitchell Wrote: University of California economists Harold Cole and Lee Ohanian, writing in the Journal of Political Economy, evaluate why the recovery
from the Great Depression was very weak even though real wages in several sectors of the economy were significantly higher than normal. President Franklin Roosevelt believed that the severity of the Depression
was due to excessive business competition that reduced prices and wages, which in turn lowered demand and employment. Roosevelt's remedy was to impose wage and price controls by restricting competition
(creating cartels) and raising labor bargaining power. Cole and Ohanian, however, assert that these policies did more harm than good... Cole and
Ohanian add that, not only did the adoption of these industrial and trade polices coincide with the persistence of the Depression through the late
1930s, but the subsequent abandonment of these policies coincided with the strong economic recovery of the 1940s.
Tuesday, October 12, 2004 ~ 8:00 a.m., Dan Mitchell Wrote: Howard Stern's sleazy radio show is headed into outer space. Stern shook the radio world on Oct. 5 by declaring that he will move his
long-standing cavalcade of coarseness to Sirius Satellite Radio for a cool $100 million a year in cash and stock, beginning in January 2006, when
his current contract with Infinity Broadcasting expires. ...The increased threat of punishment from the Federal Communications Commission (FCC), including $495,000 in fines for Clear Channel stations airing
Stern, has been a major headache for the Sheik of Shock. ...FCC Commissioner Kevin Martin said in February that satellite radio and television providers are licensed by the FCC, which could potentially
hold them accountable. He concedes, however, that companies like Sirius could argue that since consumers pay a premium for their products, they would not have to comply.
Tuesday, October 12, 2004 ~ 7:14 a.m., Dan Mitchell Wrote: I want to propose a new entry in the constellation of political lodestars: the principle of competition. This is the principle that all things of value
should be provided by numerous suppliers in rivalry with each other. It may sound odd to suggest competition as a new principle, for few ideas are invoked more frequently in American policy debate. But the
conventional usage is reflexive and superficial, and often opportunistic and insincere. We all favor competition except when it comes to ourselves--that is, to the things we really care about--where we do
everything possible to avoid it. When a politician or lobbyist says he favors competition and only wants a level playing field, our first instinct
is to grab for our wallets. My argument is for a more systematic and principled version of competition. I believe it holds promise for solving
many serious problems in government, for seeing familiar issues in new and productive ways, and for building popular support for policy reform.
...With the growth of international markets, policy competition has become an increasingly important, and on the whole salutary, phenomenon. In Europe, the policy entrepreneur has been Ireland, which
has cut its corporate and individual tax rates dramatically during the past decade, spurring an investment boom that has caused Irish wages to soar and prompting many other nations to follow suit. My colleagues
Eric Engen and Kevin Hassett have shown that the U.S. corporate tax, which fifteen years ago was among the lowest on the planet, is today (even after the Bush tax reductions of 2003) the highest of those of all
the economically developed nations excepting Japan. Corporate taxes have always been particularly harmful economically and particularly appealing politically, but international competition is changing the
calculus in a way that a President Kerry, despite his campaign rhetoric, would be obliged to recognize. The numerous efforts to "harmonize" the
domestic policies of nation-states--in taxation, labor standards, environmental standards, and price regulation--are for the most part efforts to form policy cartels in response to the increasing mobility of
commerce and finance; they should be resisted.
Monday, October 11, 2004 ~ 2:20 p.m., Andrew Quinlan Wrote: According to the Kerrys' own tax records, and they have not released all of them, the couple had a combined income of $6.8 million in income last
year and paid $725,000 in income taxes. That means their effective tax rate was a whopping 12.8%. And it was all (presumably) done legally....there is delicious irony in the Kerry family tax-return data. Here
is the man who finds clever ways to reduce his own tax liability while voting for higher taxes on the middle class dozens of times in his Senate career. He even voted against the Bush tax cut that saves each
middle-class family about $1,000. The Kerrys have unwittingly made the case for what George W. Bush says he wants to do: radically simplify and
flatten out the tax code. Dick Armey and Steve Forbes have persuasively argued over the years that America should have a flat tax with a rate of
17% to 19%. John Kerry has consistently opposed a flat tax, because he says it would be a tax break for the rich. But the truth is with a 19% flat
tax, some rich people with lavish tax shelters, like John Kerry, would pay more taxes.
Monday, October 11, 2004 ~ 1:26 p.m., Dan Mitchell Wrote: Incoming European Commissioner for Taxation, Ingrida Udre, revealed last week that she supports the idea of EU company tax base
harmonisation, although she rejected any move towards the fixing or harmonising of corporate tax rates. "I would like to facilitate cross-border business by continuing the work for the creation of a
consolidated tax base in the EU," Udre, a former speaker of the Latvian national assembly, told a confirmation hearing at the European Parliament. Toeing the current Commission line on tax competition,
Udre went on to add that allowing countries to set their own tax rates was good for European business. "It is the responsibility of each country
to choose their tax rate and fair tax competition is normal in the free market," she observed.
Monday, October 11, 2004 ~ 12:04 p.m., Dan Mitchell Wrote: A more benign tax regime surrounding the writing-off of capital expenses will be a likely result of the review of the US tax code proposed
for a second Bush presidential term, Treasury Secretary John Snow indicated last week. Speaking to business leaders in Independence, Missouri, Mr Snow revealed that a change in the tax code to encourage
more investment and saving in the US would be a high priority under future reforms. "Supporting capital investment is something that we are
certainly going to have to pay attention to as we rethink the code," he noted.
Monday, October 11, 2004 ~ 11:32 a.m., Dan Mitchell Wrote: Conservatism's 40-year climb to dominance receives an examination worthy of its complexity in "The Right Nation," the best political book in
years. Its British authors, John Micklethwait and Adrian Wooldridge of the Economist, demonstrate that conservative power derives from two sources -- its congruence with American values, especially the nation's
anomalous religiosity, and the elaborate infrastructure of think tanks and other institutions that stresses that congruence. ...Messrs. Micklethwait and Wooldridge endorse Sir Lewis Namier's doctrine:
"What matters most about political ideas is the underlying emotions, the music to which ideas are a mere libretto, often of very inferior quality."
The emotions underlying conservatism's long rise include a visceral individualism with religious roots and anti-statist consequences. Europe,
post-religious and statist, is puzzled -- and alarmed -- by a nation where grace is said at half the family dinner tables. But religiosity, say
Micklethwait and Wooldridge, "predisposes Americans to see the world in terms of individual virtue rather than in terms of the vast social forces
that so preoccupy Europeans." And: "The percentage of Americans who believe that success is determined by forces outside their control has
fallen from 41% in 1988 to 32% today; by contrast, the percentage of Germans who believe it has risen from 59% in 1991 to 68% today." Conservatism rose in the aftermath of Johnson's Great Society, but
skepticism about government is in the nation's genetic code. Messrs. Micklethwait and Wooldridge note that in September 1935, during the Depression, Gallup polling found that twice as many Americans said
FDR's administration was spending too much as said it was spending the right amount, and barely one person in 10 said it was spending too little.
