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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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Wednesday, May 31, 2006 ~ 10:44 a.m., Yesim Yilmaz Wrote: Mr. Inhofe will be introducing a bill mandating the U.N. not advocate or promote global taxation -- since the hopelessly dysfunctional polyglot of poppycock is musing about "new sources of development
finance." Or for those not fluent in bureaucratic Esperanto -- taxing Americans. The monolith of Turtle Bay has visions of "a new international agency" imposing U.N. taxes such as 35 cents per
gallon of gas, global taxes on international currency transactions, fossil fuels such as oil, coal and natural gas, carbon dioxide emissions, consumer energy bills, "for the environment" or anything
else it can get away with, according to Cliff Kincaid, president of America's Survival Inc. Mr. Kincaid does not want America to be lulled into a false sense of security since there is legislation now on
the books requiring the Department of State to make sure no U.N. tax on Americans somehow slips through the cracks. But when the Helms-Biden law expired a few years ago -- stipulating the U.N. not even mention
global taxation if it wanted America's overdue dues -- there was nothing preventing the blue-beret buffoons from behaving like the scheming parasites they always have been. When Inhofe's bill becomes law,
"fuhgetaboutit" will need no translation. Wednesday, May 31, 2006 ~ 9:58 a.m., Sven Larson Wrote: European finance ministers will be urged this week to take "drastic" action to stamp out cross-border value added tax fraud, estimated to
cost national treasuries at least EUR60bn a year. Laszlo Kovacs, EU tax commissioner, will tell ministers the best way to defeat the fraudsters is to turn European VAT law on its head. He wants to end
the current system - which lies at the heart of the fraud - where the cross-border supply of goods and services is free from VAT. Instead Mr Kovacs will urge ministers to agree a new system where VAT is
charged and paid up front at the beginning of the supply chain. He admits that changing tax law is a "drastic" solution, which would
represent a move from a "country of consumption" VAT system to one based on the country of supply. But he says it offers the best hope of stemming VAT losses which he estimates at EUR60bn ($76bn,
£41bn) a year or 10 per cent of all transactions. Wednesday, May 31, 2006 ~ 8:03 a.m., Dan Mitchell Wrote: You may never have heard of Camille Howard of New Orleans's Jefferson Parish. But if you pay taxes, you've helped her repair her home with federal flood insurance (NFIP) -- no less than four times
since she has owned it, and seven times before that. And therein lies a tale of policy mistakes and taxpayer liability. The federal government
says some 120,000 properties nationwide have received "multiple" taxpayer subsidized flood insurance payments -- at a cost of $7.25 billion. An astounding 26,000 of those have received four or more
flood payments. One property in Houston flooded 16 times and sucked up $807,000 in repairs -- seven times its market value. The owner keeps rebuilding, mother nature keeps tearing it down, and
hapless taxpayers keep footing the bill. ...The fact that many flood payments go to wealthy owners of beachfront vacation homes seems to have eluded politicians in both parties. Dauphin Island off the
coast of Alabama, for example, is one of the nation's most vulnerable barrier islands and has lost nearly 500 expensive vacation homes and rental properties since 1979. The island has nonetheless received
more than $21 million in federal flood payments. Congress is equally oblivious to the basic business concept that insurance is supposed to cover its costs via premiums. NFIP premiums currently cover just
60% of expenditures, which explains why the program is $21 billion in debt. ...Federal flood insurance, in short, is the equivalent of paying heart patients for smoking cigarettes and then also paying for
their next triple bypass. Without NFIP, thousands of the homes swept away by Katrina in low lying flood plains would probably have never been built in the first place, while homeowners and local governments
would have taken flood-mitigation precautions to reduce property losses. Ideally Congress would abolish the NFIP, and homeowners would purchase flood insurance in the private market or accept the
risks of building. Tuesday, May 30, 2006 ~ 8:52 a.m., Dan Mitchell Wrote: Unlike citizens of most other countries working overseas, Americans pay taxes both abroad and at home. Until last week, Section 911 of
the U.S. tax code allowed these unofficial ambassadors to exclude up to $80,000 of their ... Congress's revenuers argue that the tax treatment is a gift to fat-cat corporations, which use it to lower the
cost of hiring Americans overseas....Chuck Grassley, the Iowa Republican who chairs the Senate Finance Committee, slipped a last-minute amendment into the tax bill that President Bush signed
into law last week. The changes nudge up expatriates' tax exemption to $82,400 but substantially raise taxes on additional compensation and effectively cap housing benefits. They are also all retroactive to
January 1. ...Under the static analysis favored by the Joint Tax Committee, the expat effrontery will raise $2.1 billion over the next decade. Good luck. American businesses will react.
PricewaterhouseCoopers estimates that 24,000 Americans employed in America could lose their jobs, never mind those working overseas. That means tax revenues may undershoot the Senate committee's
expectations. ...Section 911 will have the biggest impact on American businesses in the fastest-growing parts of the globe -- the Middle East and Asia -- that have some of the world's lowest-tax regimes. Since
Americans pay tax abroad and then use that to offset tax owed at home, expats in low-tax countries like Hong Kong and Saudi Arabia will feel the most pain. The U.S. is one of only a handful of countries
that taxes its citizens' incomes regardless of where they reside. And unlike Eritrea and North Korea, other members of this exclusive club, the U.S. actually collects taxes from its nationals abroad. A better
idea would be for the U.S. to follow the example of virtually every other developed country and adopt a territorial tax regime that leaves its citizens overseas alone. Link to this Blog Entry
Tuesday, May 30, 2006 ~ 8:25 a.m., Dan Mitchell Wrote: In spite of some pretty torrid scandals in recent years, the United Nations (U.N.) is far from finished. In fact, Kofi Annan, Secretary
General of the U.N., is leading the gambit for perhaps its biggest power-grab yet - independent tax-raising powers or globo-taxation. In fact, the U.N. is deeply committed to establishing this 'sovereign'
power for itself - independent of the scrutiny and direction of its large aid donors (namely the United States). It wraps this concept up in the intentionally boring globo-speak of 'enhanced dialogues on tax
co-operation' and 'new innovative funding mechanisms,' but that is just intended to put a pretty bow on top of a very ugly concept - the removal of the exclusive sovereign power of nation states to levy
taxes on its citizenry. ...They propose globotaxes on everything from air transportation to aviation fuel, from airline tickets to carbon emissions, from currency transactions to arms. The list is as
ambitious as it is scary. The long arm of the U.N.'s IRS could be in your pocket soon. Link to this Blog Entry
Tuesday, May 30, 2006 ~ 7:45 a.m., Dan Mitchell Wrote: Finns should be happy about paying some of highest income taxes in Europe. At least that's what Finland's new Happy Taxpayers'
Association says. ...She was speaking after the association, boasting some 250 members, was recognized by the national board of patents and registrations. ...The main Taxpayers' Association of Finland, with
190,000 members, focuses on lobbying for tax cuts.
Monday, May 29, 2006 ~ 12:51 p.m., Dan Mitchell Wrote: Virginia's secretary of transportation sent out a letter announcing the state's annual "Click It or Ticket" campaign May 22 through June 4.
... I personally wear a seatbelt each time I drive; it's a good idea. However, because something is a good idea doesn't necessarily make a case for state compulsion. The justifications used for "Click It or
Ticket" easily provide the template and soften us up for other forms of government control over our lives. ... Should the government mandate daily exercise for the same reasons they cite to support
mandatory seatbelt use, namely, that to do so would save lives and save billions of health care dollars? ... Should government outlaw adding salt to meals? While you might think that these government
mandates would never happen, be advised that there are busybody groups currently pushing for government mandates on how much and what we can eat.
Sunday, May 28, 2006 ~ 6:17 p.m., Dan Mitchell Wrote: These regressions provide clear evidence that tax savings are an important motivation for online shopping: our e-retailer's sales are
substantially greater in high-tax states than in low-tax states. We can provide an additional piece of supporting evidence to bolster the case that the differences are due to taxes and not due to unobserved
consumer heterogeneity: our e-retailer sells much less in California than in comparable states. (This would be expected under the tax hypothesis because our e-retailer must charge sales tax on sales to
California residents.) ...Consumers living in states with higher sales tax rates are found to be more likely to have bought products online. The big-picture conclusion is that subjecting e-retailers to taxation
could reduce online sales by 24%. ...In terms of sales taxes, for example, it is quite easy for consumers, in high tax states, especially, to learn the general principle that buying things online saves on
taxes, and we find clear evidence sales being higher in high tax states.
Saturday, May 27, 2006 ~ 4:34 p.m., Yesim Yilmaz Wrote: One of the clear goals of the reform was to take the politics out of pensions by making the system more transparent and making
adjustments driven by formula rather than politics. In addition it encourages workers to postpone retirement since benefits continue to accrue based on annual earnings...The transition to the new structure
has gone well according to most reports. Individuals will be phased in over a 16-year period based on cohorts. Only workers born in 1954 or later will fully participate in the new system In contrast, the first
cohort, those born before 1938, will receive only one-fifth of their benefit from the new system while receiving four-fifths from the old defined benefit system. In the end, the biggest advantage of Sweden's
reform can be found in pension fund sustainability. While the notional accounts structure is designed to adjust future benefit levels based on economic and demographic conditions it runs the risk of providing
benefit levels will be inadequate if economic conditions are sufficiently adverse. In this case the system might unravel under political pressure. What is clear is that the Swedish system now makes
individuals far more responsible for planning for their own retirement and given pension pressures facing many governments, NDCs will continue to receive attention.
Friday, May 26, 2006 ~ 11:39 a.m., Yesim Yilmaz Wrote: The answer boils down to one word: globalization. ...The consequences of high taxes and inflexible labor markets weren't
especially severe in the low-tech, low-mobility 1960s and 1970s. As globalization heated up in the 1980s and 1990s, the cost of these policy decisions-in lost output, slower job creation and forgone
productivity-became plain for all to see....The underlying message is as simple as it is accurate: Nations that offer more competitive economic environments will reap greater benefits from a more open
world economy....Globalization places a premium on economic freedom and gives nations greater incentive to engage in policy competition aimed at liberalizing their economies. But some worry
that policy competition has gone too far. A recent report from the Organization for Economic Cooperation and Development, for example, concludes that the developed world should eliminate the
"harmful tax competition" that tempts firms to move in search of better business climates. A few months ago, the finance minister of Germany's new coalition government echoed this concern when he
urged the 10 newest EU members to raise taxes in the name of fairness. ...In the mid-1990s, Sweden had to raise its farm subsidies as a condition for EU entry. In early 2004, the EU forced the Czech
Republic to adopt labor-market regulations the country deemed onerous. And in January 2006, Poland fought a pitched battle with European leaders to keep its tax rates below what EU leaders
wanted. ....Some analysts have cast the great continental debate as a contest between Europhiles desperate to bind EU countries together and Euroskeptics determined to maintain national sovereignty. But
integration per se need not be the issue. After all, a uniformly low-tax Europe with flexible labor markets would be just as integrated as a Europe with uniformly high tax rates and inflexible labor markets.
