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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Thursday, August 31, 2006 ~ 10:30 a.m., Sven Larson Wrote: Hungary's government will refrain from lowering taxes until the end of 2011 as the country strives to reduce the European Union's largest budget deficit compared with the size
of the economy, Prime Minister Ferenc Gyurcsány said. Our "program isn't calculated with a decline in total tax revenue in mind, based on the current tax rates and forecasted income levels," Gyurcsány
told reporters in his office at Budapest's Parliament building today. Gyurcsány is boosting tax revenue, increasing energy prices and reducing the size of the state bureaucracy to trim the budget deficit and
move the country toward euro adoption. ...The government is also working on a package of measures to help attract investment without lower taxes.
Thursday, August 31, 2006 ~ 9:18 a.m., Sven Larson Wrote: France's Europe minister has given a strongly pessimistic view of the state of the European Union suggesting it is suffering from "general
fatigue." Speaking at the annual gathering of French ambassadors on Tuesday (29 August), Catherine Colonna said "the functioning of the
union - and more generally the state of the union - appears worrying to me." "It is not that there is a crisis, that is not the case, the European
Union is rather suffering from a sort of illness of apathy, from general fatigue." She went on to say that this does "not augur well for its future capacity to respond to the needs of its people."
Swedish EU communication commissioner Margot Wallstrom has weighed in to calm tempers at home over Brussels regulation on
cake-baking, stressing the rules apply only to commercial-scale production. The row broke out in the town of Molby when a zealous local food inspector tried to stop people from selling home-made sugar
cakes, tarts and cinnamon buns in a Christian book cafe. The inspector claimed that under the EU's provision directive, only cakes that had
been baked in authorised production facilities could be served up to the public. The small incident turned into a national debate when Swedish
liberal MEP Lena Ek called for mass defiance, saying "I call on all to commit disobedience. Bake buns and sell them!" Swedish daily Svenska Dagbladet reports.
Wednesday, August 30, 2006 ~ 7:41 a.m., Dan Mitchell Wrote: Truck drivers in the Rocky Mountain states have recently been parking their rigs, thanks to a diesel fuel shortage that has forced rationing at
stations and raised prices by nearly 40 cents a gallon since early July. Welcome to the latest government-inspired energy mess. Behind the diesel dry-up is yet another federal mandate, an EPA order that 80% of
diesel production after June 1 meet new "ultra-low-sulfur" requirements. As federal clean-air rules go, this at least has the advantage of targeting particulates, which can do health damage. ...If
this all sounds familiar, recall that Congress's big new ethanol fuel mandate hit just at the start of the summer driving season. That payoff to the Midwest corn lobby requires the nationwide use of 7.5 billion
gallons of that corn-based fuel by 2012. With ethanol manufacturers unable to keep pace, and the makers of a rival fuel additive, MTBE, fleeing the market because of liability concerns, drivers were hammered
with spot gas shortages and price run-ups nationwide. The refinery industry is still trying to work the kinks out of that one. The diesel headache won't make it any easier. ...The refining industry warned
Congress and regulators that the multiplicity of mandates would do this damage, but the Bush Administration and GOP leaders chose to accept the Clinton-era mandates. Americans are paying the price, and right
around election time. Sometimes we think Republicans are trying to lose Congress this year.
Wednesday, August 30, 2006 ~ 7:27 a.m., Dan Mitchell Wrote: The party, headed by the youthful Nikola Gruevski, a former trade minister and finance minister in the government headed by the
VMRO-DPMNE in 1998-2002, emphasized economic reform in its campaign, not Macedonian nationalism. "We believe that Macedonians want to do more than just survive -- they want to succeed. And to
succeed we need a stronger, healthier economy -- one that delivers jobs and growth, that frees individuals to pursue their God-given potential with a minimum of government interference and that opens up the
creative spirit in people," wrote Gruevski ...The VMRO-DPMNE promises to cut public expenditure by 2 percent of the GDP by 2010. It plans to cut red-tape by 2007, thereby enabling registration of new
companies to be completed within three days. The party plans to implement a flat personal tax rate of 10 percent by 2008 - a turnaround from the current progressive income tax rates of 15, 18 and 24 percent.
The tax rate on corporate profits will be reduced from 15 percent to 10 percent and, following the example of Estonia, the tax on reinvested profits will be scrapped altogether.