Monday, October 11, 2004 ~ 11:15 a.m., Dan Mitchell Wrote: The degree of intimacy that existed between Iraq and France may vindicate British and American leaders who believed that Jacques
Chirac, the French president, was never open to arguments for removing Saddam. The CIA report states that Saddam regarded France as the key player in keeping his regime safe from American intervention.
"Consequently, Saddam ordered the MFA and other ministries to improve relations with France, according to recovered documents," the
report found. Among the options considered for improving relations with Paris were inviting French officials to Iraq, sending more diplomats to
France, "and assessing possibilities for financially supporting one of the candidates in an upcoming French presidential election". ...Tariq Aziz,
Saddam's deputy, told his American jailers that "the primary motive for French continued support and co-operation with Iraq in the UN was
economic". ...In January, documents emerged which showed that 270 individuals, governments and businesses had received lucrative oil
contracts from Iraq that allowed them to buy oil cheaply before selling it on at a considerable profit. Among those French individuals and companies mentioned in the documents obtained by ABC News were a
former government minister who allegedly benefited to the tune of $12 million, a businessman with close links to Mr Chirac who was reported to have received $25 million, and a former French ambassador to the
United Nations said to have got $3 million.
Monday, October 11, 2004 ~ 10:50 a.m., Andrew Quinlan Wrote: Canadian provincial governments' recent decisions to increase some corporate tax levels pose a threat to the federal government's efforts to
make Canada's taxation system more competitive, particularly compared to that of the United States, according to a study released Oct. 6 by the
C.D. Howe Institute. While overall Canadian corporate tax levels are declining, due largely to federal tax cuts, the federal initiatives have been
"blunted" by tax increases in Ontario, Saskatchewan, and Nova Scotia, said the study by Jack Mintz, president of the Toronto-based private
sector economic think tank, and analyst Duanjie Chen. "Federal and provincial governments must coordinate their actions in the future to ensure that Canada's business tax system encourages companies to
locate and create jobs in Canada. Otherwise, the policies instituted by the federal government can be continually compromised by provincial tax increases that undermine the country's ability to compete
internationally," it said.
Monday, October 11, 2004 ~ 10:37 a.m., Dan Mitchell Wrote: Norwegian Finance Minister Per-Kristian Foss yesterday announced cuts in some income taxes which will be offset by a rise in the rate of VAT as
part of the government's 2005 national budget. Under the government's proposals, the rate of VAT will be increased by 1% to 13% for food items
and 1% to 25% for other goods and services. This measure is expected to raise some NOK6 billion (US$890.3 million). However, the budget also
allows for a reduction in certain income tax levies such as wealth taxes and dividend taxes expected to be worth around NOK3.3 billion.
Sunday, October 10, 2004 ~ 1:15 p.m., Dan Mitchell Wrote: French President Jacques Chirac warned Thursday of a "catastrophe" for global diversity if the United States' cultural hegemony goes
unchallenged. ...The outspoken French president warned that the world's different cultures could be "choked" by US values. This, he said, would
lead to a "general world sub-culture" based around the English language, which would be "a real ecological catastrophe". Citing
Hollywood's stranglehold over the film industry as an example, Chirac stressed that only with government assistance could countries maintain their cultural heritage.
Sunday, October 10, 2004 ~ 11:55 a.m., Dan Mitchell Wrote: The EU needs to move more towards the US social model if it is to close the productivity gap with America and reach its economic goals, the
Dutch economics minister and Chairman of the EU's competitive council said today (7 October). Speaking at an event organised by the Lisbon Council - a Brussels-based pro-reform think tank - Laurens Jan
Brinkhorst said, "I will argue that the updated European Social Model should differ distinctly from the current one. It will inevitably resemble
the US model more than is the case today". ..."Since the early 1990s", said Mr Brinkhorst, "the US has largely outpaced the EU in terms of
economic growth. From 1991 to 2003, the US economy grew by no less than 47 percent in total, whereas the EU economy achieved only 28 percent growth". He added, "With respect to the GDP [gross domestic
product] per capita, Europe ranks significantly below the world's best performers. In 2003, America's GDP per capita was 55 percent higher".
"Only one member state - Luxembourg - could compete with most US states in terms of GDP per capita. The average person in France, Germany and Italy earns less than the average American in all but four
of the US states (Arkansas, Montana, West Virginia and Mississippi)". ...He also called for more flexible labour markets, stimulating innovation, improving regulation and lowering taxes as a way to boost
growth and productivity.
Saturday, October 9, 2004 ~ 11:00 a.m., Dan Mitchell Wrote: Australian Prime Minister John Howard is considering - if re-elected - a cut in the top rate of income tax should the budgetary circumstances
permit, the nation's media has reported. Whilst Mr Howard was keen not to get trapped into making rash pre-election tax promises during his National Press Club address, he nevertheless indicated a willingness to
cut future rates of tax, remarking: "If there does arise the capacity in future Coalition Budgets to provide further relief then I would certainly
want to do it." The Prime Minister went on to observe: "We have done something towards ameliorating those punishing rates at the top level, I
think we do have rates that are too high at that level and I think part of the entrepreneurial culture that we need to entrench is tied up with that."
Friday, October 8, 2004 ~ 10:23 a.m., Dan Mitchell Wrote: ...under the corporate tax bill now emerging from Congress, manufacturers will effectively get their tax rate cut to 32% from 35%. So
the race has been on for every company with a lobbyist worth the name to qualify under the law's definition of "manufacturer." In the end, the
coffee roasters have apparently made the cut, thanks in part to the political muscle of Starbucks, but lowly coffee brewing was not deemed worthy. ...Now if only the rest of us can get around to hiring a good
lobbyist, we may also soon be able to qualify as manufacturers and thus pay the lower rate. Of course, it would be so much easier if Congress
avoided this kind of industrial policy and merely cut the rate across the board, as House Ways and Means Chairman Bill Thomas proposed from
the start. This would also help in the efficient allocation of capital. But that would also mean cutting the solons out as political middlemen -- and how are they going to get re-elected?
Friday, October 8, 2004 ~ 9:45 a.m., Andrew Quinlan Wrote: Welfare reform, the largest legislative achievement of the 1990s, diminished the Democratic Party's dependency-bureaucracy complex.