The key question centers on the kind of integration Europe ought to undertake. Should it pursue an integration that fosters free markets and the economic growth they bring, or should it pursue an
integration in which member states band together to resist the economic consequences of high taxes and heavily regulated labor markets in a global era? Link to this Blog Entry
Friday, May 26, 2006 ~ 8:57 a.m., Dan Mitchell & Yesim Yilmaz Wrote: Dan Mitchell wrote: A Tcsdaily.com column reviews two new studies that illustrate how bigger government creates inefficiency and misery: Two recent studies released by UK and Swiss researchers provide some insight into the overall argument: is smaller government better
for a country's non-economic well-being? First, a group of Swiss and Danish researchers from the WIF Institute of Economic Research in Zurich looked at whether government involvement in the economy is
conducive to life satisfaction across 74 countries. The results show that life satisfaction actually decreases with higher government spending. ...Another comprehensive study released by the Centre for
Policy Studies (CPS) in the UK summarized available data from various sources, to show that modern governments that spend less can, indeed, provide better public services, a better standard of living
and more equitable incomes than high-spending governments. ...since 1990, leaner states averaged consumption growth of 3.6 percent per annum, while states with larger governments saw household
consumption growth of just 2.1 percent per annum. Yesim Yilmaz wrote: In a TCS article, Constantin Gurdgiev discusses the recent findings on the relation between the size of the government and indicators of economic and social development in the industrialized world. As expected, countries with smaller governments offer better economic environments: lean countries with tax revenues under 40% of their GDPs (US, Ireland, Spain, New Zealand, Canada) outperform larger governments that spend above 45% of their GDPs (Germany, France, UK, Italy, Portugal) in economic measures such as personal income, growth in consumption, domestic savings and investment, lending to the private sector, productivity growth, size of stock markets, inflation, growth in wages, and foreign direct investments. There also is a Laffer Curve effect because the tax cuts have boosted the productivity in the private sector, and increased the size of the tax base, resulting in overall larger tax revenues. For example, in Ireland, since 1999, tax revenues, on average grew by 6.4% following reductions in the corporate tax rate. While lean and large governments have similar life expectancy and mortality measures, overall health and education expenditures (including all private sources) are much higher in larger countries. Finally Gurdgiev points out that countries with small governments (relative to GDP) do better in environmental indicators: However, contrary to popular beliefs, the better economic and social spending indicators performance by the leaner countries were also
associated with the relative strength of their performance in terms of environment. In 1990, states with larger government produced some 0.4 kg pf carbon dioxide emissions per 1 unit of income. By 2000 this
figure fell to 0.3 kg. Comparable measures in the states with leaner governments were 0.5 kg in 1990 and 0.4 kg in 2000. On the surface, this appears to be the story of matched improvements across the two
types of states with the leaner states continuing to lag behind the larger states. The problem with this arithmetic is that it neglects the vital role of CO2 sinks, such as forests, capable of absorbing the
emitted pollutants. Leaner states have 11.6 times greater volume of sinks than the larger states and their forestry areas are increasing at double the rate of forestry growth in the states with large
government. Adjusting for the average absorption rates for forestry sinks and relative size of sinks in two groups of countries, the states with leaner government have net CO2 emissions of 0.25 kg per unit
of output. This, effectively, is less than the pollution intensity of output that is hoped to be achieved under the Kyoto Protocol. Link to this Blog Entry
Friday, May 26, 2006 ~ 8:30 a.m., Dan Mitchell Wrote: When it comes to paying taxes itself, the Swedish Tax Authority, responsible for collecting some of the highest in the world, would just
as soon keep them as low as possible. It's saving a bundle on the production of slick TV spots that encourage Swedes to file online by producing them in the neighboring free-market, low-tax haven of
Estonia. The small Baltic country is a high-growth EU economy with low labor costs and distinctly un-Swedish tax rates. A tax official in Stockholm told the newspaper Expressen that it would have cost his
agency 50%-100% more to make the ads in Sweden.... Spokesman Björn Tharnstrom told us, "We decided to do it in Tallinn because the costs are lower. One of those costs is taxes, of course. ...Sweden has
the world's most onerous tax burden at 51.2% of GDP. Taxes on personal income are 56.5% for the highest income bracket. Estonia, by contrast, takes only 32.7% of GDP in taxes, and imposes a flat tax
on personal and corporate income of 24%.
Friday, May 26, 2006 ~ 7:50 a.m., Dan Mitchell Wrote: John Sheperson is a hero. When Hurricane Katrina struck, he turned on the news and learned that people in Mississippi had lost electric
power. They desperately needed generators. He decided to help them, while helping himself. He borrowed money, bought 19 generators, rented a U-Haul and drove it 600 miles to Mississippi, where he
offered to sell the generators for twice what he paid for them. Eager buyers surrounded his truck. "People were excited," he said. So did the generators go to hospitals? To nursing homes? Did they save
lives? Did Mississippi officials give Sheperson a medal? Nope. Instead, they locked him up -- and his generators, too. ... making money isn't evil, it's good. Modern life is made possible by people
working to make money. And making a profit by "taking advantage" of people in need by meeting their needs is even better. Today we
hear about "gouging" at the gas pump. But it's simple supply and demand. Those "greedy" oil companies don't search for oil and drill
for it out of the kindness of their hearts. They do it to make money, just like John Sheperson. The hope of fat profits is what motivates them to take risks to find new sources of oil to meet our energy needs.
If companies think the government will "cap" prices to keep profits "fair," they would have little incentive to take the risk. "Gouging"
prices are made possible by extraordinary need -- by times when people decide that it's so important to get a generator that they're willing to pay twice the normal price. This free trade makes both
parties better off, or they wouldn't agree to it: Taking advantage of someone's extreme need means meeting someone's extreme need and getting fairly compensated for the unusual effort you had to make in
order to do it. ... Nobel Laureate (1992) Gary Becker says "gouging" is the "fairest and best" way to get supplies to those who need them
the most. "That's a good thing," added Vernon Smith (2002). And Milton Friedman (1976)? "The 'gougers' deserve a medal."
Thursday, May 25, 2006 ~ 4:43 p.m., Sven Larson Wrote: Ministers noted that there is increasingly a shared interest in a more global level playing field; this would require more intense OECD
co-operation with major non-Members. Ministers encouraged the major emerging economies to participate more actively in OECD's work and to move closer to OECD standards and disciplines,
especially in such areas as export credits, investment, anti-bribery, intellectual assets, development assistance and the environment. They called on the Organisation to support this process and to
strengthen its capacity to deal with global issues and the impact of important new players in a comprehensive, systematic and forward-looking manner, in order to help its Members fully reap the
benefits and respond to the challenges of globalisation. Link to this Blog Entry
Thursday, May 25, 2006 ~ 7:51 a.m., Dan Mitchell Wrote: There are slightly over 24 million households in the UK and their time spent sorting trash should be valued at, well, what? Say the minimum
wage...well, say £5 an hour (around $9, which is a little lower than the actual minimum wage) for ease of calculation. If it takes each household one hour a week to follow these regulations on sorting the
trash then we've got a cost of £6.25 billion. ... that's four times the cost we're trying to save! It's also about 0.5% of the GDP.
Wednesday, May 24, 2006 ~ 8:51 a.m., Dan Mitchell Wrote: A little-known provision inserted at the last minute into the $70 billion tax reconciliation bill signed last week by President Bush will
increase the burden of taxation on the many thousands of US expatriate workers employed in foreign jurisdictions. While the package increased the amount that Americans working abroad can
earn tax free to $82,400 from $80,000, income above that level is now typically subject to higher effective tax rates. ...Employers, who normally absorb these tax costs through higher salaries, will also see
their costs rise significantly and it may now be more cost effective for them to recruit workers from jurisdictions with more benign expat tax regimes. ...a married American citizen with $150,000 in base pay,
$30,000 in taxable employer-paid foreign housing expenses, and $15,000 in interest income from a US bank, would be $9,500 worse off in Saudi Arabia, and as much as $20,000 worse off in Hong Kong,
according to the Wall Street Journal. The provision was added to the $70 billion tax package late on in the negotiations by Senate Finance Committee chairman Charles Grassley.
Wednesday, May 24, 2006 ~ 8:16 a.m., Sven Larson Wrote: A taxing drama is slowly unfolding in Olympia. At issue is whether state officials and the Washington Supreme Court will listen to
voters. State officials and employees - including members of the Legislature, Office of Financial Management, Expenditure Limit Committee, the governor, and even the attorney general - continue to
appear opposing the will of voters on state spending. That's why a coalition of business and consumer watchdog groups has been battling in court over spending-limit violations of Initiative 601. For
the most part, Snohomish County Superior Court Judge James Allendoerfer recently ruled in the coalition's favor. He ruled the state's collection of certain taxes are illegal and that the Legislature
improperly increased the state's spending limit in 2005, after allowing evidence of incriminating e-mails between Democratic lawmakers and state employees. The e-mails showed budget writers knowingly
violated the law and shifted funds around to artificially increase the spending limit. A recent column included a link to some of the e-mails.
Wednesday, May 24, 2006 ~ 7:42 a.m., Dan Mitchell Wrote: The average federal worker earned $100,178 in wages and benefits in 2004, which compared to $51,876 for the average private-sector
worker, according to U.S. Bureau of Economic Analysis data. ...federal compensation has grown more rapidly than private compensation in recent years. Since 1990, average compensation has
increased 115 percent in the government and 69 percent in the private sector, while average wages have increased 104 percent in the government and 65 percent in the private sector. ...Federal
workers receive health benefits, retirement health benefits, a pension plan with inflation protection, and a retirement savings plan with a very generous match. (By contrast, 40 percent of private-sector
workers do not have access to an employer retirement plat all.) Federal workers typically have generous holiday and vacation schedules, flexible work hours, training options, incentive awards,
excessive disability benefits, flexible spending accounts, union protections, and a usually more relaxed pace of work than private workers. Perhaps the most important benefit of federal work is the
extreme job security. The rate of "involuntary separations" (layoffs and firings) in the federal workforce is just one-quarter the rate in the
private sector. ...federal hiring of top caliber workers is a problem because it draws talent away from high-valued activities in the private sector. With today's large government, marginal resources
are likely to be more efficiently used in the private economy, thus shifting more skilled workers to the government would reduce gross domestic product.
Tuesday, May 23, 2006 ~ 11:04 a.m., Yesim Yilmaz Wrote: The survey of tax executives from 120 multinational corporations at this year's KPMG international tax conference in Berlin revealed that
62% were planning to move assets or operations to low tax regimes, a significant increase on the 55% who gave the same answer in a poll at the 2005 conference in Rome. More than one in ten respondents
(14%) reported that they have already moved part of their operations to a lower tax regime in response to more aggressive tax planning challenges from tax authorities. "The clear message from business is
that tax rates are important, but in our experience they are not everything when it comes to deciding where to site your operations,"
noted KPMG's Global Head of Tax, Loughlin Hickey. "If companies find a country in which relations with the tax authorities are conducted in a constructive and predictable way, they may accept a
higher tax rate and more contact with the authorities as a reasonable cost of doing business. ...KPMG's survey also showed a rapid rise in the level of interest among investors and shareholders in corporate
tax affairs. In 2005, 69% of executives said that they were finding it of great or increasing importance to communicate with investors and shareholders about tax matters. This year, that number had risen to 80%.
Link to this Blog Entry
Tuesday, May 23, 2006 ~ 10:33 a.m., Sven Larson Wrote: Using inflation-adjusted dollars, the rise in State Funds equates to 8.3 percent. This represents the fastest rate of growth in state-funded
spending since a 10 percent real increase in 1973-74, in the last budget adopted during the 15-year tenure of Governor Nelson Rockefeller. ...More than three-quarters of the added spending is
concentrated in three areas: school aid, which is $841 million higher than the governor proposed; higher education, which is $756 million higher; and Medicaid, which is $230 million higher. Most of the
increase in Medicaid spending is due to the added costs the state will assume under the 2005 law capping growth in county and New York City shares of Medicaid spending at 3.5 percent a year. Medicaid
spending will increase by another $1.1 billion, including federal funds, if the health industry and its allies succeed in a threatened court
battle to overturn Pataki's blockage of this spending on constitutional grounds. The school aid increase includes $420 million in "sound,
basic education" aid for New York City. This is more than $5 billion short of the added city school spending recommended by a state Supreme Court justice as a result of the Campaign for Fiscal Equity
lawsuit, which is now once again in appellate courts.
Tuesday, May 23, 2006 ~ 10:21 a.m., Yesim Yilmaz Wrote: EU tax levels remain generally high in comparison with the rest of the world; the EU25 tax ratio exceeds those of the USA and of Japan
by some 14 percentage points. However, the tax burden varies significantly between Member States, ranging in 2004 from 28.4% in Lithuania and 28.6% in Latvia to 50.5% in Sweden and 48.8% in
Denmark. Generally, the new Member States tend to have lower tax ratios; however Ireland (30.2%), Portugal (34.5%) and Spain (34.6%) also display notably low overall tax ratios. In the past decade
significant changes in tax ratios have taken place in several Member States. The largest falls have been for Slovakia, where the overall tax burden dropped from 40.5% in 1995 to 30.3% in 2004, Poland (from
38.5% to 32.9%) and Estonia (from 37.9% to 32.6%). The highest increases were noted for Malta (from 27.6% to 35.1%) and Cyprus (from 26.9% to 34.1%). Overall, given also that in many Member
States tax ratios have shown little change, EU25 tax levels are nearly the same as they were in 1995 (39.7%) nevertheless, the ratio has shown a non-negligible decrease from a peak of 41.2% in 1999.