Tuesday, August 29, 2006 ~ 8:50 a.m., Dan Mitchell Wrote: Fifteen years later, it is clear that the rosy predictions of income-tax supporters were wildly off the mark. We have already seen how despite
the promises of Weicker and legislators, actual, lasting budget cuts played no role in restoring Connecticut's fiscal balance -- the largest tax
increase in state history and heavy borrowing were used to close the gap. Today, even after adjusting for both inflation and population, Connecticut spends more tax revenue and has more employees on its
payroll than it did in 1991. ...Since Connecticut began to tax working, net job creation has ground to a halt. Economists, politicians, and
reporters frequently cite the fact that Connecticut has yet to regain the number of jobs it had at its period of peak employment in the summer of 2000. But a recent Federal Deposit Insurance Corporation report
revealed that the problem goes back even further -- since the early 1990s, "no other state in the country has had such stagnation in employment." ...Between 1991 and 2004, the most recent figure
available from the U.S. Census Bureau, median household income in the Nutmeg State fell by almost $3,300. In contrast, the national figure rose by almost $2,800. ...In the 1990s, Connecticut was one of only two
states to lose population. That should not have come as a surprise. Research shows that high-tax states such as Connecticut have been losing population to low-tax states for decades. ...The Taxpayers
Network documented that from 1990 to 1999, over 2.6 million native-born Americans moved from high-tax states to low-tax states -- "a migration of about one thousand persons per day for each business
day during this period." ...With a decade and half of hindsight, it is now clear that passage of Connecticut's income tax was an act of fiscal
irresponsibility justified by a "crisis" generated by a decade of fiscal irresponsibility. Failure to address the fundamental problem -- i.e.,
runaway state spending -- combined with a massive tax hike and tedious (and ultimately, pointless) bickering over what minor tax cuts to pass
left the vast majority of Nutmeg State's workers, taxpayers, families, and businesses worse off.
Tuesday, August 29, 2006 ~ 8:42 a.m., Sven Larson Wrote: The European Commission decided on Wednesday (23 August) that imports of long grain rice from the US must be tested and found not to
contain an unauthorized genetically modified strain (LL Rice 601) before it can be exported to the bloc. The EU's move came after Japan suspended all imports of US long-grain rice when it emerged last week
that small amounts of an unapproved type of genetically engineered rice had found its way into the feed and food chain in the US. "We have
strict legislation in place in the EU to ensure that any GM product put on the European market has undergone a thorough authorisation procedure based on scientific assessment", said EU health and
consumer commissioner Markos Kyprianou. "There is no flexibility for unauthorised GMOs - these cannot enter the EU food and feed chain under any circumstances".
Tuesday, August 29, 2006 ~ 8:14 a.m., Dan Mitchell Wrote: Three women who used to work for him sued, claiming he created a "hostile environment." The plaintiffs say they were made to feel
unwelcome... Women who still work for Charney don't see a problem. One told me, "You see the company, you see the posters on the walls. I think that he was always honest about who he is. And for someone to
come and say, 'Oh, I didn't know, and I'm surprised,' I don't think it's fair." Charney adds, "There is a sexual element to fashion that is
inescapable. So like, to then start saying, ah, let's get scared about sex. You know, we can't mention the word sex in the workplace, I mean, it
just doesn't add up. It's not right." Good point. If you don't like the atmosphere in a workplace, don't work there. Why should people have a
right to "damages" because they don't approve of a company's environment? No one is forced to work for Charney, so why can't people like him run their companies just as they wish? As the novelist
Ayn Rand put it, "The right to agree with others is not a problem in any society; it is the right to disagree that is crucial. It is the institution of
private property that protects and implements the right to disagree." "Freedom is everything," says Charney. Freedom is the most important
thing. But now Charney is a maverick swimming against the tide of Big Government with its endless laws telling us how to live, what we may say, and even whom we can look at sexually. Do the bureaucrats and
labor lawyers really know best?