That complex consists of wards of government and their government supervisors. And Bush's "ownership society" is another step in the plan
to reduce the supply of government by reducing the demand for it. That felicitous formulation, from Jonathan Rauch's masterful analysis of Bush's domestic ambitions (National Journal, July 26, 2003), follows
from two axioms of which conservatives are fond: Give a person a fish and you give the person a meal; teach the person to fish and you give a livelihood. And: No one washes a rental car. Meaning people behave
most responsibly about what they own. Hence Bush's menu of incentives for private retirement, health, education and savings accounts. Conservatives hope such measures will encourage aptitudes that will
make the welfare state compatible with traditional American individualism and self-reliance. And conservatives hope such aptitudes will result in Republican attitudes, especially among the elderly and other
people with portfolios of equities. ...In addition to their economic rationale, the Bush tax cuts have the political purpose of crimping Democrats' abilities to satisfy their factions' desires for spending. And
Bush's private retirement, health and education savings accounts would implement the theory that, as Rauch says, Republicans will empower the people, who in turn will empower Republicans. Furthermore, Social
Security private investment accounts would simultaneously multiply investors and diminish both dependence on government and resistance to reduction of it. Among some prescient Democrats this pincer strategy
provokes anxiety, and some of today's fury.
Friday, October 8, 2004 ~ 8:58 a.m., Dan Mitchell Wrote: Should the United States enact a VAT? The tax has the same advantages that retail sales taxes have over the income tax: lower compliance costs,
favorable treatment of savings and investment, and improved U.S. business competitiveness. The difference is administrative: VATs are collected at each state of production, while sales taxes are collected only
at the final purchase. There are dangers to the tax. For one thing, most VAT supporters see it as an add-on to existing taxes. The Treasury study,
completed for former secretary Paul O'Neill, included one proposal that would retain the corporate tax, retain the individual income tax for families earning over $100,000, and impose a 15 percent VAT. That is a
dreadful option because the economy would be burdened with a new VAT infrastructure on top of the most inefficient parts of the existing income tax. A VAT has been pushed as a way to raise money for
reducing the federal deficit. But the steady rise in European VAT rates since 1970 has created larger governments, not smaller deficits. In 1970,
tax revenue as a share of gross domestic product was 28 percent in the U.S. and 30 percent in Europe. In 2000, the U.S. share was 30 percent but the European share had grown to 42 percent. ...any tax reform
should avoid creating a more powerful federal revenue engine, particularly now as some politicians are looking for ways to fund rising entitlement costs.
Friday, October 8, 2004 ~ 8:00 a.m., Dan Mitchell Wrote: There have, of course, been numerous anecdotal claims of media bias. What has been lacking has been a rigorous scientific study of media bias,
and our new paper is an attempt to provide just that. If we limit ourselves to news coverage of economic data, it is possible to get an objective measure of the news behind the stories. Our research team first
collected a list of days that important economic news was released for most papers since 1991 and for four major papers and the Associated Press since 1985. We then used Nexis, a computer database of news
stories that contains information on 389 newspapers, to gather all of the 12,620 headlines that ran in America's newspapers covering economic news stories. We excluded follow-up and feature stories because we
wanted to be able to link the headlines directly with the numbers on which they were based. ...We found that the incidence of positive coverage during Republican presidencies was fairly steady--but economic
news under President Clinton received by far the most positive coverage. This partisan gap or bias (the difference in positive headlines between Republicans and Democrats for the same underlying economic news)
consistently implied that Democrats got between 10 and 20 percentage points more positive headlines. We also examined individual newspapers. Among the top 10 papers, we found strong evidence that the Associated
Press, the Chicago Tribune, the New York Times, and the Washington Post were much more likely to have positive headlines for Democrats even with the same economic news. The New York Post showed no
statistically significant difference. The Los Angeles Times did not tend to treat Republicans and Democrats significantly differently. ...What
motivates newspapers and their copy editors to pick the headlines that they do is not a question we tried to answer. Whether these motivations
are conscious or not, a partisan gap exists, and it helps explain one of this year's biggest economic puzzles. Unfortunately, the recent charges of
political bias at CBS may only be a small part of the problem with the news.
Friday, October 8, 2004 ~ 7:30 a.m., Dan Mitchell Wrote: The Organization for Economic Cooperation and Development Oct. 5 released a report that generally commended Spain's environmental
policies but outlined 46 specific ways Spain could improve its performance in this area, including "green taxes." The report, OECD Environmental Performance Review of Spain, recommended that Spain
pursue "green tax reform" and consider implementing a carbon tax.
Friday, October 8, 2004 ~ 7:11 a.m., Dan Mitchell Wrote: Newt Gingrich, as speaker of the House, tried to do what no one has done before or since. Ten years ago this autumn he set out, quixotically,
to control Congress's apparently insatiable urge to spend the nation's money. He tried to limit the terms of the all-powerful committee chairmen, who had so skewed the appropriations process to the
advantage of their constituents. He assailed what he called the "East German socialist" farm subsidy programs that had gone unchallenged
for a half-century. He even managed to pass a line-item veto, which would have allowed then-President Bill Clinton to cut pork from the then-Republican Congress's legislation, had it not been declared
unconstitutional. ...At least he made an effort, which is more than can be said of anyone in the current congressional leadership. Back in the last
decade, Gingrich's rants against the Democratic congressional establishment and its penchant for spending were perceived as partisan Republican attacks. But nowadays, the Republicans themselves -- in
control of the House, the Senate and the White House -- bear the greatest responsibility for the apparently unstoppable expansion of government. ...discretionary federal spending -- meaning money nobody is being
legally forced to spend -- has risen 29 percent over the past four years and is growing even faster than spending on Medicare and Social Security. According to a Cato Institute study, the increases for 2002,
2003 and 2004 constitute three of the five biggest annual increases in the past 40 years. ...The Education Department, once slated for abolition,
has experienced a huge spending boost. So has the Energy Department, whose creation was once greeted with skepticism. In fact, many of the programs that Republicans promised to eliminate in the mid-1990s -- the
dubious public-private partnerships, the extraneous commissions, the grants for pet causes -- now have larger budgets than ever.