...Despite lower overall tax ratios, the new Member States on average show a roughly similar ITR on labour as the EU25. In contrast to the nearly stable ITR on labour, the average implicit tax rate on
consumption in the EU25 has been on the increase; it rose from 20.8% in 2001 to 21.9% in 2004. The 2004 increase is the third in a row. Consumption was most taxed in Denmark (33.3%), Hungary
(28.6%) and Finland (27.9%). At the other end, Spain (16.0%), Italy (16.8%) and Malta (17.0%) registered the lowest implicit rates. The average implicit tax rate on capital in the EU25 increased steadily
from 23.1% in 1995 to 27.7% in 2000, then fell to 25.8% by 2003 (2004 data are missing for several Member States). There is considerable disparity in this ratio: among the Member States, the
highest implicit tax rates on capital were recorded in Denmark (43.8% in 2004), France (36.9% in 2004), the United Kingdom (34.9% in 2004) and Belgium (34.8% in 2004) and the lowest in
Lithuania (6.8% in 2003), Latvia (9.3% in 2003) and Estonia (10.3% in 2003). Labour taxes remain the largest source of tax revenue, representing around half of total tax receipts in the EU25. Taxes on
capital accounted for approximately 22% of total tax receipts, and consumption taxes 28%. Link to this Blog Entry
Tuesday, May 23, 2006 ~ 8:52 a.m., Sven Larson Wrote: The US oil industry charged the government with behaving like a third world despot after the House of Representatives voted to punish companies if they refused to change contracts to give the government
a bigger share of rising oil profits. "We live in a nation of laws," said John Felmy, chief economist at the American Petroleum Institute,
which represents US oil producers. "This is not Caracas or Moscow." ... In order to encourage oil and gas production in the deep waters of
the Gulf of Mexico, the Clinton Administration in the late 1990s signed roughly 1,000 contracts with producers that exempted them from paying the usual 12-16 per cent royalties to the federal
government on sales of hydrocarbons extracted from the Gulf. ...In contentious debate, supporters of the amendment argued that with oil industry profits at record highs and the government facing huge
budget deficits, giveaways worth billions to oil and gas producers were unacceptable. Opponents of the measure, chiefly among House Republicans, contended that forcing companies to renegotiate their
deals constituted a breach of contract that would harm the government's credibility and lead to costly litigation. Monday, May 22, 2006 ~ 8:48 a.m., Dan Mitchell Wrote: ...states worried that the imposition of significant death taxes might precipitate a "mass exodus" of their most wealthy-and often most
productive-taxpayers. Individuals who moved out of state in response to death taxes would neither spend their money in their former state of domicile nor pay taxes to that state. Such a migration would
deprive these states of these important citizens and their capital. The notion that aggressive death taxation would drive wealthy taxpayers out of state was especially problematic for many of the wealthier,
industrialized, states. A few rogue states had purposely bucked the early twentieth century trend towards the imposition of state death taxation. Leaders in these states believed that a comparatively
favorable tax climate would attract migrants of wealth and industry. Florida became the best known of these domestic "tax havens," as it
pursued its belief that a low overall state tax burden, combined with a complete absence of state death taxes, was a powerful means of generating a continued influx of wealthy residents, especially from
higher-tax states. ...Leaders of that state actively and visibly welcomed wealthy taxpayers with open arms, rather than with outstretched palms. ...three states-Arkansas, South Carolina, and
South Dakota...affirmatively repealing their state estate taxes in light of EGTRRA. Those three states now stand on equal footing with the twenty-three other states that simply took no legislative action as
EGTRRA repealed their entire state death tax regimes. ...The state death tax uniformity of the late twentieth century is now but a memory. Interstate competition to attract wealthy residents begins
anew. ...State politicians have decided to turn a fiscal challenge into a marketing opportunity. While leaders in many other states focused on
drafting new tax legislation, Florida Governor Jeb Bush appointed a "Destination Florida Commission" on July 29, 2002 in order to
"evaluate Florida's competitive position in attracting retirees and to recommend ways to make Florida more retiree friendly." ...A front-page article in Crain's New York Business decried that retirees
are simply "fleeing New York" in response to its state death tax. The Connecticut Law Tribune titled its editorial about the new
Connecticut death tax "A 'Run Away' Tax," predicting state residents would run away to Florida in response. Link to this Blog Entry
Monday, May 22, 2006 ~ 8:33 a.m., Sven Larson Wrote: Our legislators seem to think that private property is an issue of money and paperwork. Municipalities exercising eminent domain
must pay an extra 25 percent if they take your primary residence, and an extra 50 percent if the home has been in your family for 50 years or more. And the law requires more public input, more negotiations,
and more court oversight before a taking can occur. Such tweaks miss the point. Fundamentally, property rights are about equal rights before the law. Private property places the smallest homeowner on
an equal footing with the largest corporation. If the company wants the homeowner's land, he must pay a price the homeowner is willing to accept or look for land elsewhere. In contrast, when the law
permits eminent domain for private profit, ordinary property owners become subject to the whim of the powerful and well-connected. We recently saw a clear example of the dangers of eminent domain abuse
in Clayton, where the Board of Aldermen is in the process of condemning five small downtown retail establishments to make room for the expansion of Centene Corp's corporate headquarters. The city
justifies the taking on the basis that the retail establishments are "blighted," despite the fact that downtown Clayton is one of the most prosperous neighborhoods in the St. Louis metro area.
Monday, May 22, 2006 ~ 8:14 a.m., Dan Mitchell Wrote: At present, Cyprus has a 10% corporate tax on all local or international-owned companies, while shipping companies can still
choose between this levy or tonnage tax, that has helped keep the German and Greek-dominated tanker and shipping fleets under the Cyprus flag. There is up to 20% personal income tax for all
individuals, and a 5% flat tax on pensions that attracted thousands of British expatriates to settle down on the relaxed south western coast of Paphos. Up until 1999 a ceiling of 30% was slapped on any
inheritance or transfer of assets and personal wealth to spouses and children, which was abolished on January 1, 2000. That is why shipping, oil and aquaculture tycoon John Fredriksen decided to hand
in his Norwegian passport last week and took up his Cypriot one. His daughters will now avoid paying any inheritance tax or wealth transfer tax in Oslo. ...Fredriksen has felt ill-treated by Norwegian
authorities, and the final straw was probably the introduction of a rule limiting the amount of time in Norway to no more than 90 days a year over three years in order not to be taxed by Norway, according
to a report in Aftenposten. Prime Minister Jens Stoltenberg was unmoved by such arguments. "It hasn't crossed my mind to adjust the tax system so that John Fredriksen can avoid taxes, for it is exactly
people like John Fredriksen that should pay," he told the Norwegian news agency NTB. "There are many who want to become Norwegian citizens. If John Fredriksen doesn't, it is not a problem. It doesn't
bother me. He hasn't lived in Norway for several decades. He hasn't paid tax to Norway in several decades either," Stoltenberg said.
Monday, May 22, 2006 ~ 7:54 a.m., Yesim Yilmaz Wrote: The typical state in the typical year experienced an absolute deviation in the growth of employment of about 2 percentage points from
average growth. In other words, it is not unusual for a state to grow 2% faster or 2% slower than average. The size of this typical deviation, however, fell by about one-half of a percentage point after
interstate banking reform, meaning that deviations around average growth are about 25% smaller than before. Why does local economic volatility fall after banking deregulation? It seems that the answer
must have to do with integration that allows the banking system to become more robust to local shocks via diversification. To test whether this expected channel actually explains the data, Strahan
(2003) reports the relationship between the annual growth rate in a state's economy and the annual growth rate of capital in that state's banks, after controlling for both the national business cycle as well as
differences in long-run growth prospects across states. This correlation was very high during the years of banking disintegration, prior to the expansion of bank branching and cross-state bank
ownership. For instance, the estimates suggest that a 10% decline in bank capital was associated with a decline in state-level growth of about 1.3%. This correlation, however, declined to nearly zero after
states permitted interstate banking. In other words, the health of the banking system (measured by the growth in capital) now varies little with the health of the local economy. Since banks no longer become
distressed during local downturns, credit remains available, thus allowing business to recover more quickly.
Sunday, May 21, 2006 ~ 5:41 p.m., Sven Larson Wrote: Governments must seek to create and to increase both the demand for youth labour and the supply of young people with the skills that
are needed. The demand for youth workers can be bolstered by targeting sectors with high youth employment potential, such as information technology or services. Labour market policies should be
reviewed to better balance flexibility and security that both employers and workers need in a fast changing world. At the same time, strengthened job placement schemes can help ease the entry of
first-time job seekers into the workforce.
Sunday, May 21, 2006 ~ 2:16 p.m., Yesim Yilmaz Wrote: Today, public opinion polls show that 69 percent of the French favor economic patriotism. Then again, economic patriotism is not a
peculiarly French reaction to globalization, and other forces must be at work. One is the current crisis of the EU. Since last year's French and Dutch rejection of the proposed European Constitution, previous
attempts, many halfhearted, at European industrial policies and cooperation, and dreams of "Europe as Power" are at a standstill. At the same time, the deregulation of key European markets has
generated a frenzy of mergers and acquisitions unseen since 2000. Governments have consequently acted along their own perceived national interests, pressured by their citizens anxious about the social
costs of deregulation and the loss of decision-making in foreign buyouts. Proponents of economic patriotism argue that, in the post-Cold War world, technological and economic competition has
become paramount, not only for security, but also for diplomacy, politics and social benefits. "Economic patriotism is a thoroughly modern concept," according to Thierry Breton, France's minister for
the economy, finance and industry, and a former head of France Telecom. So all things considered, the paradox one finds in French policies on foreign investment is a generalized one. For all their talk
of letting the market decide, the developed countries are just as quick as developing ones to raise walls when they think their national interest may be affected or for reasons of domestic political
expediency. Economic patriotism is the flip side of free-market liberalism and part of the current fashion for globalization à la carte.
Saturday, May 20, 2006 ~ 1:42 p.m., Dan Mitchell Wrote: Another myth is that Americans work more than Europeans. By now, a wealth of studies have found very little difference in work and
leisure times between American and European employees, once one takes into the account the hours spent working in household production of trivial home services. A January 2003 study from
IZA-Berlin compared Americans and Germans and found that "...overall working time is very similar on both sides of the Atlantic. Americans spend more time on market work but Germans invest
more in household production." According to the authors "...these differences in the allocation of time can be explained by differences in
the tax-wedge and wage differentials." The tax-wedge is a measure of tax burden that combines income tax, employment tax and consumption taxes to assess the overall effect of government levies
on household income. Ronald Schettkat of Utrecht University confirms that "...when time in household production is included, overall working time is very similar on both sides of the Atlantic" and
shows that American men work almost exactly the same hours, paid and unpaid, as German men, while American women work actually 1.5 hours a week less than their German counterparts. ...According to
the 2004 study by Stephen Nickel of the London School of Economics, "Comparing ... France, Germany and Italy with the United States, the difference in the tax wedge (around 16 percentage points) would
explain ...around one quarter of the overall difference in the employment rate." The remainder can be attributed to other Social Welfare state features of the European model including the
substantial differences in the social security systems and labor market institutions.
Saturday, May 20, 2006 ~ 11:14 a.m., Sven Larson Wrote: Universal preschool advocates like [movie director] Rob Reiner and Governor Napolitano [of Arizona] argue that early schooling improves academic achievement and offers children long-term
academic and economic benefits. Yet this study finds the evidence supporting those claims to be unfounded, at best. ...America's flexible approach to early education gives children a strong foundation. Skills
assessment at kindergarten entry and reports by kindergarten teachers show a large and increasing majority of preschoolers are prepared for kindergarten. The effectiveness of the current system is
also evident in early test scores. At age 10, U.S. children have higher reading, math, and science scores than their European peers who attend the government preschools cited by advocates as models for
the United States. To the degree that the state remains involved in financing early education, we recommend measures for transparency, program assessment, and improved flexibility through individual
student funding. Friday, May 19, 2006 ~ 8:58 a.m., Dan Mitchell Wrote: Cuno v. DaimlerChrysler concerned an Ohio law offering an investment tax credit and property tax abatements to entice the
company to build a plant in Toledo. Some taxpayers challenged the incentives arguing that they violate the Constitution's Commerce Clause. On behalf of the court, Chief Justice John Roberts wrote: "All
the theories plaintiffs have offered to support their standing to challenge the franchise tax credit are unavailing. Because the plaintiffs have no standing to challenge that credit, the lower courts
erred by considering their claims against it." As economic policy, we don't like incentives targeted at individual companies. Politicians are
better off creating a low-tax climate that makes the whole state a business magnet. But such laws are the way states have operated for 220-odd years, and this tax competition has helped to keep U.S.
politicians from raising taxes inexorably. We recently reported on Rhode Island Democrats proposing to cut income-tax rates to stem the flight of taxpayers to Massachusetts, which had earlier cut taxes
to prevent flight to New Hampshire, which has no income or sales tax at all. The Cuno case was part of a broader liberal agenda to impose a uniform and harmonized tax system on the states. Sound familiar?
That's precisely what the French and Germans are trying to impose through the European Union on such low-tax nations as Ireland. ...Low state taxes foster economic development by allowing
businesses to move freely across state lines to lower costs and prices. And the economic evidence indicates that taxes have a powerful impact on location decisions. Over the past decade, the 10 lowest-tax
states have grown at about a one-third faster rate than the 10 highest-tax states, as Americans have voted with their feet and checkbooks. One irony of this debate is that the same liberals who
routinely argue that tax rates don't affect investment in Washington are now conceding that they do matter at the state level -- and therefore tax competition must end. But if low taxes can induce a
company to move from Michigan to Ohio, won't lower national taxes on capital gains or personal income influence an investment to migrate from, say, Germany to the U.S.? Link to this Blog Entry
Friday, May 19, 2006 ~ 8:17 a.m., Dan Mitchell Wrote: Now new data is out and it shows that the states that embraced supply-side tax cuts are not only financially more sound and enjoy
stronger economies, but they are draining residents away from the states that opted for high taxes. The Pacific Research Institute has crunched the tax numbers in all 50 states and published the "U.S.