Tuesday, August 29, 2006 ~ 7:28 a.m., Andrew Quinlan Wrote: Where Section 404 [of the Sarbanes-Oxley Act] has gone awry is in the implementation of the requirements. The current implementation of
Section 404 is not tailored, and does not work well, for smaller public companies. The one-size-fits-all approach of Section 404 is highly burdensome to smaller companies, and such companies are bearing
disproportionate costs on a relative basis. ... The U.S. Government Accountability Office (GAO) also made similar findings in its May, 2006, report stating that smaller public companies at the bottom 6% of total
U.S. market capitalization pay up to $1.4 million on external auditors for Section 404 compliance. In fact, 47% of the companies reported that
Section 404 compliance resulted in significant "opportunity costs" by draining resources away from innovation and research. ... For most
biotechnology companies, the actual costs of Section 404 compliance, including both internal costs as well as external auditor costs, are substantial. In fact, the opportunity costs of Section 404 for smaller
companies can be even greater, impeding the ability to invest in and sometimes, to continue ongoing, critical research and development activities. Biotech companies are at the forefront of developing new
treatments for many diseases, and biotech companies presently are engaged in over 350 clinical trials for over 200 diseases, from cancer to multiple sclerosis. August 23, 2006, Advanced Cell Technology Press Release
Monday, August 28, 2006 ~ 10:46 a.m., Sven Larson Wrote: Many in the Washington establishment were shocked Aug. 17, when the Congressional Budget Office reported a surge of "unanticipated tax
receipts" that will sharply push down this year's deficit. Those who had been proclaiming the Bush tax rate cuts would result in a big reduction
in tax revenues tried to hide their disappointment. It was tough being proved wrong again after having said the same thing when Ronald Reagan cut tax rates in the early 1980s. We have now had three major
experiments with tax rate reduction in the last half-century, and each time both economic growth and tax revenues have surged, despite the fears and cries of the anti-tax-cut crowd. How much more evidence will
they need to understand the difference between tax rates and tax revenues? Most everyone, including most members of Congress, can understand that properly structured tax rate reduction, by decreasing
the impediments to working, saving and investing, will lead to a
Monday, August 28, 2006 ~ 10:00 a.m., Andrew Quinlan Wrote: According to the General Services Administration, the federal government subsidizes $300 billion in grants to some 30,000 groups.
Specific data on these grants, however, is scattered across innumerable sources, is unspecific, and is difficult to obtain. Typically, citizens must
therefore go to the trouble of filing a Freedom of Information Act request, and subsequently battle agency bureaucrats to ascertain the amount and source of taxpayer funding. ...This problem manifests itself
vividly when it comes to government-funded "studies" by supposedly "independent" entities, which are subsequently cited to bolster the very
same funding agency's preexisting policy position. ...For example, University of Connecticut Associate Professor Leslie Snyder recently published a study asserting a direct link between alcohol advertising and
increased underage drinking. Liberal advocacy groups and regulatory agencies naturally trumpeted Professor Snyder's study in their continuing efforts to further regulate our lives and the free market. One
small problem: Professor Snyder's study has already been eviscerated as scientifically and internally flawed. ...As another example of
government-subsidized sham "studies," recall the recently-celebrated National Academy of Sciences paper allegedly establishing a human cause behind climate change. Liberals and their mainstream media
mouthpieces again trumpeted this piece, but some scientists listed hadn't actually written the study or even seen it prior to publication. ...Massachusetts Institute of Technology climate expert Richard S.
Lindzen, for instance, opposed the piece publicly. This merely demonstrates that government research dollars steer toward advocates of "global warming," naturally encouraging recipients to justify the
federal dollars and perpetuate the false "need" for further studies and taxpayer funding.
Monday, August 28, 2006 ~ 8:59 a.m., Dan Mitchell Wrote: In May, a senior centre-right French MEP named Alain Lamassoure suggested that the EU should levy a tax on text messages (SMS) and
email messages to shore up the future financing of EU programs. ...Lamassoure also argued that in times of globalization, it is less and
less easy for states to raise tax revenues. "I suggest this as an idea not only for the EU but also for member states themselves and on the
worldwide scale," he said. ...the French idea is something that may make sense only in the world of statist, protectionist, status-quo-preservation that is modern France. Afraid of anything that
lies beyond the immediate control of the state, French political discourse is becoming increasingly Orwellian. Thus, the ghosts of US "cultural
imperialism" and the bugbears of globalization became the mantra of French society, breeding paralyzing fear of change in the nation's psyche.
Monday, August 28, 2006 ~ 8:30 a.m., Sven Larson Wrote: With gasoline prices exceeding $3 per gallon throughout much of the United States, motorists are feeling a considerable amount of pain at
the pump. Many elected officials are feeling pressure from their constituents to "do something" that will alleviate the burden of high
energy costs. "Doing something" in this case usually means railing against the evils of "Big Oil." Of course, worldwide supply and demand
are the primary determinants of gasoline prices, but that does not stop the wild allegations - often centered on accusations of "price gouging" -
against oil companies every time they raise prices or announce a quarterly profit. Accusations of gouging then typically lead to calls for government intervention through investigations and punitive taxes on
the industry, such as a levy on windfall profits. ... According to Department of Energy data from 1977 to 2004, federal and state governments extracted $397 billion by taxing the profits of the largest
oil companies and an additional $1.1 trillion in taxes at the pump. In today's dollars, that's $2.2 trillion - enough to buy a Toyota Prius for
every household in the nation. In fact, oil companies paid three times more in taxes than they earned in profits during those 28 years.[1]
Remarkably, there are some in this country who think "big oil" is not paying its fair share and that a windfall profits tax is needed to punish
the oil industry for their "excessive" profits. Politicians who feel the pressure to "do something" are likely to ignore these facts, however.