Thursday, October 7, 2004 ~ 11:07 a.m., Andrew Quinlan Wrote: The key to the president's winning both the debate and the argument on pocketbook issues is for him to lay out in a simple, straightforward
fashion how his tax policies are fostering economic growth and prosperity and why Kerry's obsession with class warfare will create economic hardship for the middle class and erect roadblocks to entry
into the middle class for poor people. He could start by explaining that whenever politicians aim at the rich, they always hit the middle class and
crush the poor. The Bush tax-rate reductions aren't about putting money into anyone's pockets, certainly not the pockets of the rich. The tax-rate
reductions and the tax reforms the president has gotten enacted into law are all about creating incentives to work, save, invest and take entrepreneurial risks. It's impossible to help the poor by punishing the
rich because the poor need access to capital, which the rich own, and the productivity-enhancing machinery and software it produces. Injure capital and you incapacitate labor. Stifle capital formation and you
smother job creation. ...The government recently revised second-quarter GDP growth up to 3.3 percent from an earlier reported 2.8 percent. Third-quarter economic growth may actually have hit 5 percent and
shows no indication of slowing down. Since the second quarter of 2003, inflation-adjusted economic growth has averaged 4.7 percent, 42 percent
higher than the 40-year average growth rate of 3.3 percent. And growth is translating into more personal prosperity. Year over year, personal income growth is up 5 percent, and wage and salary income is up 4.6
percent. As for jobs, don't believe the gloom and doom coming out of the Kerry campaign. Unemployment, at 5.4 percent, is lower than the 5.8 percent rate it averaged during the 1990s, and new jobs and new
business ventures are being created at a rapid rate.
Thursday, October 7, 2004 ~ 10:51 a.m., Dan Mitchell Wrote: Democrats have made much out of the fact that Vice President Cheney still receives deferred compensation from his former company,
Halliburton, even though this is standard practice and the payments are insured so that he has no stake in the financial well-being of the company. Mr. Edwards also received deferred compensation from his old
law firm, Kirby & Edwards, for most of his Senate term. Wouldn't it be better for both parties if there was no need to shift income around in such artificial ways that allow opponents to suggest something
underhanded is going on? Democrats say they want to preserve the existing system because it is progressive -- that is, it taxes the rich more
than the poor. If that's their objective, Senator Edwards acknowledged in the debate that it's not working. He complained that "a millionaire
sitting by their swimming pool, collecting their statements to see how much money they're making, make their money from dividends, pays a lower tax rate than the men and women who are receiving paychecks for
serving on the ground in Iraq." That sounds a lot like a line we've heard President Bush use on the stump. Try to raise taxes on the rich using the
current rules and all you get is more tax avoidance. The wealthy have the means to hire attorneys and accountants who find the loopholes. Who
ends up paying the greater burden? That's right, the middle class, and even the soldiers in Iraq, as Senator Edwards said. We should quickly add that while Mr. Edwards was wrong to say that soldiers (most of
whom are in the 15% bracket) pay more than millionaires, he is right in the case of at least one super-rich notable. John Kerry's mega-millionaire
spouse, Teresa Heinz Kerry, is estimated to pay only about 15% of her income in taxes, because so much of it is sheltered in various foundations and trusts.
Thursday, October 7, 2004 ~ 9:14 a.m., Andrew Quinlan Wrote: The cover-up is always worse than the crime, they say. But that doesn't necessarily hold true when you're dealing with the crime of the century -
in fact, two centuries. And the U.N. Oil-for-Food program is among the largest criminal enterprises in history. ...Members of the United Nations
seem to have been deeply involved in the scandal. For example, Benon Sevan, once the executive director of Oil-for-Food, was included on an
Iraqi Oil Ministry listing of hundreds of people who allegedly received oil vouchers as bribes from Saddam's regime. ...As such details have dribbled out, the U.N. has reacted predictably - by trying to sweep
Oil-for-Food under the rug or change the subject. For example, the U.N.'s commission of inquiry, headed by former Federal Reserve Chairman Paul Volcker, has been at work for almost six months. But it
doesn't seem to be making progress. And that's not surprising - the commission seems to have been set up to fail. As Heritage Foundation
experts Nile Gardiner and James Phillips reported recently, it has "no subpoena power and is clearly open to U.N. manipulation. It bears no
enforcement authority (such as contempt) to compel compliance with its requests for information and has no authority to discipline or punish any
wrongdoing it discovers." ...U.N. Secretary General Kofi Annan tried to change the subject. He recently told the BBC the war with Iraq was
"illegal" under the U.N. charter. It makes sense Mr. Annan would rather make such a ridiculous charge than talk about Oil-for-Food. His son was
a consultant for a company that later won a questionable $4.8 million U.N. contract. Plus, the U.N. has completed at least 55 confidential internal Oil-for-Food investigations. Mr. Annan should release all those
reports so we'll know what he knew and when he knew it.
Thursday, October 7, 2004 ~ 8:22 a.m., Dan Mitchell Wrote: On the rare occasions that presidential candidate John Kerry talks about homeland security, he criticizes President Bush for not spending enough
money on it. This is surprising because proposed funding of homeland security for fiscal year 2005 is $47 billion, a staggering 180 percent increase since 2001. Mr. Kerry's knee-jerk instinct to spend more is
hardly unusual. Too many politicians in Washington focus on the level of spending and very few bother considering the quality of spending. ...much of homeland security money is spent on grants to state and local
governments that won't have any impact on terrorism. The formula used by DHS to spread federal funds provides every state with a guaranteed minimum amount regardless of risk or need. So, states in rural areas
receive a disproportionate amount of grant money. Incredibly, among the top 10 money-receiving states, only the District of Columbia also appears on a list of the top 10 most at-risk places. And while state
officials are fighting over who will get the biggest share of the security money, reports demonstrate that they are spending these grants on pet
projects that have little to do with homeland security. The District used the region's first wave of DHS aid to fund leather jackets for its police
force, a computerized car towing system from the mayor's wish list and summer jobs programs. ...Spreading pork, opposing rational cost-benefit
analysis and creating unionized federal employees won't make us safer. Is it too much to ask that homeland security spending actually have some
connection with policies that reduce the threat of terrorism? Is creating union jobs more important than having the best screeners possible? Let's
hope Mr. Kerry is forced to answer these questions during the second presidential debate.
Thursday, October 7, 2004 ~ 7:39 a.m., Dan Mitchell Wrote: Social Security has a built-in bias against saving. This was deliberate, based on a Keynesian distrust of thrift. Economists no longer believe that
saving is contractionary. Government's largest program is designed to implement a theory that is decades out of date. Other government policies that punish thrift reflect even older prejudices. Because we tax
income rather than consumption, a worker who earns $50,000 a year and saves $10,000 will end up paying much more in taxes over her lifetime than a worker who earns $50,000 a year and spends all of it. The
income tax reflects Marxist theories that saving is done by a capitalist "class" that exploits workers. ...What Gross is suggesting is that the
United States is headed for a government-dominated economy. The loss of economic dynamism and personal freedom under such a scenario would be tragic. The European scenario can be avoided if the American
people can be persuaded to maintain financial independence through prudent saving. The more that people save for contingencies such as job
transitions, retraining, college education, retirement, and health care, the lower will be the tax burden on the hard-working and the thrifty. Economists are coming around to the view that people should not be
encouraged to spend freely in order to "keep the economy strong." Instead, particularly because of longer lifespans and more spending on
health care, increased personal savings are required both to strengthen our economy and to maintain a system of individual liberty.