Economic Freedom Index" ranking all states according to how friendly or unfriendly their policies were toward free enterprise and consumer choice in 2004--the most recent year that comparative data
is available for each state. ...In 2005, per capita personal income grew 31% faster in the 15 most economically free states than it did in the 15 states at the bottom of the list. And employment growth was a
staggering 216% higher in the most free states. It hasn't been a "jobless recovery" in states that have adopted pro-growth tax and regulatory policies. ...new data from the Nelson Rockefeller Institute
shatters the myth that budget deficits are caused by supply-side policies. In 2005, the 15 states with the most economic freedom saw their general fund tax revenues grow at a rate more than 6% higher
than the 15 least free states, despite their lower effective tax rate. Instead of blowing a hole in state budgets, lower tax rates rewarded productivity and risk-taking and allowed the economy to grow. As the
economy expanded it also generated more revenue for the state Treasury as capital and people flowed in. Census data shows an astounding 245% difference in net state-to-state migration rates in
2005 between the freest states (net inflow) and least-free states (net outflow). Link to this Blog Entry
Friday, May 19, 2006 ~ 8:00 a.m., Sven Larson Wrote: An Act to Create a Taxpayer Bill of Rights will be on the November 2006 Maine ballot. Voters will decide whether or not to reign in state
and local governmental spending by enacting a predetermined growth allowance. From a tax perspective, this restraint is important because spending is the locomotive for the tax train. In other words,
spending determines taxes. Analyses show that Maine's level of taxation has reached unsustainable heights. As a percent of income, not only were Maine's state and local government tax collections a
whopping 24.2 percent higher than the national average in FY 2002, but the trend-line shows a widening disparity between Maine and the national average. This study examines how the Maine Taxpayer Bill
of Rights will arrest, and then reverse, the climb of taxes in Maine over the next 15 years up to 2021. ...Key findings include: Maine's state and local taxes as a percent of personal income are at such a
high level that, even under the Maine Taxpayer Bill of Rights, Maine's taxes will not fall to the national average (10.3 percent of personal income) until FY 2021. ... Maine's ranking of state and local taxes as
a percent of personal income will fall under the Maine Taxpayer Bill of Rights to number 19 by FY 2021 from number 2 in FY 2006. ... Maine's state and local tax collections grow from approximately $5.6
billion in FY 2006 to $8.7 billion in FY 2021-an average annual increase of nearly $207 million (3.5 percent).
Friday, May 19, 2006 ~ 7:50 a.m., Yesim Yilmaz Wrote: Henri Malosse, President of the Section for Employment, Social Affairs and Citizenship, Economic & Social Committee, made a
passionate attack against the upholding of labour market restrictions vis-à-vis the new member states in seven of the "old" member states.
He was particularly harsh on his home country: "The scare of the Polish plumber in France was shameful. I only know of a Polish electrician, Lech Walesa, who helped bringing down communism."
Malosse expressed his understanding of a disappointment among some citizens that "the EU has delivered anything concrete since the euro." He namely mentioned that the European nations are letting
down the young generation by accepting a persistently high youth unemployment.
Friday, May 19, 2006 ~ 7:43 a.m., Dan Mitchell Wrote: If Republican leaders in Washington still think their break-the-bank spending won't cause trouble with voters in November, they'd better
pay attention to what just happened in the Quaker State's elections. It is an understatement to say Pennsylvania conservatives were in a nasty mood. Despite the fact that conservative challengers were
outspent on average 8 to 1 in these races, the two top senate leaders were thrown out and 13 incumbent House members bit the dust. ..."All the incumbent Republicans who lost were complicit in the
advancement of [Democratic Governor] Ed Rendell's borrow, tax and spend agenda" notes Matt Brouillette, the president of the conservative Commonwealth Foundation. Over the past three years
the GOP majorities in the House and Senate have expanded the budget by twice the inflation rate and rubber-stamped an unpopular Rendell income tax hike. The final straw for voters in this
economically struggling industrial state (it ranks 49th in job creation over the past 20 years) was that, in an act of remarkable arrogance, the Republicans violated the state constitution against a midterm pay
raise by voting at 2 a.m. to hike their own salaries as much as 50%. It's clear now Pennsylvanians don't think these raises were for a job
well done. "We have had a dramatic earthquake in Pennsylvania," conceded a dazed and now deposed Senate President Bob Jubilirer. We hope the tremors are felt by Republicans in Congress and in state
capitols around the country. It seems this is a message GOP politicians have to relearn over and over: When they run as Reagan Republicans they win; when they run as big government Democrats they lose.
Thursday, May 18, 2006 ~ 1:30 p.m., Yesim Yilmaz Wrote: Among the developed economies, Japan and the U.S. have the highest corporate tax rates, while Ireland has the lowest at 12?
percent. Clearly, given a choice with everything being equal except the corporate tax rate, a stockholder or a worker in a company with markets and production facilities in many countries would prefer
Ireland as the company's corporate home rather than the U.S. The left has a notable ability to ignore the fact that low-tax-rate states tend to create more jobs and grow more rapidly than high-tax-rate
states. We see this throughout the world, but one of the greatest laboratories of the benefits of tax competition is that between the 50 U.S. states. More than a half-century ago, when New York was
relatively much richer than most of the other states, it adopted the high-tax, big government model. Florida adopted a lower tax, limited government model. The result, Florida went from having about
one-fifth the population of New York in 1950 to having a population that will exceed New York's in the next couple of years -- people voting with their feet. Florida has steadily increased its relative per
capita income, while improving government services at a fraction of the per capita cost in New York. (By 2004, New Yorkers had incurred a per capita state debt of $4,964 versus $1,334 for the Floridians.)
Why is it that states without a personal income tax, like Florida, Texas and New Hampshire, can fund government services perfectly well and gain ground against their high tax competitors? The answer
seems to be too taxing for the left. Link to this Blog Entry
Thursday, May 18, 2006 ~ 8:43 a.m., Dan Mitchell Wrote: The latest evidence is Treasury's monthly budget report for May that tax receipts were up by $137 billion, or a remarkable 11.2%, for the
first seven months of Fiscal 2006 through April. That's more than triple the inflation rate. And it comes on top of the $274 billion, or 14.6%, increase in federal revenues for all of Fiscal 2005, which
ended last September 30. ...The current revenue rush also refutes the prevailing Washington consensus that the federal deficit is the result
of the Bush tax cuts. In fact, this revenue tsunami is the direct result of the expansion that took off in earnest at about the time the 2003 tax cuts passed. Lower tax rates have since had precisely the result
that supporters predicted, though don't look for that story on page one any time soon. ...This revenue wave has also come as a shock to the estimators at the Congressional Budget Office, whose May
analysis is full of implicit amazement, not to say chagrin, since they predicted nothing of the sort. As recently as March, CBO was still advertising an expected increase in the baseline for individual income
tax receipts of only $76 billion and merely $24 billion in corporate tax receipts for all of Fiscal 2006. Yet in only seven months, individual income tax revenues have already climbed by $56 billion
and corporate receipts by $40 billion. ...This revenue inflow also means that federal taxes as a share of the economy are now almost back to their post-World War II average of roughly 18%. That share
will continue to increase if the economy continues to grow, as more taxpayers get wealthier and are thrown into higher tax brackets. The only reason the federal deficit continues to exist is because Congress
continues to spend more than 20% of GDP. If ever there was a market test of economic policy, the last three years have been it. The stock market has recovered from its
implosion in Bill Clinton's last year in office, unemployment is down to 4.7%, and growth has averaged 3.9% in the three years since those tax cuts passed -- well above the post World War II average and more
than twice the growth rate in Euroland. ...Between May 2003 and May 2006, asset values in the U.S. have also risen by $13 trillion thanks to the stock and housing market rallies. Just the growth in
asset values since 2003 exceeds the entire net worth of all but a handful of nations. Democrats who want the 15% rate on dividends and capital gains to go back up to 39.6% and 20% are saying that a
big tax increase won't affect any of this. As for whether the tax cuts favor "the rich," this deserves longer treatment on another day. For
now, suffice it to say that one reason tax revenues are rushing into the Treasury at a record pace is because the rich are paying them. The tax payments of the wealthiest 3% of Americans increased at
twice the rate of the tax payments by everyone else from 2001-2004. And those richest 3% now pay nearly as much income taxes as the other 97% combined. While the incomes of the rich have risen, the
lower 2003 tax rates are still soaking them for the government's benefit. Link to this Blog Entry
Thursday, May 18, 2006 ~ 8:15 a.m., Sven Larson Wrote: Vicente Fox, the president of Mexico, on Thursday delivered a salvo against the leftwing policies of Venezuela and Bolivia, warning that
protectionism and nationalisation could damage the prospects of Latin America as a whole. In an interview with the Financial Times, he made a thinly veiled attack on Hugo Chávez, Venezuela's
president, and Evo Morales, his Bolivian counterpart, who recently moved to nationalise the gas industry. "I respect the opinions of other
presidents and do not want to interfere in their decisions," Mr Fox said, when asked about the rise of economic nationalism in the region. "But, yes, I can say if something has not worked well in Latin
America, it's precisely populism, demagoguery, deception, which only hurt the process of development and impoverish people even more."
Wednesday, May 17, 2006 ~ 1:14 p.m., Sven Larson Wrote: Norway's richest man has become a citizen of Cyprus, allowing him to avoid income tax for himself and inheritance tax for his daughters.
John Frederiksen made billions of kronor in shipping and aquaculture. Herbjorn Hansson, like Frederiksen a shipping tycoon, told Aftenposten that his friend was "hunted" out of his native
country by new tax regulations. "If we want people and capital out of Norway, this is the way to do it," Hansson said. Link to this Blog Entry
Wednesday, May 17, 2006 ~ 8:56 a.m., Dan Mitchell Wrote: One of the wonderful things about free markets is that the path to greater wealth comes not from looting, plundering and enslaving
one's fellow man, as it has throughout most of human history, but by serving and pleasing him. Many of the wonderful achievements of the 20th century were the result of the pursuit of profits. Unfortunately,
demagoguery has led to profits becoming a dirty word. Nonprofit is seen as more righteous, particularly when people pompously stand
before us and declare, "We're a nonprofit organization." Profit is cast in a poor light because people don't understand the role of profits.
Profit is a payment to entrepreneurs just as wages are payments to labor, interest to capital and rent to land. In order to earn profits in free markets, entrepreneurs must identify and satisfy human wants in
a way that economizes on society's scarce resources. Link to this Blog Entry
Wednesday, May 17, 2006 ~ 8:30 a.m., Dan Mitchell Wrote: On the flat tax, Mr. Arias is already sending encouraging signals. Last week his National Liberation Party made an agreement with the
Libertarian Movement in Congress to seriously explore the idea. Together the two parties would have enough votes to make it a reality. The concept is anathema to Costa Rica's hard left, which is
crying foul on grounds that a single, low rate is unjust: Under a flat tax the rich don't pay their fair share and it leads to profits -- a dirty
word to Latin socialists -- for business. Yet the flat tax has already proved an effective way to fight poverty in a host of developing countries. For individuals, tax evasion goes down and tax collection
goes up because of better compliance. Low corporate rates attract capital, spurring economic growth and job creation. That means there is more money in government coffers to help the needy. Without
a laundry list of tax exemptions and loopholes, corruption is thwarted. If anyone can sell these concepts to Costa Ricans, it's Mr. Arias.
Wednesday, May 17, 2006 ~ 7:23 a.m., Sven Larson Wrote: The party of Ronald Reagan has devolved into the party of Lyndon Johnson, George McGovern, Henry Waxman, and Al Gore. On
spending, LBJ's Great Society seems greater than ever. Washington Republicans' Spend-O-Rama famously included 13,997 pork-barrel projects that lodged like baby-back ribs in last year's appropriations
bills. President Bush's $92.2 billion request for Iraq War and Hurricane Katrina funding has expanded to $109 billion after Senate manhandling. It now features such germane adornments as $6 million
for Hawaiian sugar growers and $1.1 billion for private fisheries. Another $700 million would redirect train tracks that CSX Corp. invested $250 million to rebuild after Katrina; a replacement
roadway then would link condos to Mississippi casinos.