Monday, August 28, 2006 ~ 7:42 a.m., Dan Mitchell Wrote: New York City workers have managed to lobby enormous new pension guarantees through the State Legislature. Urban park rangers and 911
operators can now retire with full pensions after 25 years on the job - even if they're still in their 40's. Correction officers, emergency medical
technicians, sanitation workers, firefighters and police officers who come down with heart disease can retire with pensions equal to three-quarters of their salary, exempt from state and local taxes. Ditto
correction officers, police officers and firefighters who contract hepatitis, tuberculosis or H.I.V. Meanwhile, the city's pension plans may
be facing a shortfall of up to $49 billion. While some city officials can be wildly irresponsible when it comes to pensions (the City Council
requested passage of the Christmas bonus bill while the mayor's office howled), the real culprits here are the members of the State Legislature. They are happy to shovel these measures through in return for
campaign contributions and election endorsements from the unions while the city pays the tab.
Monday, August 28, 2006 ~ 7:15 a.m., Dan Mitchell Wrote: The futility of imprisonment, for example, is a dogma on the left. It does no good to point out that crime rates in both Britain and the United
States soared during the decade of the 1960s when poverty rates were going down -- and imprisonment rates were also going down. It does no good to point out that soaring crime rates in the United States began to
turn down only after the declining rate of imprisonment was halted and reversed, leading to a rising prison population much deplored by liberals. It does no good to point out that Singapore's imprisonment rate
is more than double that of Canada -- and its crime rate less than one-tenth the Canadian crime rate.
Sunday, August 27, 2006 ~ 3:52 p.m., Dan Mitchell Wrote: Welfare reform has worked so well that its success runs the risk of going almost unnoticed. Welfare rolls are down to about two million today
from a peak of five million in 1995. The last time welfare caseloads were this low was 1970, when America had 100 million fewer citizens. But what about the children? The rate of black children living in poverty
in America was more than 40% in 1996 and stands at 32% today, according to the U.S. Census Bureau. In the 25 years prior to welfare reform, that number had only briefly ever dipped below 40% and stood
as high as 47% in 1980. ...That precedent ought to apply now to Medicaid, another federal entitlement urgently in need of reform and on which Governors are taking the lead. Mr. Clinton vetoed a Medicaid
reform in 1995 that might well have been as successful as welfare reform in allowing states to reform health care for the poor and force fewer of them into emergency rooms. Florida Governor Jeb Bush and
others have in recent years received waivers that may well pave the way for a national reform.
Sunday, August 27, 2006 ~ 11:11 a.m., Dan Mitchell Wrote: Minister of Finance Plamen Oresharski...told a news conference on Tuesday that while the government's goal to cut corporate tax by 3% to
12% in order to attract higher levels of investment remains in place, a final decision would not be made until October.
Saturday, August 26, 2006 ~ 5:26 p.m., Sven Larson Wrote: Tax holiday season is here. A record 14 states and the District of Columbia will offer sales tax breaks this summer to make
back-to-school shopping less expensive. Most tax holidays start Friday and last through the weekend. Details vary by state. Purchases exempt
from sales taxes during these periods typically include computers, clothes and school supplies. The average family of school-age children will spend $527 on school supplies this year, estimates the National
Retail Federation. The tax holidays, originally designed to offset some of that cost, have expanded into an effort to boost retail sales and give a popular tax break. In Georgia, energy efficient items - from
refrigerators to windows - will be tax-free, too. On Wednesday, Massachusetts Gov. Mitt Romney, a Republican, signed a law that creates the nation's biggest tax holiday. All retail sales under $2,500 will
be exempt from the state's 5% sales tax Aug. 12-13. Sales tax holidays have become so popular that they are the second biggest sales period in some states, surpassed only by Thanksgiving weekend.
Saturday, August 26, 2006 ~ 2:51 p.m., Dan Mitchell Wrote: German leader Angela Merkel has assured taxpayers that there will be no more increases in taxation other than the planned increases in
value-added tax and income tax from January 2007. "I view tax increases as the wrong signal," Merkel told a press conference earlier this week, as economic data showed that the German economy is at
long last growing again. VAT is due to be increased from 16% to 19% from January 1 in order to help reduce the government's budget deficit and meet European Union rules underpinning the stability of the euro
currency. ...The increase in the rate of VAT will coincide with a number of other tax increases and cuts in tax breaks as the grand coalition
attempts to dig itself out of its fiscal hole. These include: a 3% 'wealth tax' on individuals earning more than EUR250,000 a year (US$316,000), and couples earning more than EUR500,000, driving the
top rate of income tax to 45%; and the elimination of tax breaks for commuters in a tax package designed to raise an additional EUR18 billion.