Thursday, October 7, 2004 ~ 7:00 a.m., Dan Mitchell Wrote: Delaware's corporate-secrecy laws may be making it a haven for foreign criminal groups, prompting prosecutors in Eastern Europe and Russia to
flood the Justice Department with requests for help in probes of Delaware shell companies. ...Delaware law allows for creation of limited-liability corporations and other entities without identifying
beneficial owners or directors -- one of many company-friendly laws that make the state a favored corporate-headquarters venue. These laws have led to a thriving industry that helps fuel Delaware's economy by
bringing business to the state, even though the process now often is done over the Internet. ...Delaware officials say the problem isn't their fault
and there is little they can do about it. "The reality is they are using U.S. entities for this purpose, [but] there's nothing particularly unique about
Delaware as related to these small privately held shell companies," said Delaware Assistant Secretary of State Rick Geisenberger. Many other
states have the same laws, he said. "They're choosing to incorporate in Delaware for the cachet of the fact that Coca-Cola and McDonalds and
lots of large multinationals incorporate here. So in many ways, we are sort of victims of our own renown." The emergence of Delaware as a nexus for money-laundering, tax evasion and financial fraud is a
potentially huge embarrassment to the U.S. in the war against transnational financial crime. While launching stinging rhetorical and legal attacks on foreign jurisdictions, U.S. officials long have overlooked
Delaware, which also caters to American companies that use the state to reduce state taxes.
Wednesday, October 6, 2004 ~ 11:15 p.m., Dan Mitchell Wrote: During the Vice Presidential debate, Senator John Edwards asked how Vice President Dick Cheney could possibly oppose laws such as one
preventing "plastic" guns that can avoid metal detectors. ...Dick Cheney was one of only a handful of congressmen who voted against the bill
when it came up in 1986. Yet, it was bad law. The law provided placebo cures for imaginary ills. The hysteria over "plastic guns" arose in the
mid-1980s when the Austrian company Glock began exporting pistols to the United States. Labeled as "terrorist specials" by the press, fear
spread that their plastic frame and grip would make them invisible to metal detectors. Rarely mentioned was that Glocks still had over a pound of metal. Anyone who has ever been through a metal detector at an
airport should understand how silly this fear was. ...Politicians often believe that it is important to "do something," even though that
something often does nothing or makes things worse. It might be hard to understand that someone opposes laws that merely make you look like you care. Yet, when Cheney was challenged on this vote during the 2000
campaign, he told ABC's This Week that he takes seriously our country's bill of rights that state "the right to keep and bear arms shall not be
infringed." Like many of his votes in congress, Cheney's votes made sense and required rare courage.
Wednesday, October 6, 2004 ~ 9:55 p.m., Dan Mitchell Wrote: Snow's letter also questioned a proposal to allow multinationals to repatriate overseas profits for one year at a much reduced income tax
rate of 5.25%, which he said may put wholly domestic producers at a disadvantage. "US companies that do not have foreign operations and have already paid their full and fair share of tax will not be able to
benefit from this provision," said the letter.
Wednesday, October 6, 2004 ~ 11:17 a.m., Andrew Quinlan Wrote: Tax reform in 2005 is most likely to evolve from a discussion among policymakers of more practical problems like corporate taxation, the
alternative minimum tax, and the long-term woes of entitlement programs, former Council of Economic Advisers Chairman Glenn Hubbard said Oct. 2. Hubbard, key in developing and selling on Capitol
Hill the three tax cut packages enacted in the first three years of the Bush administration, told a luncheon at the American Bar Association fall meeting that the president already has shown a propensity toward
tax reform that is likely to continue if he is re-elected. The investment incentives enacted as part of the 2002 tax cut package are consistent with consumption tax reform, while the cuts in capital gains and
dividend taxes enacted in 2003 are obviously a step toward corporate tax integration that would be consistent with either fundamental income tax reform or consumption tax reform, he said. Also, the savings
incentives included in the past two Bush administration budget proposals are, in addition to being geared toward simplification, a step toward tax reform, Hubbard said. The administration has proposed replacing
individual retirement accounts and essentially renaming Roth IRAs as retirement savings accounts and providing parallel lifetime savings accounts that could be applied toward any type of saving.
Wednesday, October 6, 2004 ~ 10:53 a.m., Dan Mitchell Wrote: California's Arnold Schwarzenegger has built his popularity by sticking up for average voters tired of interest groups running Sacramento. So
here's another opportunity: How about opposing those groups imposing huge new costs on car drivers in California and the rest of America? We're referring to the recent decision by regulators to force automakers
to reduce "greenhouse" gas emissions from cars and trucks sold in the state. The only way the industry can meet those standards is to begin
making dramatically smaller and more fuel-efficient cars, which will cost Californians something like $6 billion a year. And since Detroit and
Japan can't make a new fleet merely for the Golden State, chances are the rest of us will be stuck with these higher costs, too. ...the ostensible
justification for these rules is that they somehow combat "global warming." Yet even if you accept the debatable evidence that this is a
problem, California's rules will only reduce world-wide CO2 emissions by 0.1% once they are fully implemented. As a cure for warmer climes, this
is pure symbolism. What's really going on here is an attempt to impose tougher fuel standards on the political sly. The green lobby has been
pressing Congress to do this for some time, but with no success because most Americans don't want to drive smaller cars. ...Even though the CO2
rules are yet another example of the liberal, special-interest-dominated Davis era, the new Governor has declared he'll defend them. Mr. Schwarzenegger has been reluctant to tackle his state's green lobby --
perhaps the most radical in the country -- with the same fervor that he has unions or lawyers. He seems to be hoping that an auto industry lawsuit against the rules as a violation of interstate commerce will get
him off the political hook. That's not leadership. If Mr. Schwarzenegger is serious about restoring California's reputation as a dynamic economy, he can't let environmentalists run roughshod over business and
consumers.
Wednesday, October 6, 2004 ~ 9:15 a.m., Dan Mitchell Wrote: The Conservative Party has pledged this week to put tax reform at the centre of its economic agenda, identifying five aspects of the tax system
which it regards as "manifestly unfair." As the Tory Party conference got underway in Bournemouth on Monday, Shadow Chancellor Oliver Letwin declared that a future Conservative government would reform
"unfair and complicated" tax rules and place the UK "once again at the vanguard of tax reform." Mr Letwin identified five key areas in which
the party will focus its efforts: inheritance tax, stamp duty, local taxation, income tax and national insurance thresholds and the taxation of savings and pensions.