Tuesday, May 16, 2006 ~ 8:51 a.m., Dan Mitchell Wrote: In a report published Monday the Romanian Academic Society (SAR) believes there are no income deficits due to the fiscal reforms of
2005, including the reform that introduced the flat tax. Moreover, SAR says that these reforms could lead to an increase in public revenues, as an absolute figure as well as a percentage from the
Gross Domestic Product (GDP). The real problem is that Romania has more budget resources than it can efficiently administer, shows the report "The truth about the flat tax" prepared by the Executive
Director of SAR Sorin Ionita. ... The report on budget revenue collection between January 1 and April 16 indicates an increase of the budgetary returns in all sectors (income tax, profit tax,
value-added tax, excises, customs taxes, contributions to the social insurance funds, revenues from local administrations), compared to the same period of 2005. The sole exception is represented by the
contributions to the unemployment fund, which slightly decreased. On the other hand, the official figures show that the percentage from GDP collected to the state budget is identical to the one before the
reform became effective, although the tax payers (especially corporate ones) had more money at their disposal.
Tuesday, May 16, 2006 ~ 8:24 a.m., Dan Mitchell Wrote: Ludovit Odor, chief economist at Slovakia's ministry of finance, won the support of Patrick Minford, one of the Conservative Party's
leading thinkers, when the two met at the Seventh Annual Julian Hodge Institute of Applied Macroeconomics lecture at the National Museum of Wales, in Cardiff. If Wales followed the example of
Slovakia, corporate tax rates would be cut in half. Speaking in the UK for the first time since his country cut all taxes to 19% in 2004, Mr Odor, told Welsh business leaders in Cardiff that a radical
simplification and reduction in corporate tax could stimulate economic growth dramatically. ...Professor Minford, head of the Julian Hodge Institute of Applied Macroeconomics at Cardiff
Business School, said, "...The case of Slovakia shows that the flat tax can work, stimulating growth without the loss of tax revenue. It does not reduce progressivity of the tax system as the rich pay
proportionately more because the high tax threshold dramatically reduces tax paid by the lowest earners. ...Mr Odor said that in the two years since the new system was established, the Slovakian
economy has moved to growth of 6% compared to 4.5% before the reforms, with the last quarter producing 7.5% growth.
Tuesday, May 16, 2006 ~ 8:09 a.m., Sven Larson Wrote: The mission is not to destroy public education in Kentucky. Not all teachers or schools are doing a bad job. In fact, Kentucky has good
teachers and fine schools. But there are also serious problems with our state's education system that have been ignored for too long. For example, both the achievement and the graduation gaps continue to
widen between Kentucky's black and white students. Nationally acclaimed education researcher Jay Greene reports only 55 percent of black students graduated in Kentucky in 2003 - the latest year for
which figures are available - compared to 72 percent of whites students. And there was a 20-percent graduation gap in the Jefferson County Public Schools (JCPS) - the state's largest district - where one
out of every two black males did not graduate from high school in 2003. While the achievement gap grows, Frankfort slumbers. As the graduation gap widens, school officials charged with providing a
quality education for all children smile cutely, implement another rope-a-dope policy and promise better days ahead.
Tuesday, May 16, 2006 ~ 7:52 a.m., Dan Mitchell Wrote: Germany is now planning the largest tax increase in history, an increase in the Value Added Tax to 19 per cent from 16 percent. ...As
if that were not enough the Social Democrats are demanding and getting a "Reichensteuer," a rich man's tax. It is an increase in the
top marginal rate of income tax, mainly just to demonstrate that they are good class warriors. Aside from scoring points for the left-leaning
party, the only effect of that should be to drive the job-creators over to Belgium or Luxembourg. Or to other tax havens. Under a deal struck by members of the left/right coalition last month, individuals earning more than EUR250,000 a year (US$316,000),
and couples earning more than EUR500,000 a year will face a 3% tax increase from 2008 as the top rate of income tax rises to 45%. ...The same legislation will also cut tax breaks for commuters by
barring employees from writing off the cost of the first 20 kilometers of their journey. Another measure will cut the tax-free threshold on interest earned on savings to EUR750 annually for single people from
the current EUR1,370.
Tuesday, May 16, 2006 ~ 7:30 a.m., Sven Larson Wrote: The European halt on the import of genetically modified products violated international rules, the world trade body WTO has ruled. In a
report leaked to the press on Thursday (11 May), the WTO argued that the EU was wrong in preventing the use of new modified varieties of corn, soybeans and cotton between 1998 and 2004 on its
market without it being scientifically justified. The Geneva-based organisation also criticised the six EU countries with bans on biotech products already approved by the European Commission. But
questions remain on what impact the ruling will actually have on the EU. "Europe will continue to set its own rules on the import and sale
of GMO foods," said Peter Power, a commission spokesman. "It is self-evidently not the case - as the US sometimes claims - that the EU operates a moratorium on the approval of GM foods," he said,
adding that the bloc has approved nine products since last May. "Nothing in this panel report will compel us to change," Mr Power stated.
Monday, May 15, 2006 ~ 8:56 a.m., Dan Mitchell Wrote: Federal spending isn't all that's been on steroids in recent years in Washington. A report to be released this week by the Mercatus
Center at George Mason University and the Weidenbaum Center at Washington University finds that the feds have also been on a regulatory rampage that needs squelching. From 2001 to 2006, the
number of federal regulatory personnel has risen by one-third (or 66,000 more snoopers); regulatory budgets are up by 52% after inflation; and the Federal Register -- which prints all that regulatory
verbiage -- has climbed by more than 10,000 pages. The Institute for Policy Innovation calculates that if you stacked up all the registries from the Nixon Presidency through the present, the pile would reach
higher than the Washington Monument. The biggest increases in enforcement personnel and dollars have gone to such customer-friendly agencies as the Securities and Exchange
Commission, the Food and Drug Administration, the IRS, the Bureau of Alcohol, Tobacco and Firearms and the Antitrust Division of the Justice Department. Just last week Mr. Bush announced an intention
to expand the reach of one of Washington's more absurd regulatory regimes: automobile fuel-mileage standards, which push consumers into smaller, less-safe cars and increase traffic fatalities. So much for
regulations making us safer. Federal regulations now cost the U.S. economy about $1 trillion in lost output a year, or about $8,000 per household, according to a 2005 study by the Small Business Administration.
John Kerry, take a bow. You may have lost the last election, but at least one of your policy ideas has seen its ship come in anyway. We
refer to the Bush administration's recent embrace of higher auto-mileage standards. President Bush late last month called on Congress to give him the authority to raise Corporate Average Fuel
Economy standards (known as CAFE) on passenger cars. Those standards were put in place in 1975 and established today's cap of 27.5 miles per gallon, though it has been the environmental left's long
and fervent desire to raise them again to 40 mpg. Candidate Kerry had pledged to raise them. And the Bush administration had long opposed it -- that is, until it agreed earlier this year to set new
efficiency standards for "light trucks," including SUVs, minivans and pickups. The White House has now completed its surrender by inviting a similar change for cars as a "proven way to conserve
gasoline." This is where President Bush's new "addicted to oil" rhetoric is taking him and us -- namely, to the government further
dictating the kind of cars Americans will be able to drive, even if those cars aren't as safe on the road. It is undeniable that higher CAFE standards kill people: Larger, heavier cars have lower death
rates in crashes. Because automakers have met CAFE standards largely by reducing automobile weight, traffic fatalities in smaller cars have increased. The National Academy of Sciences once focused
on the impact of CAFE standards in a single year, 1993, and estimated that they resulted in as many as 2,600 additional deaths. Link to this Blog Entry
Monday, May 15, 2006 ~ 8:23 a.m., Sven Larson Wrote: This year's Tax Freedom Day will come three days later than it did in 2005 and a full 11 days later than it did in 2004. The reason:
California's healthy economy is producing sizable income growth and the state's highly graduated personal income tax is collecting revenue at an even faster rate. Because the state income tax relies heavily on
the wealthiest tax filers, the growth in personal income means an even greater growth in the size of revenue collection. And an increased influx of tax dollars relative to personal income means that
Californians must work more days per year to fulfill their tax obligation. But this uptick in California's tax barometer hasn't fazed those who support tax hikes to fund a litany of government
programs. Take the pro-Proposition 82 crowd, for example. Prop. 82 is the government-preschool-for-all measure advocated by movie director and activist Rob Reiner. If approved by the voters in the June
6 primary, it would impose a 1.7 percent tax on individuals earning more than $400,000 and couples earning more than $800,000. Proponents say this proposal will bring in more than $2 billion
annually and that the costs will only be borne by the 0.6 percent of Californians who cross that income threshold. But California history provides a lesson: when we try to soak the rich, everyone pays. In
1991, the state created two new upper-income tax brackets in order to cover a $14.3 billion budget deficit. Instead of filling in the gap, the tax led to the loss of 350,000 jobs, shrinking the tax base enough
to drop revenues by $2 billion in the following two years.
Monday, May 15, 2006 ~ 7:43 a.m., Dan Mitchell Wrote: Angry conservatives are driving the approval ratings of President Bush and the GOP-led Congress to dismal new lows, according to an
AP-Ipsos poll that underscores why Republicans fear an Election Day massacre. ...Conservative voters blame the White House and Congress for runaway government spending... Hardline conservatives
are not likely to vote Democratic in the fall, but it would be just as devastating to the Republicans if conservatives lose their enthusiasm and stay home on Election Day.
Monday, May 15, 2006 ~ 7:32 a.m., Yesim Yilmaz Wrote: Most of the Central and East European countries lowered their corporate tax rates in the runup to accession to compensate for the
abolition of discriminatory tax breaks, which was required by EU state aid rules. Many countries also introduced 'flat' rates of personal income tax....It is true that headline corporate tax rates in the new
members are now much lower than in the EU, typically 15-20 per cent compared with 34-38 per cent in Germany, Italy and France. But this does not automatically mean that East European governments
are shy to tax local companies. Tax revenue consists of two components: the tax rate and the tax base (on which the tax is levied). West European tax systems tend to be riddled with
exemptions, and many offer generous depreciation rules to encourage certain investments. So the 'effective' tax rate on corporate profits is often much lower than the headline rate. Estimates of the effective
tax rates vary widely. According to some calculations, the effective rate of corporate taxation in Germany is only half the headline rate of 38 per cent. Some of the country 's largest companies enjoy so
many tax breaks that their effective tax rate is zero.26 Other estimates show that the effective tax rate in the East European
members is now a lot lower than in the old EU, for example, around 18 per cent in Poland and Hungary, compared with 35-36 per cent in Germany and France...Another (albeit similarly flawed) way of
gauging the real tax burden is to look at how much money national treasuries actually obtain from companies. According to the European Commission, Germany collected corporate taxes worth
only 0.8 per cent of its GDP in 2003, and France 2.2 per cent. Compare that with allegedly low-tax countries such as Ireland and the UK (3.8 per cent and 2.7 per cent of their GDP, respectively) or
Slovakia and Hungary (2.8 per cent and 2.2 per cent of GDP respectively). Even Estonia, which does not tax reinvested profits at all, still managed to collect more than Germany in corporate taxes as
a share of its GDP... But even if one assumes that effective corporate tax rates in Central and Eastern Europe are significantly lower than those found in the old EU, it does not necessarily follow that tax
policy is behind Eastern Europe's investment boom. Investor surveys show that tax levels are just one factor among many that companies take into account when they decide where to set up shop. Others,
such as economic and political stability, the quality of the labour force, wage and productivity levels, market size or proximity to major markets, usually rank higher.
Link to this Blog Entry
Monday, May 15, 2006 ~ 6:30 a.m., Dan Mitchell Wrote: Alain Lamassoure, a senior centre-right French MEP, has suggested that the EU levy a tax on SMS and email messages in a debate on the
union's future financing. ...He told EUobserver "The economic value of today's globalisation lies in information through transactions in the
form of international communication. Why don't we levy taxes on this value, for instance SMS messages?" "A small tax on an SMS from Paris to another French city could be allocated to the French
government, but taxes on emails or SMS messages from Paris to Rome could be dedicated to the EU budget," he said. ...Mr Lamassoure also defended his proposal by arguing that in times of
globalisation, it is less and less easy for states to tax income on people, corporations and consumption. "I suggest this as an idea not only for the EU but also for member states themselves and on the
worldwide scale," the MEP added, explaining that revenues from taxes on global information flows could be spent on international development. A European Parliament working group has reached a "broad agreement" that there is a need for the existing own-resources system
which funds the European Union's budget to be replaced by a scheme more understandable to the public, possibly a new tax. ...at present, the EU budget is funded through a combination of import duties,
value added tax revenues and direct contributions from member states - the so-called "Gross National Income resource" which is calculated according to wealth. Over time, the GNI resource has
grown to represent the main source of funding of the EU, with a direct impact on deficit-threatened national budgets, and Jose Manuel Barroso, President of the European Commission, has stated
that the EU must find a way of avoiding "such a direct link between national budgets and the European budget." Barroso has hinted a
single tax is the likely road ahead, and idea which has found support amongst the EU's Christian Democrat leaders including Wolfgang Schussel, Austrian chancellor, Edmund Stoiber, Bavaria's chancellor,
and Nicolas Sarkozy, leader of France's centre-right UMP. ...It is also unclear how an EU tax would be raised in the first place, with parliamentarians suggesting a variety of sources including corporate
profits, flight levies and a tax on SMS messaging.