Friday, August 25, 2006 ~ 11:50 a.m., Sven Larson Wrote: Japanese minister of economy Toshihiro Nikai is set to unveil plans for a pan-Asian free trade area of 3.1 billion people, half the world's
population, Malaysian news agency Bernama has reported ahead of the 38th ASEAN Economic Ministers meeting starting today in Kuala Lumpur. The free trade area would include ASEAN-countries Australia,
China, South Korea, India, Japan and New Zealand and would be promoted by a Japanese fund of 100 million US dollars. The Japanese minister will travel to Malaysia on Tuesday (22 August) seeking
acceptance for his plan from the Association of South East Asian Nations (ASEAN) ministers. The 39-year-old ASEAN bloc agreed already in October 2003 to set up a single market by 2020, modelled on
the EU. But ministers meeting this week hope to speed up the plans and get it ready by 2015.
Thursday, August 24, 2006 ~ 8:58 a.m., Dan Mitchell Wrote: Ontario and Quebec once reigned supreme as the economic hub of Canada, but no more. The western provinces of British Columbia,
Alberta and Saskatchewan are quickly taking their place. …Western Canadian governments of all political stripes -- from Progressive Conservatives in Alberta to Liberals in British Columbia to New
Democrats (socialists) in Saskatchewan -- have reduced marginal personal income tax rates and overall business taxes. The tax policies pursued by western Canada over the past few years are quintessentially
supply-side. That is, the tax relief is largely focused on improving incentives for work, savings, investment and entrepreneurship. Alberta led the way in 2000 by creating Canada's only single-rate personal
income tax -- 10%. British Columbia and Saskatchewan soon followed by substantially reducing their personal income tax rates. Top marginal rates in these two provinces were reduced to 14.7% and 15%. Compare
that to Ontario's top marginal rate of 17.4% or Quebec's 19.2%. Canada's three western provinces now have the lowest top marginal rates in the country. The changes to personal income taxes were
matched, perhaps more importantly, by reductions in business taxes. All three governments pursued two broad measures: reductions in corporate income tax rates and the elimination of corporate capital
taxes, a uniquely Canadian tax that severely punishes investment and development. …The economic results of tax reform based on improved incentives have been stunning. Over the past three years British
Columbia has grown 3.4% a year on average; Alberta 4%; and Saskatchewan 3.5%, all easily outperforming the Canadian average of 2.6% a year over the same period. Growth in the three provinces also
outpaced the U.S. national average for the past two years. Among Canadian provinces and the 50 American states, Alberta ranked seventh in growth, British Columbia ninth, and Saskatchewan 17th.
Thursday, August 24, 2006 ~ 8:45 a.m., Sven Larson Wrote: Among the worst violators of Americans' property rights are out-of-control regulators who enforce federal environmental laws.
Unfortunately, our elected officials and the courts are doing little to rein in these ecological extremists. The Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (the Corps), along with a
plethora of other federal and state agencies, have joined forces in recent decades to expand the terms of the federal Clean Water Act -
particularly as it relates to property designated as wetlands - in an effort to address what they perceive as gaps in the law. In some cases, the
fervor with which these environmental regulatory agencies misapply the Clean Water Act has made fugitives of landowners, bankrupted others and left the remainder perplexed about their own property. Two of those
landowners - Michigan residents John Rapanos and June Carabel - have been caught in a legal swamp reaching all the way to the Supreme Court. Despite the fact that his property is 20 miles from the nearest
navigable waters, the Corps claims Rapanos illegally altered a wetland. And, while Carabel's land is connected to Michigan's Lake St. Clair by
man-made ditches, the Corps considers these conveyances "navigable waters" over which it has jurisdiction. John Toebben, a well-known and
environmentally conscientious Northern Kentucky developer, has also endured a running battle with the Corps of Engineers about what constitutes a wetland. The conflict has delayed construction projects
and increased costs to home buyers.
Thursday, August 24, 2006 ~ 8:43 a.m., Dan Mitchell Wrote: After pickled sheep, unmade beds and painting with elephant dung, some questioned where modern art could go next. Kira O'Reilly will
provide her own answer today by spending four hours naked, hugging a dead pig - at the taxpayer's expense. … She will spend four hours with the dead pig - bought from a local abattoir - in her arms. She wrote on
the gallery's website: 'When I cut pig I have an urge to delve both hands into the belly, to meld into her warm flesh, my blood and her blood.'
Miss O'Reilly's fee for the performance is thought to have been drawn from Ł30,000 given to the gallery by the Arts Council England.