Wednesday, October 6, 2004 ~ 7:39 a.m., Dan Mitchell Wrote: ...the government, already crippled by Prime Minister Jan Peter Balkenende's hospitalization due to a leg infection, blinked. It promised
to scale back the much needed reforms. While the coalition of free-market liberals and conservatives deserves credit for initiating the reform effort, it made some serious mistakes. First the government failed
to explain why welfare cuts are inevitable. Members of the coalition parties also ill-advisedly called the unions "toothless" and a "club of old
people." Dutch Finance Minister Gerrit Zalm proclaimed: "Let them demonstrate, I'll then wave at them." That's bad politics in a country
where economic problems are usually solved by consensus. ...In fact, the Dutch economic model was never as impressive as the statistics made it
appear. Take the jobless rate, for instance, which currently stands at about 6% -- still good compared to the rest of continental Europe. But when you factor in the Netherlands' hidden unemployment, the real
figure is probably closer to 10%. Out of a workforce of about 7.7 million, almost one million receive disability benefits. That's not because some
mysterious illness has befallen the Dutch but is due to very generous assessments of "disability" claims. ...the finance minister should be less
concerned with abstract budget rules than with restoring Dutch competitiveness and lowering payroll taxes. That's what these reforms are really about -- and why it's so unfortunate that the government caved
in this week. It agreed to scale back cuts to jobless benefits and dropped plans to raise tuition fees.
Tuesday, October 5, 2004 ~ 1:02 p.m., Dan Mitchell Wrote: Britain's Caribbean tax havens are set to come under renewed pressure from Brussels to lift their jealously guarded banking secrecy. In a
document on corporate and financial malpractice, the European Commission has called time on the opaque financial laws of such offshore investment magnets as the British Virgin Islands and the
Cayman Islands. ...It suggests introducing banking transparency into existing EU trade and aid deals with African, Caribbean and Pacific countries and territories. This would give Brussels the power to use such
things as banana quotas and development grants as bargaining chips over access to financial information. Brussels is also offering 'economic
support' to help 'co-operative' territories that open up their financial sectors to scrutiny.
Tuesday, October 5, 2004 ~ 12:23 p.m., Andrew Quinlan Wrote: Accounting firm Ernst & Young has urged the government of Hong Kong to abolish the territory's estate tax, arguing that the levy is no longer
seen as relevant in Hong Kong's modern economy. ...Chan observed that the nature of Hong Kong's economy has changed greatly during the past ninety years, particularly in the import/export and financial services
sectors, and suggested that these changes affect the fundamental principle of the original objective of the tax. Total revenues collected from estate duty amount to some HK$1.5 billion per year (US$192.3
million), or about 4% of government capital revenue. There were about 1,300 cases which attracted the tax during the past two years, with many exempted and about 300 which actually resulted in duty being paid.
Tuesday, October 5, 2004 ~ 11:44 a.m., Dan Mitchell Wrote: According to reports, the German government is studying a proposal to harmonise energy taxes across the European Union. Finance Ministry
spokesman Stefan Giffeler was quoted as observing on Friday that the myriad of different levies placed on fuel in the EU's member states needs
to be ironed out in a bid to stop "tank tourism", where drivers take their cars across national borders to fill up on cheap petrol. Giffeler told the
German daily Sueddeutsche Zeitung that this situation "is economically counterproductive and pays alimonies to state budgets of neighbouring countries to the disadvantage of Germany."
Tuesday, October 5, 2004 ~ 11:07 a.m., Dan Mitchell Wrote: In July 1997, while the treaty was being negotiated, the U.S. 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. Kyoto, as Senators knew, did both. On the resolution, named for its sponsors, Sens. Robert Byrd (D-WVa) and Chuck Hagel (R-Neb),
Kerry voted "aye." The treaty was signed in December 1997, but for the next three years President Clinton did not even bother submitting it to
the Senate for ratification. He knew that it would be defeated, by legislators like John Kerry. ...The latest research, not just in the United States but around the world, is proving Bush--and the 95
Senators--correct. A rush to Kyoto-style measures would have severely impeded economic growth and reduced jobs, according to studies by respected economists (including the Clinton administration's own), and
the science of warming appears more fuzzy than ever. For example, extensive monitoring of the regions just about the earth since 1979 by satellite and balloon has found no significant increase in temperatures,
even though surface temperature readings have risen at a rate of about 0.17 degrees Centigrade per decade. Why the difference? New research indicates that, assuming the surface readings (taken with cruder
methodology) are correct, economic growth may have created surface-level hotspots. But without warming at higher levels, the entire
"greenhouse" theory of warming, which is the foundation of the theories of climate-change alarmists that power models showing catastrophe, is
invalid. Surface hotspots do not lead to the floods, droughts and other dire consequences that warming fanciers foresee.
Tuesday, October 5, 2004 ~ 8:55 a.m., Andrew Quinlan Wrote: Another Ohio uncertainty is the fallout from fierce fighting among Republican factions and their gubernatorial candidates for 2006. One
candidate to succeed Gov. Bob Taft, who is term-limited, is Secretary of State Ken Blackwell, an African- American who in 2000 supported Steve Forbes' presidential candidacy. Blackwell says that in the 1990s an
average of 1,000 Americans moved from a high-tax state to a low-tax state every day, and today, every 24 hours 250 Ohioans become Floridians. He says Ohio's 71 percent increase in spending led all states
over the last 10 years. He is furious that Taft and the Republican-controlled Legislature, collaborating with public employees unions and violating repeated promises to submit such increases to a
referendum, passed a $3 billion tax increase. This included a 20 percent increase in the sales tax, which was annoyingly broadened to apply to
such things as manicures and satellite television. Since 2000, Ohio leads the nation in losing persons 14-to-44 -- ``the drivers of growth" -- and
Blackwell says ``we're in an economic death cycle," with tax increases fueling the spending spree. If Bush loses Ohio, that will be because the
state lost so many jobs while it moved, under Taft, from 14th to third on the Tax Foundation's list of states with the worst state and local tax burdens.