Sunday, May 14, 2006 ~ 3:40 p.m., Yesim Yilmaz Wrote: Leendert Geelhoed, advocate-general at the European Court of Justice, said it was "quite patently discriminatory" that France was
imposing a higher tax burden on dividends destined for a Dutch parent company than those distributed to French parent companies....The case, brought against the French government, is
likely to have implications for all European governments that levy withholding taxes. These taxes, on dividends and interest payments paid to a non-resident taxpayer, are designed to ensure that income
does not leave the country without being taxed....The case is the latest in a series in which the European Court of Justice has considered whether national tax laws contravene the "fundamental
freedoms" of capital and movement, enshrined in the Treaty of Rome... Most European countries would be affected by a judgment requiring radical reform of withholding taxes on dividends, while the
UK would be affected by the abolition of withholding taxes on interest payments.
Saturday, May 13, 2006 ~ 4:16 p.m., Yesim Yilmaz Wrote: The case could have far-reaching implications for the way North Carolina engages in the business of attracting business. It could force
leaders to be stingier with tax dollars and become better marketers of the state's work force, location and costs. It also could stymie economic growth in North Carolina, say those who recruit industry.
They contend that incentives are integral to luring new employers and that losing incentives would put the state at a disadvantage in the
fight for jobs. "For some of the larger key projects, incentives are not a request, they're almost a requirement," said Ted Conner, vice president of economic development for the Greater Durham
Chamber of Commerce. "You've got to be in the position to offer something." Since Dell, the state has offered $88 million from two main incentives programs to attract 13,300 jobs and more than $2
billion in investment, according to figures provided by the N.C. Department of Commerce. That excludes perks offered by local officials and broader state tax credits, but illustrates the scope of the issue.
Friday, May 12, 2006 ~ 11:11 a.m., Sven Larson Wrote: A leading online insurance brokerage, eHealthInsurance, recently calculated the cost of a standard individual insurance policy ($1,000
deductible with a 20% co-insurance) across the nation's 50 largest cities, comparing some 4,000 insurance plans and 140 insurance companies. Insurance in the top 10 cities is quite affordable - all
under $60 a month. In contrast, New York City ranked dead last, with premiums averaging $334 a month. The survey didn't list any cities in New Jersey, but the situation is worse in the Garden State: A typical
family policy now costs more, per month, than the lease of a Ferrari. Just as troubling is the dearth of healthcare choices in many parts of the country. With so much regulation, coupled with multiple mergers,
fewer and fewer insurance carriers compete. The American Medical Association released a report last month surveying the situation in 294 metropolitan areas. It found a "remarkable reduction in the
number of competing health plans." In 95% of cities, a single insurer had at least 30% of the market; in roughly half of these metropolitan
areas, a single insurer had 50% or more of the market. Mr. Shadegg's remedy is straightforward: Just as Americans can bank out-of-state, they should be able to choose a non-local insurance policy. Thus, an
insurer licensed in, say, Ohio could sell insurance here, governed by Ohio's regulations. Such legislation is entirely consistent with the Commerce Clause of the Constitution. Link to this Blog Entry
Friday, May 12, 2006 ~ 10:45 a.m., Yesim Yilmaz Wrote: According to data compiled by the U.S. Department of Energy's Energy Information Administration, the domestic profits of the 25
largest oil companies in the U.S. have been highly volatile since the late 1970s. As illustrated in Figure 1, between 1977 and 1985, the oil industry recorded relatively high profits-averaging nearly $33 billion
per year, after adjusting for inflation. These good times were followed by ten years of relatively flat profits, averaging just $12.3 billion per year. In 1996, profits began to rise again but have been
anything but stable, ranging from $9 billion to nearly $42 billion per year. Between 1977 and 2004, the industry's domestic profits totaled $643 billion, after adjusting for inflation. In contrast, federal and
state taxes on gasoline production and imports have been climbing steadily since the late 1970s and now total roughly $58.4 billion. Due in part to substantial hikes in the federal gasoline excise tax in 1983,
1990, and 1993, annual tax revenues have continued to grow. Since 1977, governments collected more than $1.34 trillion, after adjusting for inflation, in gasoline tax revenues-more than twice the amount of
domestic profits earned by major U.S. oil companies during the same period. State and Federal Taxes on Gasoline Production and Imports Exceed
Friday, May 12, 2006 ~ 10:06 a.m., Yesim Yilmaz Wrote: I propose to use tax incentives to attract foreign direct investments (FDI) to developing countries to promote growth, and explain what
practical and conceptual changes in the tax systems of developing as well as developed countries (introducing a notion of inter-nation equity) should be made to make this work. ...The motivation for
writing this paper stems from the following facts: (a) in spite of transfers of well over $1 trillion from developed to developing countries over the past 50 years, the gap is widening as many poor
countries fail to experience economic growth; (b) according to "the new growth theories" endogenous technological progress is the engine of growth; (c) nevertheless, the standard advice of
international bodies to developing countries continues to be limited to: more savings and more schooling; (d) nearly all of the world's technological progress originates in about 20 leading countries; (e)
foreign direct investments (FDI) could transfer technology from developed to developing countries that could have spillover effects promoting growth in developing countries; (f) little implementation of
the "new growth theories" was done in the legal literature; (g) no implementation was done in the field of law and development and tax policy. Link to this Blog Entry
Thursday, May 11, 2006 ~ 12:15 p.m., Yesim Yilmaz Wrote: ...the offshore centres have champions, notably the Center for Freedom and Prosperity, a US lobby group that has campaigned
against efforts by industrial countries to "bully" tax havens. Advocates of tax havens argue that individuals may have good reasons, including fears about political instability and kidnapping, to
move money out of their home country. They also say tax havens are victims of hypocrisy: efforts by the OECD and European Union to force these small countries to be more transparent are unfair, given
that a significant number of bigger ones have refused to reform their banking secrecy laws to allow exchange of information. The Center for Freedom and Prosperity goes further and argues that tax havens
play a crucial role in putting downward pressure on tax rates in industrial countries. Attempts by high-tax governments to probe their citizens' offshore accounts are merely an attempt to insulate
themselves from market discipline. These arguments have resulted in a lack of political unanimity, which has helped havens to preserve some of their freedoms. The OECD's efforts to constrain them were
watered down after 2001, when the Bush administration complained this would stifle tax competition. As a result, the OECD has focused on persuading havens to provide information about taxpayers in
cases where a foreign tax authority can show it has specific grounds for suspicion. Likewise, the EU savings directive, introduced last year to improve transparency within the EU and associated tax havens,
has had limited impact because political differences led to many loopholes. Moreover, from the perspective of the tax evader, it has been easy to divert money to large financial centres such as
Singapore that are outside its reach. The dilution of OECD and EU ambitions has been a victory for tax havens, says Daniel Mitchell of the Heritage Foundation, a US think-tank. "Five years ago, it
appeared tax competition, fiscal sovereignty, and financial privacy were heading for extinction. But advocates of tax harmonisation have been stymied and there is every reason to believe that these
opponents of economic liberalisation will remain frustrated so long as low-tax jurisdictions forcefully defend themselves." Link to this Blog Entry
Thursday, May 11, 2006 ~ 11:23 a.m., Sven Larson Wrote: The bill at hand, sponsored by Wyoming's Mike Enzi, concerns so-called Small Business Health Plans, often referred to as
Association Health Plans. The idea is that if small businesses are allowed to band together on a nationwide scale, they'll have greater leverage when negotiating prices with insurers. The bill would let
them bypass many of the state insurance rules that make coverage so expensive. By creating a larger and freer market for health insurance, the Enzi bill would increase the number of people who have it. And
that's exactly what such government-run health care advocates as Mr. Pollack -- and Connecticut Democrat Chris Dodd, who joined him yesterday to denounce the bill -- don't like. Some provider groups
are also opposed for nakedly self-interested reasons, since it would allow plans to bypass state regulations mandating coverage for, say, chiropractors. Their claims that the Enzi bill would allow for
worthless policies and fly-by-night insurers are unfounded. Big companies are already exempt from state insurance mandates under a federal law known as ERISA, and they haven't engaged in some
"race to the bottom" for their employee coverage.
Thursday, May 11, 2006 ~ 11:12 a.m., Yesim Yilmaz Wrote: Lack of collaboration between federal agencies can add further to the suffering of law-abiding Americans. Engleby [a special agent in
charge of the SSA's Office of the Inspector General in Utah] noted that the Internal Revenue Service routinely finds Social Security number discrepancies, but instead of investigating the agency goes
after the real number-holders for alleged unreported income. Tax collection notices are sent, refunds garnished. Engleby tries to help victims clear their names, but it takes time. In the interim, the ID
thieves continue to use the number to buy cars, take out mortgages and file bankruptcies that destroy their victims' credit. Various studies show that in addition to the tens of billions of dollars in losses
financial institutions face, ID theft victims will spend at least 600 hours trying to repair their backgrounds.
Thursday, May 11, 2006 ~ 9:51 a.m., Sven Larson Wrote: Arizona cities and towns are hitting the panic button over a proposal to cut state income taxes by $600 million over the next three years.
Mayors from Phoenix, Mesa and other cities say the proposal, which is emerging as a key sticking point in legislative budget negotiations between Republican leaders and Democratic Gov. Janet Napolitano,
will take a substantial bite from shared state revenues that cities use to pay for police, fire, parks and other services. "The cuts to Phoenix
would be catastrophic," said Phoenix Mayor Phil Gordon, who met with Senate President Ken Bennett about the proposed tax cuts. "If we take another hit, you would have to dramatically reduce police
and fire, plus other services. We rode the hard times down, and now that there's more revenue, to not ride it up and not share in the revenue that we helped create is morally unfair." [J]urisdictions like Phoenix will share $425 million from state income tax revenue collected this fiscal year. This amount will increase every
year to $684 million by fiscal year 2009, according to the Joint Legislative Budget Committee. If the state legislature reduces income tax rates by five percent next year, revenues to cities and towns will
still increase 54 percent over this period to $654 million. A 54 percent increase in revenue can hardly be described as "catastrophic." The idea that Phoenix will be left out of recent years
of surging revenues does not square with the facts. With or without a reduction in income tax rates, cities and towns are sharing a 14 percent increase this year, a 30 percent increase next year, and a 16
percent increase in 2008.
Wednesday, May 10, 2006 ~ 10:02 a.m., Yesim Yilmaz Wrote: Austria and the commission have proposed changes to end the low rates of VAT in Luxembourg and the Portuguese island of Madeira
that have enticed e-commerce companies to relocate and offer cut-price services. Under the plans, VAT would be charged at the rate in the country where the service is used rather than where it is
supplied, as at present. EU tax commissioner Laszlo Kovacs said: 'We want to avoid unfair tax competition because if we maintain the place of origin principle, in that case, businesses will establish
themselves in the country with the lowest rates and that would certainly distort the competition.' Portugal, Luxembourg and Germany are so far refusing to support the changes.
Wednesday, May 10, 2006 ~ 9:31 a.m., Sven Larson Wrote: The biggest issue from our perspective is that the cost of capital equipment in Brazil is roughly twice what it is in the rest of the world.
Because of import duties and taxes, the end user price is roughly double what it is elsewhere. So essentially this is a disincentive for investment in information technology. I think that's a structural
problem that inhibits investment in IT and therefore affects international competitiveness. The global economy is an information economy. ...In fact, look at what is probably the biggest emerging
market competitor for Brazil, and that's China. The Chinese offer incentives like tax credits for investments in infrastructure and information technology. At the other end of the spectrum, Brazil taxes
those investments, so if you look at the net differential in terms of the cost for an infrastructure investment on capital equipment, it's probably three-times as much in Brazil when compared to China as
opposed to double the cost compared to other countries, because of the tax credits offered in China. It's quite an amazing difference in policy, which directly affects the consumption rate for investment. It's
also a major disadvantage for Brazil.