Wednesday, August 23, 2006 ~ 2:54 p.m., Sven Larson Wrote: Across the nation and in Atlanta, policy-makers are preparing to spend billions of dollars of taxpayers' money building rail transit. The problem
they face now is how to get people onto trains when most people live miles from rail lines. The solution: Jam people into high-density housing around each rail transit station and call it "transit-oriented
development," or TOD. Berkeley, California, TOD proponent Dena Belzer claims rail transit in other cities has spurred billions of dollars
worth of developments. She adds that many people are eager to live in high-density, mixed-use developments where they can walk downstairs to a coffee shop or grocery store instead of having to get in a car and
drive. First of all, the billions of dollars of development supposedly inspired by rail transit is simply a lie. To make this claim, rail supporters
have included every downtown skyscraper and taxpayer-subsidized sports stadium that happened to be built near any rail line. They have even counted downtown parking garages. If rail transit works so well,
why the need for new garages downtown? Second, while some people prefer to live in a beehive of activity, they are definitely the minority. A poll conducted by National Family Opinion found that 82 percent of
Americans say they aspire to live in a single-family home in the suburbs, and only 18 percent want to live in cities close to work, shopping and
transit. Certainly, people do not move to Atlanta's wide-open spaces so they can live in Brooklyn-style neighborhoods. Unfortunately for TOD
enthusiasts like Belzer, the real-world experience with transit-oriented development in Portland, Oregon, the San Francisco Bay Area and other cities is that TODs only work when they are subsidized and
designed around the automobile, not transit.
Wednesday, August 23, 2006 ~ 8:41 a.m., Dan Mitchell Wrote: The flat tax has generated larger revenues to the state budget, which makes NBR Governor Mugur Isarescu feel that its effects, called into
question for a long time, could be beneficial, after all. "The fact that we have larger revenues cannot be neglected. Eighteen months later, the
flat tax might be showing effects. If it worked in Slovakia, why wouldn't it work here, too?" Isarescu rhetorically wondered during the conference where he presented the second quarter inflation report. He
points out that the "unexpectedly positive" development of revenue is consistent with how it feels from NBR's standpoint. The revenue of the
general consolidated budget rose by 38.4% this July compared with last July, to 2.63 billion euros (9.4 billion RON). The rate of growth that
exceeded 38% in July is double the average of the first six months, when budgetary revenues went up by 20% in nominal terms in RON. Isarescu yesterday explained during the above-mentioned conference that the
budget deficit could be visibly lower than the 2.5% of GDP target announced, as revenues of the budget exceeded initial estimates by far.
Tuesday, August 22, 2006 ~ 8:45 a.m., Dan Mitchell Wrote: Irish residents with money held outside the country have switched their funds to new locations to avoid EU rules cracking down on offshore tax
evasion. Provisional figures from the Revenue Commissioners showed just €400,000 had been raised in taxes from Irish investors with money
held in selected offshore centres, following the introduction of the EU Savings Directive, which took effect last year. This figure is much lower
than expected by tax experts, suggesting substantial funds had moved to locations not covered by the directive. … A number of tax experts have criticised the directive because they claimed investors could switch
money to locations outside the EU, to escape the withholding tax and prevent the Revenue from finding out about the existence of their investments. Other savers have left their money in place but
restructured their investments through a corporate account or trust to avoid disclosure. Patrick Convery, tax and legal services director with
PricewaterhouseCoopers, said it was likely the terms of the directive would be reviewed to minimise the scope for evasion in due course.
Tuesday, August 22, 2006 ~ 8:23 a.m., Dan Mitchell Wrote: Increasingly, major U.S. corporations are removing themselves from the public equities markets and going private. Why? To a large degree,
because the cost of government regulations has become unbearable. HCA, the largest hospital operator, recently announced a record $21 billion deal to take itself private. Among reasons cited by the company's
founder, Thomas Frist, for departing the NYSE: the untenable cost of complying with Sarbanes-Oxley. The recent trend of major companies
going (or planning to go) private -- Hertz, Toys "R" Us, Kinder Morgan, Albertson's, Univision -- is not coincidental. And that's only half the tale.
While corporations are retreating from our public capital marketplace, exchanges in the rest of the world are thriving at our expense. Of the 25
largest IPOs worldwide in 2005, only one took place in the U.S. Most went to London or Hong Kong. … When management is diverted from focusing on creating shareholder value so as to contend with increasing
regulatory demands, stagnation sets in. It doesn't take a rocket scientist to work out what happens to a business next. So in order to stay out of
the crosshairs of government regulators, companies are avoiding risks they might otherwise take to innovate or grow their businesses: "Keep
your head down." …Clearly the marketplace is trying to tell the U.S. something when so much of the world's IPO activity is moving offshore.