Tuesday, October 5, 2004 ~ 8:46 a.m., Dan Mitchell Wrote: The Kremlin has argued that "stability," i.e. one man or one party rule, serves Russia's economic interests better than democracy. Insiders now
hold up, with a straight face, modern China or Pinochet-era Chile as a model. Mr. Putin, nostalgic for Soviet times, isn't a Marxist: He's more a
derzhavnik, a believer in a centralized, Soviet-like state that sees the advantages of a capitalist economy. Maybe one of Mr. Putin's KGB
friends should get up the courage to tell him that his recent decisions are already coming back to haunt him. By destroying democracy, the Russian leader has weakened his own, once strong, legitimacy. By running
roughshod over property rights, Mr. Putin undermines the impressive economic achievements of his first four years in power. Don't take our word for it. Russians, who presumably know their country better than
foreigners, are voting with their money as well. After the Kremlin cut taxes and pushed reforms, capital flight fell to $2.3 billion last year,
compared with $20 billion some years in the 1990s. But this year, in a dramatic reversal, the central bank expects $8-12 billion to leave for
safer havens abroad. ...Illiberal politics has, not surprisingly, brought less liberal economics. Mr. Putin, raised in the Soviet system, may not be
aware that clear rules underpin any capitalist system. But he has also slammed the brakes on reform, from pensions to banking to privatization.
Monday, October 4, 2004 ~ 2:05 p.m., Andrew Quinlan Wrote: An updated Congressional Budget Office report shows that Social Security personal retirement accounts would expand the U.S. economy
by an estimated $58 billion during the next 20 years, Sen. Larry E. Craig (R-Idaho) said Sept. 30. The report updated a July 21 CBO analysis (152 DTR G-4, 8/9/04) that examined the impact on the Social Security
program, the federal budget, and the U.S. economy of President Bush's proposed Social Security personal individual accounts, Craig, chairman of the Senate Special Committee on Aging, said in announcing the
updated report. "This report confirms what the experts have been saying all along--partial ownership of Social Security will boost benefits for
low-income workers and help promote our long-run economic growth and national prosperity," Craig told BNA Oct. 1. "Simply put, a larger
economy means higher wages and additional jobs for Americans."
Monday, October 4, 2004 ~ 1:30 p.m., Dan Mitchell Wrote: The incoming European Industry Commissioner Guenter Verheugen nailed his colours to the tax competition mast last week by dismissing
claims that Eastern European tax cuts amount to fiscal dumping. "I don't see dangers of relocation of industry from the old member states because of the tax gap," Verheugen told a European Parliament
confirmation hearing. He added: "Social dumping is a kind of myth. I don't think that low corporate tax rates in the new member states are going to be an incentive for the relocation of business." Saddled with high levies at home, German companies will find more reason to invest in Central and Eastern Europe as corporate taxes there
continue to ebb, according to a Sept. 27 study by Ernst & Young and the Centre for European Economic Research. "The tax gap within the
[European Union] continues to widen," said Matthias Roche, a partner at Ernst & Young, in the report. "The competitive race within the EU has
begun in earnest and Germany is increasingly falling behind." According to the study, effective corporate tax rates for a German company operating in the new EU states now range from 15.02 percent in
Lithuania to 34.2 percent in Malta. That compares with an effective tax rate of 36 percent in Germany. Berlin trimmed this levy from 37.2 percent in 2003, but has no immediate plans for another cut. Hungary,
Latvia, Lithuania, Poland, and Slovakia have all sliced their corporate taxes this year, and others like the Czech Republic and Estonia are due
to follow suit. Next year Cyprus is set to have the lowest corporate tax rate in the EU, at 9.8 percent for domestic companies.
Monday, October 4, 2004 ~ 11:57 a.m., Dan Mitchell Wrote: For years, mortgage giant Fannie Mae has produced smoothly growing earnings. And for years, observers have wondered how Fannie could
manage its inherently risky portfolio without a whiff of volatility. Now, thanks to Fannie's regulator, we know the answer. The company was
cooking the books. Big time. We've looked closely at the 211-page report issued by the Office of Federal Housing Enterprise Oversight (Ofheo),
and the details are more troubling than even the recent headlines. The magnitude of Fannie's machinations is stunning, and in two key areas in
particular they deserve to be better understood. By improperly delaying the recognition of income, it created a cookie jar of reserves. And by
improperly classifying certain derivatives, it was able to spread out losses over many years instead of recognizing them immediately. ...Fannie Mae isn't an ordinary company and this isn't a run-of-the-mill
accounting scandal. The U.S. government had no financial stake in the failure of Enron or WorldCom. But because of Fannie's implicit subsidy from the federal government, taxpayers are on the hook if its capital
cushion is insufficient to absorb big losses. Private profit, public risk. That's quite a confidence game -- and it's time to call it.
Monday, October 4, 2004 ~ 11:00 a.m., Andrew Quinlan Wrote: Only half of America's black and Hispanic students graduate from high school. Gigantic increases in per-pupil spending over many decades
haven't raised the graduation rate. Schools have pursued fad after fad - ability tracking, ability detracking, less vocational ed, more vocational
ed, multiple-intelligence curricula, etc. - without noticeable success. On the other hand, some types of larger structural reform have been shown
to raise student outcomes. And when it comes to getting more kids all the way through school, one reform in particular shows real promise: choice. ...The nation's oldest and largest urban voucher program is in
Milwaukee, a city that's no stranger to education problems. I estimate that the graduation rate in Milwaukee's public schools is a dismal 36 percent. ...Now we have our first look at how vouchers are doing at
preventing dropouts. My study finds that Milwaukee students going to private schools on a voucher have a graduation rate of 64 percent. ...Vouchers in Milwaukee are keeping a lot more kids in school. This
helps confirm all the earlier studies finding that vouchers result in higher test scores for both the kids who use them and the kids who remain in
public schools. Other cities would do well to learn from Milwaukee's example.
Monday, October 4, 2004 ~ 10:21 a.m., Dan Mitchell Wrote: Italian Prime Minister Silvio Berlusconi is still hoping to cut taxes by EUR6 billion next year, despite the omission of tax cuts from the 2005
budget approved by the cabinet this week. ...Under Berlusconi's plan, three tax brackets would be created from the five that exist currently. The maximum rate will be cut to 39% from 45%, with a minimum rate of
23% and middle bracket of 33%. However, much of his original plan has had to be scaled back due to pressure from within the governing coalition, and from beyond Italy's borders in the form of the European
Commission.
Sunday, October 3, 2004 ~ 9:45 a.m., Dan Mitchell Wrote: Speaking to an audience of students and diplomats at the College of Europe in Warsaw on Wednesday, Estonian Prime Minister Juhan Parts
hit back over the French government's suggestion that the lower-taxing new EU member states should lose their EU regional funding if they do not agree to increase their corporate tax rates. Condemning remarks
made to that effect recently by French Finance Minister Nicolas Sarkozy as "not according to European values", Mr Parts observed that:
"Companies are always looking for the best opportunities. I would say that it is better that they stay in the EU than move to Asia." He also took
the opportunity to address the implication that the newer members of the European Union are too poor to afford low tax rates, arguing that: "Business-friendly tax rates produce more growth and thus more
revenues for the public sector."