Wednesday, May 10, 2006 ~ 9:27 a.m., Yesim Yilmaz Wrote: By my count there have been formal and informal calls by legislators to reduce gasoline excise taxes in 46 states. Nevada state Sen. Bob
Beers (R) has even called for the complete repeal of his state's gasoline tax. Nevada's tax is about 24 cents a gallon. But the $200 million raised from the tax is dedicated to highway repair and
construction. Beers says the state should use general fund revenue to pay those costs. Democrats in the Texas Legislature have proposed a moratorium on the state's 20-cents-a-gallon gasoline excise tax. The
measure (HB 120) would suspend collection of the tax for 90 days. The funny thing is that the gas tax in Texas is partially earmarked for education. That actually isn't as funny as it is weird. You might
wonder why an excise tax on fuel would be earmarked for something unrelated like education. The Democrats say that with a multibillion-dollar budget surplus, the time is right for a gas tax
holiday. New Hampshire Republican gubernatorial candidate Jim Coburn is running on a platform that calls for a similar three-month gas tax holiday. He wants motorists to drive tax-free in New
Hampshire and save on the 18.3-cents-a-gallon excise. His plan would cost $30 million. I couldn't find one state legislator who considered it a good idea. There are lots of other examples. I'm no
fan of the gasoline excise tax. Like most excises, it burdens the poor to a much greater extent than anyone else. But it also acts as a hidden tax on everyone. The tax increases fuel prices, which are
passed on to consumers who never know they're paying it. The only justification for any excise tax is to compensate society for the external costs of using the product. Much gas tax revenue is
dedicated to road repair. But much gas tax revenue finds its way into the state's general fund. Link to this Blog Entry
Tuesday, May 9, 2006 ~ 4:25 p.m., Sven Larson Wrote: Anti-money-laundering laws do impose high costs, and that cost is borne by the financial industry and its consumers. The recent decision
to reauthorize the Patriot Act, without any examination of whether it makes sense to extend some 30 onerous money-laundering provisions, guarantees that costs will continue to rise. According to the Financial
Crimes Enforcement Network, institutions filed 14.8 million reports in 2004, including nearly 13.7 million currency transaction reports (for $10,000-plus transactions) and more than 650,000 suspicious
activity reports. What constitutes suspicious activity? The government offers no guidelines, except to decree that depository financial institutions report "any instances of known or suspected
illegal or suspicious activity." It's sort of like U.S. Supreme Court Justice Potter Stewart who, when asked to define hard-core pornography, famously said, "I know it when I see it." Banks have
privately complained that potentially suspicious transactions encompass a quarter of all their business.
Tuesday, May 9, 2006 ~ 12:48 p.m., Sven Larson Wrote: The general government surplus was around 2½ per cent of GDP in 2005. It is easily the largest in the euro area, although this is entirely
accounted for by the pension funds, whereas the combined central government and municipalities financial balances are roughly in balance. The combined balance of central government and the
municipalities should remain in surplus on a cyclically-adjusted basis for the rest of this decade. This would imply a general government surplus of 3-3½ per cent of GDP. Maintaining such a large general
government surplus, while desirable to prepare for the fiscal pressure from imminent population ageing, will be difficult given the government's promise of tax cuts on earned income and strong
spending pressures at the municipal level. Link to this Blog Entry
Tuesday, May 9, 2006 ~ 12:06 p.m., Yesim Yilmaz Wrote: Such a proposal would stand little chance of getting through since unanimity is required on tax matters. But the fact that finance
ministers debated it does reflect a rising level of concern among EU ministers as consumers see prices at the pump surge. ... "There seems
to be a certain level of irritation in the public opinion," with the record profits made by big oil companies, Juncker told reporters at a
news conference. But "we are only at the start of our reflections," he tempered. Austrian finance minister Karl-Heinz Grasser, who currently chairs the EU's economic and finance ministers' Council
meetings, said the idea was "worth reflecting upon". But he added that "this should be done on a global scale" and without distorting
competition between the US, the EU and Asia. France did not exclude the idea either but others such as the Netherlands and Greece are strongly opposed, according to newswire reports.
Tuesday, May 9, 2006 ~ 10:26 a.m., Yesim Yilmaz Wrote: Over the last four years, state and local taxes on business have risen faster than total state and local taxes. As a result, businesses have
paid a major portion of the additional state and local taxes collected. Businesses paid 48 percent of the entire increase in state and local taxes from fiscal 2002 to fiscal 2005... Businesses paid over half of
the total three-year increase in state and local taxes in 35 states. This was partially due to the modest growth of the individual income and sales taxes paid by households (14.6 percent growth) compared with
the relatively large increase in taxes paid by business, which grew over 25 percent, due partially to a strong upswing in corporate income and employment taxes from the 2001-2002 economic
slowdown... Property taxes on business property were nearly $183 billion in fiscal 2005, accounting for 37 percent of total state and local business taxes. Sales tax on business inputs and capital
equipment totaled almost $112 billion, accounting for over 22 percent of business taxes. The property and sales taxes paid by businesses are taxes on capital located within a state and totaled 59
percent of total business taxes in fiscal 2005...Although the corporate income tax has been the focus of intense legislative debate in many state legislatures during the last few years, it represents only 8
percent of total state and local business taxes nationally...Individual income taxes paid by owners of noncorporate businesses totaled $19
billion in fiscal 2005, 4 percent of total state and local business taxes. Those taxes on noncorporate earnings were nearly half the tax paid
on the net income of corporations...The composition of total state and local business taxes paid varies by industry, with manufacturing and transportation continuing to face significant property and sales taxes
on business property. Traditionally regulated businesses can pay significant industry-specific excise and gross receipts taxes.
Tuesday, May 9, 2006 ~ 10:00 a.m., Sven Larson Wrote: The legislation provides a new "Connector" purchasing pool for health insurance, which also is a funnel for subsidies to lowerincome
workers to help them purchase insurance. But the legislation stipulates that the Connector policies must cover all of the state's 40 mandates on what the insurance must pay for, from hair prostheses
to in vitro fertilization. And it stipulates that the policies must have first-dollar coverage (a "zero deductible"), with no copayments or
premium charges for lower-income workers. Actuaries contracted by the state estimated that the cost of coverage through the Connector would be about $200 a month, but insurers already are saying they
don't see how they can offer policies at that price that abide by all of the expensive mandates and regulations in the legislation. While the Connector is designed to offer choice, it actually is taking away the
ability of insurers to freely compete with different product offerings and for people to purchase the coverage of their choice at a price they can afford to pay.
Monday, May 8, 2006 ~ 10:13 a.m., Sven Larson Wrote: Developing countries at the WTO are being asked to sign up to a deal on Non-Agricultural Market Access (NAMA) that defies the lessons of
history. In return for minimal progress on agriculture, they are under pressure to dramatically and permanently open their industrial markets to foreign competition. The vast weight of historical
evidence suggests that countries must be able to raise and lower tariffs according to changing circumstances if they are to promote growth and industrialisation successfully. Yet the current negotiations
at the WTO aim to eliminate this flexibility. Link to this Blog Entry
Monday, May 8, 2006 ~ 9:56 a.m., Sven Larson Wrote: A group of cigarette distributors and sellers sued New York Wednesday seeking to overturn a law banning Internet, telephone and
mail order tobacco sales. The suit by the Association of Responsible Cigarette Sellers, filed in state Supreme Court in Erie County, contends the 2000 state law violates the U.S. Constitution's
commerce clause. David McNamara, the group's lawyer, said his case was bolstered by last year's U.S. Supreme Court ruling striking down laws in New York and Michigan that banned wine shipments from
out-of-state producers. The Constitution prohibits states from passing laws that discriminate against out-of-state businesses. The group, based in Salamanca, N.Y., near the Seneca tribe, claims the law also
violates the Indian Commerce Clause, which gives the federal government the sole right to regulate commerce with Indian tribes. Many Internet sellers are located on tribal reservations in western New York.
Monday, May 8, 2006 ~ 9:34 a.m., Yesim Yilmaz Wrote: With five years of the Bush administration behind us, we have more than enough evidence to make an assessment about the president's
commitment to our fundamental legal charter. Unfortunately, far from defending the Constitution, President Bush has repeatedly sought to strip out the limits the document places on federal power.
In its official legal briefs and public actions, the Bush administration has advanced a view of federal power that is astonishingly broad, a view that includes a federal government empowered to regulate core
political speech-and restrict it greatly when it counts the most: in the days before a federal election; a president who cannot be restrained,
through validly enacted statutes, from pursuing any tactic he believes to be effective in the war on terror; a president who has the inherent constitutional authority to designate American citizens suspected of
terrorist activity as "enemy combatants," strip them of any constitutional protection, and lock them up without charges for the duration of the war on terror- in other words, perhaps forever; and a
federal government with the power to supervise virtually every aspect of American life, from kindergarten, to marriage, to the grave.
President Bush's constitutional vision is, in short, sharply at odds with the text, history, and structure of our Constitution, which authorizes a government of limited powers.
Sunday, May 7, 2006 ~ 2:11 p.m., Sven Larson Wrote: Oklahoma would benefit from a major reform of its income tax system that includes a broad-based income tax cut for Oklahoma
taxpayers. ...Research shows that states with a slower growth in tax burden experience faster growth in personal income than states with higher growth in tax burden. In fact, from 1979 to 2000 only seven
states had a tax burden that grew faster than Oklahoma's tax burden. Not coincidentally, during the same time period only 14 states had a personal income that grew at a rate slower than Oklahoma. So not
only is Oklahoma a relatively poor state, it is losing ground. Another feature of Oklahoma's tax structure is its high level of progressivity. ...Both empirical research and economic theory suggest that marginal
tax rates matter to people's decisions. High marginal tax rates inhibit the mechanism of prosperity by giving people a disincentive to create wealth.
Saturday, May 6, 2006 ~ 3:49 p.m., Sven Larson Wrote: The researchers found that less than a fifth of the 48 specialist centres fulfilled all eight recommendations. And of the 23
non-specialist centres, only 14 formally collaborated with a specialist centre. The two key areas that were most difficult for centres to comply with were performing the minimum number of congenital
heart operations a year and involving nurse specialists in patient care. However, because the researchers did not receive information for all centres in every country, they said they could not compare
individual country's services. But Dr Philip Moons, assistant professor at the Centre for Health Services and Nursing Research of the Catholic University of Leuven in Belgium, who led the research said:
"We can definitely say that the provision of care overall is suboptimal and there is much room for improvement.
Saturday, May 6, 2006 ~ 12:23 p.m., Yesim Yilmaz Wrote: For the next three years, the EU's strongest economies will remain partly or fully closed to workers from the EU-8 states. Austria,
France, Germany, Italy and the Netherlands will continue to keep their doors closed to job hunters from Eastern Europe (the Dutch may ease the restrictions by 2007). Meanwhile, Finland, Greece,
Portugal and Spain have decided to adopt the EU's open-border policy. Free movement of all workers in the EU is our goal," Employment Commissioner Vladimir Spidla said recently. "The
distinction between old and new member states should disappear as soon as possible." Commenting on the fact that some member states have decided to make concessions, Spidla said that "I am convinced
that this move will be to the great benefit of European workers and economy alike. It will give a strong impetus to those member states that have kept restrictions and I hope that they will gradually lift
restrictions in the coming years." In a report scheduled to be published on 3 May, the Financial Times has said that the Commission will argue that the 2004 enlargement of the Union has
been a clear economic success and that it has not upset the labour market balance in any of the member states.
Friday, May 5, 2006 ~ 6:30 p.m., Sven Larson Wrote: While a high number of people praise peace among the member states (60%) and free movement (56%) as the EU's greatest achievements,
the bloc is not seen as performing well in curbing unemployment which is the single most crucial issue for Europeans, according to the survey. That sentiment is also portrayed in opinions about what the
EU should focus on in future. For 51% of respondents "the most helpful thing" for Europe to succeed would be comparable living standards, followed by the introduction of the euro in all member
states (26%) and a common constitution (25%).
Friday, May 5, 2006 ~ 8:13 a.m., Sven Larson Wrote: Thanks to a Republican Congress, government expenditures have reached $23,760 per household, domestic discretionary spending has
increased 7.6 percent per year, education spending is up 139 percent, energy spending has doubled and the Bush Medicare prescription drug bill will add $33 billion a year to federal expenditures, says du
Pont. So how can Republicans retake the reins on federal spending? The answer lies with the American people, says du Pont: The president must be persuaded to reduce congressional spending and
use his rescission authority to force Congress to vote on rescinding some $15 billion. He needs to veto spending bills that exceed the requested budget spending levels, and he also needs line-item veto
authority. Finally, Congress needs to establish term limits for Appropriations Committee members so that the congressional political establishment cannot go on swag-splitting forever. Now
comes the hard part, says du Pont -- a long-term solution to control the congressional spending process. Republicans have tried and failed to launch a constitutional balanced budget amendment; however,
there are two alternatives that could change congressional spending habits: A flat tax would eliminate political manipulation, raise government revenues and save taxpayers much of the $150 billion
and six million hours it costs Americans to comply with the current tax code. Congress should also repeal the McCain-Feingold campaign spending law that supposedly protects incumbents but
actually violates the First Amendment's guarantee of free speech. Even though none of these changes will be easy, a paradigm shift is needed to control spending excesses and restore the economic
conservatism that has long been the core of the Republican Party's election victories, says du Pont.