Consider that in 2001 the U.S. accounted for 36% of global IPO activity in dollars. By 2005 that figure had plunged to 24%, a one-third loss in
overall market share. In fact, last year a record 29 countries hosted IPOs worth $1 billion or more, meaning that the competition will only get tougher. In response, the U.S. must make itself more -- not less --
attractive as a financial marketplace.
Tuesday, August 22, 2006 ~ 8:03 a.m., Sven Larson Wrote: Today, in a landmark victory for NRA and law-abiding gun owners, Judge Carl J. Barbier of the U.S. District Court for the Eastern District
of Louisiana denied the City of New Orleans' motion to dismiss NRA's lawsuit against the city and held that the Second Amendment applies to law-abiding residents in the State of Louisiana and the City of New
Orleans. Straining the bounds of credibility and reflecting the true sentiment of anti-gunners, the City of New Orleans contemptuously argued that the Second Amendment does not apply to residents in the
State of Louisiana and the City of New Orleans. NRA first filed suit after reports surfaced indicating that, following Hurricane Katrina, firearms
were confiscated from law-abiding New Orleans residents. Former New Orleans Police Chief Eddie Compass issued orders to confiscate firearms from all citizens, under a flawed state emergency powers law.
With that one order, the one means of self-protection innocent victims had during a time of widespread civil disorder was stripped away.
Tuesday, August 22, 2006 ~ 7:51 a.m., Dan Mitchell Wrote: The German Finance Ministry has confirmed a report in the national press that companies are escaping EUR65 billion (US$82 billion) in
German taxes annually by shifting profits abroad. The claims, published by the daily newspaper Die Welt, are based on an internal Finance Ministry report which studied the discrepancy between the overall
economic balance sheet and revenues from corporate tax. They have been confirmed by a spokesman for the Ministry. With one of the highest combined corporate tax rates in the developed world, it is perhaps no
surprise that companies operating in Europe's biggest economy are keen to cut their tax bills by shifting income to lower tax jurisdictions. Presently, large companies pay almost 40% of their income in corporate
tax, based on a 25% federal corporate tax and regional corporate tax of about 13%. The grand coalition of Chancellor Angela Merkel is seeking to remove the incentive to dodge German taxes and attract more
investment in the country's flagging economy by slashing the combined corporate tax rate to less than 30%, through a cut in the headline corporate tax rate from 25% to 12.5% from 2008.
Monday, August 21, 2006 ~ 8:36 a.m., Dan Mitchell Wrote: The ban on liquids, creams and gels follows a pattern of government reaction to the latest terrorist plot with measures that seem designed to
reassure the public with an illusion of security. … According to an expert cited by the International Herald Tribune, "about 5 ounces ... of
a powerful explosive like nitroglycerin might be enough" to bring down a plane. If I can inadvertently smuggle enough liquid to do the job,
surely a determined terrorist could do it on purpose -- especially since the Transportation Security Administration (TSA) is letting passengers
carry on baby formula, breast milk and baby food. The exceptions are understandable but puzzling, since the recently disrupted terrorist plot that prompted the new rules reportedly involved liquid explosive
disguised as baby formula. It is also hard to figure out why the TSA is completely banning "gel cap-type pills" but allowing each passenger to
carry up to 4 ounces of over-the-counter liquid medication, contact lens solution, nasal spray or eye drops. These inconsistencies are reminiscent
of the reaction to Richard Reid's attempted ignition of a shoe bomb on an American Airlines flight from Paris to Miami in 2001. Congress responded by banning lighters from airplanes. But Reid himself did not
use a lighter; he used matches, which are still permitted. Before the latest scare, the TSA urged Congress to repeal the lighter ban, arguing that enforcing it, which involves confiscating some 30,000 lighters a
day, is a distraction from more serious threats -- the same rationale the agency offered when it revised its rules to permit small scissors and
tools. … Under the new rules, screeners are expected to keep an eye out for dozens of additional everyday items that people commonly take with them in traveling. How many toothpaste tubes, deodorant sticks and
teething rings will they seize every day, and how many will they miss? More important, what else will they miss while they're looking for toiletries, beverages and gel-impregnated toys?