Saturday, October 2, 2004 ~ 10:45 a.m., Dan Mitchell Wrote: We examine the incentive effects of transfer programs using a unique policy episode. Prior to 1989, social assistance recipients without
children in Quebec who were under age 30 received benefits 60 percent lower than recipients older than 30. We use this sharp discontinuity in policy to estimate the effects of social assistance on various labour
market outcomes and on living arrangements using a regression discontinuity approach. We find strong evidence that more generous social assistance benefits reduce employment, and more suggestive
evidence that they affect marital status and living arrangements.
Saturday, October 2, 2004 ~ 9:21 a.m., Dan Mitchell Wrote: Russian President Vladimir Putin has agreed to ratify the Kyoto Protocol, paving the way for the world-wide implementation of the agreement. The United Nations and the European Union welcomed the news. Klaus Toepfer, executive director of the U.N. Environment Program, said the
news "is cause for celebration." "UNEP is convinced that, while only the first step in a long journey towards stabilizing greenhouse gas emissions
in the atmosphere, the Kyoto Protocol is the international instrument for addressing global warming," Toepfer said Sept. 30. "President Putin's
leadership in asking the Duma to support the protocol sends an inspiring signal to the international community," UNFCCC Executive Secretary
Joke Waller-Hunter said in a statement Sept. 30. "Russian ratification would ensure that the protocol enters into force and launch an exciting
new phase in the global campaign to reduce the risks of climate change." The president of the European Commission, Romano Prodi, also praised
the move. "Once the Duma confirms the ratification, it means that the Kyoto Protocol will enter into force," Prodi said in a statement Sept. 30.
"This is a huge success for the international fight against climate change. The Commission looks forward to working with Russia on carrying out
the protocol. I have always held the view that this is in the best interest of Russia and its people."
Friday, October 1, 2004 ~ 12:55 p.m., Dan Mitchell Wrote: We use a panel of 16 OECD countries over several decades to investigate the effects of government debts and deficits on long-term
interest rates. In simple static specifications, a one-percentage-point increase in the primary deficit relative to GDP increases contemporaneous long-term interest rates by about 10 basis points.
...The effect of debt on interest rates is non-linear: only for countries with above-average levels of debt does an increase in debt affect the interest rate. Does government debt affect interest rates? Despite a substantial body of empirical analysis, the answer based on the past two decades of
research is mixed. While many studies suggest, at most, a single-digit rise in the interest rate when government debt increases by one percent of
GDP, others estimate either much larger effects or find no effect. Comparing results across studies is complicated by differences in economic models, definitions of econometric approaches, and sources of
data. Using a standard set of data and a simple analytical framework, we reconsider and add to empirical evidence on the effect of federal
government debt and interest rates. We begin by deriving analytically the effect of government debt on the real interest rate and find that an
increase in government debt equivalent to one percent of GDP would be predicted to increase the real interest rate by about two to three basis
points. While some existing studies estimate effects in this range, others find larger effects. In almost all cases, these larger estimates come from
specifications relating federal deficits (as opposed to debt) and the level of interest rates or from specifications not controlling adequately for
macroeconomic influences on interest rates that might be correlated with deficits.
Friday, October 1, 2004 ~ 12:21 p.m., Andrew Quinlan Wrote: Internal Revenue Service Commissioner Mark Everson, has warned that proposed cuts in his agency's fiscal year 2005 budget request would
reverse progress made in key tax enforcement areas in recent years. ...According to Everson, the budget cut would put at risk 229 major corporate fraud investigations and stymie plans for significant increases
in audit rates of both small and large business taxpayers. ...Everson was responding to concerns from Senator Baucus that the cuts may have a
detrimental effect on the closure of the 'tax gap' between what is owed and what is paid to the IRS, estimated at an annual figure of $311 billion.
Friday, October 1, 2004 ~ 11:43 a.m., Dan Mitchell Wrote: Aggregate consumption Euler equations fit financial asset return data poorly. But they fit the return on the capital stock well, which leads us to
three empirical findings relating to the capital income tax burden. First, capital taxation drives a wedge between consumption growth and the
expected pre-tax capital return. Second, capital taxation is the major distortion in the capital market, in the sense that most of the medium and long run deviations between expected consumption growth and the
expected pre-tax capital return are associated with capital taxation. Third, consumption growth appears to be pretty elastic to the after-tax
capital return (i.e., capital is elastically supplied), even while it appears inelastic to returns on various financial assets. Capital income taxes are
passed on through reduced capital accumulation, or higher markups, or some combination.
Friday, October 1, 2004 ~ 9:32 a.m., Dan Mitchell Wrote: A coalition of 26 large U.S. multinational companies Sept. 23 argued that a proposal by Democratic presidential nominee Sen. John Kerry
(Mass.) to eliminate the ability of companies to defer payment of U.S. taxes on foreign income would result in the loss of domestic jobs. The Coalition for Fair International Taxation cited a study by Dartmouth
University professor Matt Slaughter that concluded that, for every job that U.S.-based global employers create in foreign markets, almost two
are established within U.S. borders. "Million of good U.S. jobs depend on American companies being able to compete with foreign-based
companies to serve consumers in markets around the world," the group said. ...The group said the imposition of the U.S. rate of tax on foreign earnings of U.S. companies would leave them at a competitive
disadvantage in the world marketplace. "Because our foreign competitors do not pay this heaving burden in these foreign markets, U.S. companies would be left to make up the difference by raising prices
or reducing other costs," CFIT said. "This is a recipe for cutting growth and jobs in the United States--precisely the wrong policy."
Friday, October 1, 2004 ~ 8:02 a.m., Dan Mitchell Wrote: Incoming European Industry Commissioner Guenter Verheugen said on Thursday that tax competition in the European Union was useful, and
the idea that lower taxes in eastern Europe created a form of "social dumping" was a myth. The German commissioner dissociated himself
from calls by France and Germany for minimum corporate tax rates in the EU... "I don't see dangers of relocation on industry from the old
member states because of the tax gap you mentioned. Tax competition is actually helpful to a certain extent," he told a European Parliament
confirmation hearing. ...The debate about harmonising tax rates was a waste of time since there was no prospect of the EU gaining competence over the issue in the foreseeable future, including in the new EU
constitution, if it is ratified. However, he supported creating a harmonised corporate tax base to create legal certainty and consistency for industry, a proposal being discussed by EU finance ministers but
which is opposed by Britain. |
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