Thursday, May 4, 2006 ~ 5:21 p.m., Dan Mitchell Wrote: The IMF delegation, headed by the chief negotiator for Romania Emmanuel van der Mensbrugghe, at that time criticized some of the
policies adopted by Romanian authorities in 2005. The introduction of the 16 percent flat tax, they said, created an income shortage of 1.5 percent of the GDP to the state budget. … IMF experts claimed that
postponing the introduction of measures for the compensation of flat tax side effects would affect the necessary reduction of social security contributions. They called to mind that in Romania, budget income as
a percentage of the GDP was considerably lower than that of EU member states, those in the last wave of enlargement included. The IMF insisted that additional income was necessary to finance
education, health and the expenditures connected to the EU accession process. The Ministers for Finance in the European Union will request Romania to consider increasing some of the taxes in view of raising
the level of State Budget revenues and to encourage investments, ahead of the European Union accession. The ministers believe the introduction of the flat tax rate affects Romania's capacity to cover
the expenditure related to the European Union accession, while the tax abatement may lead to a significant deterioration of public finances, Nine o'Clock reports. …The European officials' request
comes as no surprise to Bucharest authorities, given that revenues to the State Budget as a share in the GDP is lower than in any other EU member states. … After Minister Vladescu admitted that Bucharest
may be forced to raise the flat tax on January 1, 2007 and Secretary of State with the Ministry for European Integration Leonard Orban announced that European officials requested Romania to raise one of
the main taxes, the Head of Government stated that this request will not be complied with. Several weeks ago, Premier Calin Popescu Tariceanu made it clear that the flat tax would not be raised during
his term in office, while the VAT would stay at 19 per cent throughout 2007.
Thursday, May 4, 2006 ~ 5:03 p.m., Dan Mitchell Wrote: Enter ''hammer and sickle" into a shopping search engine, and up pop dozens of products adorned with the Marxist brand -- T-shirts
and ski caps, bracelet charms and keychains, posters of Lenin and ''Soviet Kremlin Stainless Steel Flasks." The glamorization of communism is widespread. On West 4th Street in Manhattan, the
popular KGB Bar is known for its literary readings and Soviet propaganda posters. In Los Angeles, the La La Ling boutique sells baby clothing emblazoned with the face of Che Guevara, Fidel
Castro's notorious henchman. At the House of Mao, a popular eatery in Singapore, waiters in Chinese army uniforms serve Long March Chicken, and a giant picture of Mao Zedong dominates one wall.
What can explain such ''communist chic?" How can people who wouldn't dream of drinking in a pub called Gestapo cheerfully hang out at the KGB Bar? If the swastika is an undisputed symbol of
unspeakable evil, can the hammer-and-sickle and other emblems of communism be anything less? Between 1933 and 1945, Adolf Hitler's Nazis slaughtered some 21 million people, but the communist
nightmare has lasted far longer and its death toll is far, far higher. Since 1917, communist regimes have sent more than 100 million victims to their graves -- and in places like North Korea, the deaths
continue to this day. The historian R.J. Rummel, an expert on genocide and government mass murder, estimates that the Soviet Union alone annihilated nearly 62 million people: ''Old and young,
healthy and sick, men and women, even infants and the infirm, were killed in cold blood. They were not combatants in civil war or rebellions; they were not criminals. Indeed, nearly all were guilty of . .
. nothing."
Wednesday, May 3, 2006 ~ 7:16 a.m., Dan Mitchell Wrote: The vast majority of social science studies find no relationship between spending and student achievement. My own analysis of
schools in Arkansas finds that schools with more money perform no better than schools with less once student and community background characteristics are controlled. And the fact that per pupil
spending has doubled over the past three decades while student achievement has remained stagnant ought to give us a clue that simply spending more won't fix schools. The shortcomings of schools
are not generally attributable to the lack of resources, but to a lack of incentives to use resources effectively. ...In Arkansas, as in too many other states, elected leaders have ceded control over the size of
education budgets to unaccountable courts. Judges and the consultants they require are not easily held responsible for misusing evidence or wasting taxpayer dollars. As long as this continues,
expect to spend more on education and see less in return.
Tuesday, May 2, 2006 ~ 8:34 a.m., Dan Mitchell Wrote: The French government has tabled fresh proposals to break the EU's constitutional deadlock, pleading for an end to national vetoes in
justice and police cooperation and workers' protection rules. ...the improvements sought by Paris reflect ideas in the EU constitution, which was rejected by French and Dutch voters in referendums last
year. ...The main area where France wants to surpress the national veto is justice and home affairs, where the EU constitution also proposed more majority-voting. ...The national veto should be equally
eliminated in some social policy areas, opening the door for EU measures on workers' protection which appear to reflect France's recent mass protests against flexibilisation of lay-off rules. ...France
also seeks "more effective coordination of economic policies in the euro zone," including in the area of taxation. A two-day seminar on the future of the EU saw the European Commission voice support for French proposals to remove national
vetoes from the current EU treaties, hoping that 2007 will bring a further "institutional dynamic." ...There is "convergence" between
the French proposals and commission thinking, they indicated. ...One area where the commission will take action and be "more vocal" is social protection against the negative effects of globalisation,
"Commissioners recognised that a globalisation fund is not enough," said an official referring to a newly established EU fund helping laid-off workers find new jobs.
Tuesday, May 2, 2006 ~ 7:52 a.m., Dan Mitchell Wrote: What passes these days in Europe for an economic rebound would be considered a hard landing in the U.S. Last week, the International
Monetary Fund raised its growth forecast for Europe's largest economy from the previous 1.2% to -- brace yourself -- 1.3%. At the same time, it slashed its forecast for next year to 1% from 1.5%.
Even yesterday's more optimistic forecast from Germany's six leading economic institutes predicts just 1.8% growth for this year and 1.2%
for next. This "recovery" looks more and more like a blip. ...In the U.S., businesses have created 5.2 million new jobs since May of 2003. During that same period Germany lost around 800,000 of those
valuable jobs that are subject to mandatory contributions to the country's struggling welfare system. Yesterday's announcement that the unemployment rate fell to 11.5% from 12% is unfortunately not a
reversal of fortunes. ...A badly needed corporate tax reform won't come until 2008, while the coalition government is fighting over a new wealth tax. The labor market will remain rigid and nonwage
labor costs high. Instead, the government is focused on bringing down the budget deficit. Not a bad idea. But instead of cutting spending, Berlin is more interested in finding new revenue sources,
hence the VAT rise and wealth tax.
Monday, May 1, 2006 ~ 8:57 a.m., Dan Mitchell Wrote: It's tempting to think of higher minimum wages as an anti-poverty weapon, but such an idea doesn't even pass the smell test. After all, if
higher minimum wages could cure poverty, we could easily end worldwide poverty simply by telling poor nations to legislate higher minimum wages. Poor people are not poor because of low wages. For
the most part, they're poor because of low productivity, and wages are connected to productivity. The effect of minimum wages is that of causing unemployment among low-skilled workers. If an employer
must pay $5.15 an hour, plus mandated fringes that might bring the employment cost of a worker to $7 an hour, does it pay him to hire a person who is so unfortunate as to have skills that permit him to
produce only $4 worth of value per hour?
Monday, May 1, 2006 ~ 8:40 a.m., Sven Larson Wrote: On the revenue side, there is no room to lower taxes before the public finances have been put on a sustainable path. ...the tax
administration has started to deliver results in terms of tax collection over the past two years. The abolition of some tax benefits and exemptions in the 2006 budget is also an appropriate step. However
the creation of a new personal income tax bracket, with a higher marginal tax rate, complicates the system and creates additional disincentives to work. A tax reform that really simplifies the tax
system is needed. In the meantime, refraining from revising the tax legislation from one year to the next, as has happened in recent years, would make the tax system easier to manage and would facilitate
long-term decision-making by economic agents. Indeed, re-establishing macroeconomic stability will be the key to ensuring that the necessary structural reforms to improve education, the
labour market and the business environment can be successfully pursued.
Monday, May 1, 2006 ~ 8:21 a.m., Dan Mitchell Wrote: If there is anything worse than partisan demagoguery, it is bipartisan demagoguery. Republican leaders have now joined the Democrats in
blaming the oil companies for the fact that prices rise when demand expands more than supply. Prices have been rising under these conditions for thousands of years, long before there were any oil
companies. This has happened with everything from food to furs and it has happened among people in every part of the world. ...Is it rocket science that, when oil prices hit new highs, gasoline prices also
hit new highs? Do you think the price of wheat could double without the price of bread going up? Would we have politicians running around spouting off about "gouging" by Big Wheat? ...Prices are a
symptom of an underlying reality. Politicians can seize on the symptom and even pass laws dealing with it, without changing the underlying reality. Prices are like a thermometer reading. When
someone has a fever, it is not going to do any good to put the thermometer in ice water to bring down the reading. ...the Senate Republican proposal for a $100 rebate, unveiled yesterday but destined for the pandering hall of fame. "As we see
skyrocketing gas prices around the country, it is time for this Congress to act," declared South Dakota's John Thune on the Senate floor. And so the Members shall, bravely marching off to battle
higher prices by writing every taxpayer (below a certain income level) a one-time check worth about two tanks of gas if you're driving an SUV. The gesture calls to mind other great moments in feckless
legislating, such as Jimmy Carter's "$50 rebate," offered in 1977 to spur the economy. As one wag noted at the time, this was about as
useful as scattering money from airplanes. Adjusting for inflation, the GOP's $100 version is worth a lot less now than $50 in 1977 -- and Republicans should expect it to do about as much for their political
standing as it did for Jimmy Carter's. ...let's not forget the contribution made yesterday by Senator Arlen Specter's Judiciary Committee. By bipartisan voice vote, the Committee created a new
federal and state task force to investigate information-sharing among oil companies. As a grandstanding bonus, it would also allow lawsuits against OPEC for controlling output and fixing oil prices. Even the
Members know that cars will run on nuclear power before suits against OPEC succeed in U.S. courts. If you think $3 a gallon is pinching your pocketbook, fill up in Paris or Amsterdam, where motorists have the high privilege of paying
nearly $6 a gallon thanks to these nations' "progressive" energy policies. However, you can be sure you won't hear that from Democrats or Northeastern Republicans on Capitol Hill--at least not
in public. Far from it. They're suddenly all for cutting gasoline prices, just as long as that doesn't require producing a single additional
barrel of oil. ...So how do the sages on Capitol Hill propose to reduce gas prices? They want to slap a profits tax on Big Oil because of alleged price gouging. Here we have another head-scratcher that
seems to defy even junior-high-school economics. Usually when you tax something, like tobacco, you get less of it. But somehow a tax on oil will magically lead to more oil. ...the White House refuses to
attack the left's anti-consumer energy policies and has even capitulated on requiring a rise in auto fuel-efficiency standards. Mr. Bush could instead be talking about the national and economic
security need for a pro-domestic-production energy policy--starting with drilling in Alaska.
Monday, May 1, 2006 ~ 7:53 a.m., Yesim Yilmaz Wrote: Having oil is one thing. Delivering it to a growing market is another. World economies differ greatly in their capacity to organize
enterprises, adopt new technologies, raise capital and supply what consumers want. When it comes to increasing oil production, economic systems matter quite a bit. More oil would flow onto world
markets and prices would be lower if major oil resources were in countries where producers responded freely to market incentives. The extent of economic freedom in the countries with the world's oil
supplies will greatly affect how well that oil is delivered to consumers...A large part of the world's oil reserves are outside the easy reach of free markets, with their incentives and disciplines. Oil
prices are rising-not because the world is running out of oil but because the bulk of reserves are in countries where market incentives cannot work fully ....Because of the mismatch between reserves and
economic systems, today's oil prices are higher than they would be in a world of free markets. Tomorrow's oil prices are likely to be higher, too, because producers, divorced from market incentives or with an
incentive to restrain production, are likely to underinvest in new capacity.
Monday, May 1, 2006 ~ 7:30 a.m., Dan Mitchell Wrote: On taking office at only 32, Laar found inflation at 1,000%, the economy frozen, with 95% state-owned and 92% of trade being
eastwards to Russia. Now inflation is 2%, every state asset has been sold or is in the process of being liberated and trade with Russia is higher in volume but as a percentage of traffic it has shrunk to
marginal significance. ...The aspect of the Estonian economic miracle that thrills me most is its bold implementation of a simple flat tax. All Estonians pay a rate of 20% - no exemptions, no confusions, no
ambiguities. Did the Treasury in Talinn find its revenues stall? No, they increased. People ceased trying to dodge taxes; 20% is so fair few feel it isn't reasonable. ...Laar admits there have been reversals.
"We had to re-bureaucratise parts of the economy to be admitted into the European Union (EU). Our grocery prices could be far lower, for example, but for the protectionist policies of the European
Commission. To join the EU was of symbolic significance but it has embraced much that is wasteful," he says.
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