Monday, August 21, 2006 ~ 8:12 a.m., Dan Mitchell Wrote: Private insurers have long had "flood exclusions" in their contracts -- which is one reason the federal government has offered flood insurance
for nearly 40 years. When Katrina hit, these private insurers offered to pay homeowners for wind damage -- as their contracts required -- but
not for destruction due to flooding. Enter Mr. Scruggs, who adopted the highly novel legal theory that because the wind had "pushed" the water
into homes, flood damage should be covered. Mr. Scruggs found a couple to represent in front of Judge L.T. Senter Jr. at the U.S. District Court of Southern Mississippi, and by some counts he and other trial
lawyers have lined up about 700 similar suits. Meanwhile, Mississippi Attorney General Jim Hood filed his own politically opportunistic suit,
claiming the flood exclusions were "unconscionable," which is a word that more appropriately applies to his own behavior. Judge Senter didn't
buy it, and with any luck his well-reasoned decision will take the wind out of these suits. The judge took a hard look at the precise language in
the contracts and pronounced that the flood exclusions were clear. He added that Paul Leonard, one of the claimants, "knew [separate] flood
insurance was available and optional," but he chose not to purchase it. …This all matters because the suits threaten to raise the cost of insurance, if not deny coverage entirely, to millions of Americans
beyond those hurt by Katrina. Private companies are reluctant to offer flood insurance because it is not a typical insurable risk. Property and casualty insurance only works when companies can collect premiums
from many policy holders, most of whom will never file a major claim and whose premiums can cover those who suffer catastrophic damage. However, the only people who buy flood insurance are those who are
very likely to be flooded, making it difficult to spread risk. Floods also tend to be repeat events, because people (being people) tend to rebuild
in flood-prone areas where they expect the feds will bail them out anyway. Because the federal government long ago stepped into this breach, private insurers haven't collected a penny in flood premiums in
years. Yet if the Scruggs theory prevails, these companies could be stuck with an estimated $15 billion in claims. The only way to cover that bill
would be to raise premiums for homeowners far and wide. That, or stop selling policies in states (like Mississippi) with higher than normal flood risks.
Monday, August 21, 2006 ~ 8:00 a.m., Sven Larson Wrote: Democratic Gov. Dale Bumpers and the General Assembly raised Arkansas' top income tax rate to "broaden the tax base" in 1971(1). Yet
Arkansas' per capita income, expressed as a percentage of the U.S. total, has barely improved, moving from 71 (1971) to 77.7 percent (2005) over the 34-year period, according to data from the U.S. Bureau
of Economic Analysis. Arkansans would have to wait until the final decade of the 21st Century (2090-2100) to enjoy per capita income on a par with the U.S. average if growth continues at its current anemic rate.
The 1971 income tax increase reversed a decades-long strong growth trend and left Arkansas with the highest income tax rate among bordering states (Mississippi, Missouri, Louisiana, Oklahoma, Tennessee
and Texas).
Sunday, August 20, 2006 ~ 3:21 p.m., Sven Larson Wrote: The World Health Organization (WHO), in collaboration with the International Labour Organization and the International Organization
for Migration, today announced the launch of a coordinated global plan to address a major and often overlooked barrier to preventing and treating HIV/AIDS: the severe shortage of health workers, particularly
in developing nations. Called 'Treat, Train, Retain', the plan is an important component of WHO's overall efforts to strengthen human resources for health and to promote comprehensive national strategies
for human resource development across different disease programmes. The plan is also part of WHO's work to promote universal access to HIV/AIDS services. Through its HIV/AIDS Programme, WHO is playing
a central role in making the goal of universal access a reality. ... 'Retain' relates to a set of interventions to help ensure that countries are able to
keep existing workers employed in the health system. These include: Instituting policy changes, codes of practice and ethical guidelines to minimize migration of health workers from low-income countries to
developed countries [and] diminishing the draw of private-sector and NGO HIV/AIDS programmes on workers in public health systems. Policy and academic debate—often impassioned—on health professional migration from developing countries has frequently advanced beyond
systematic knowledge of the extent of the phenomenon. In South Africa, epicenter of the HIV catastrophe, the health minister recently claimed
that "if there is a single major threat to our overall health effort, it is the continued outward migration of key health professionals,
particularly nurses."2 After the UK National Health Service ended its active recruitment of staff from Sub-Saharan Africa in 2001, the British
Medical Association (BMA) and the Royal College of Nursing praised this "strong moral lead," adding that "[i]t is now essential that other
developed countries … make a similar commitment to address the issue."3 BMA Chairman of Council James Johnson flatly declared that
"the rape of the poorest countries must stop."4 In academic circles, Harvard's Sabina Alkire and Lincoln Chen urge that rich countries'
migration policy "should adopt 'medical exceptionalism' based on moral and ethical grounds."5 Devesh Kapur and John McHale caution
against "poaching" health workers from developing countries and claim that the case is "obvious" for "restraint" in the recruitment of doctors
and nurses.6 Philip Martin, Manolo Abella, and Christiane Kuptsch assert that South Africa is "suffering" from a "brain drain" of doctors
and nurses and decries a fiscal impact over $1 billion.
Sunday, August 20, 2006 ~ 12:42 p.m., Dan Mitchell Wrote: Water is the king of commodities, and there's plenty of it, enough to solve the planet's water problems — but only if governments create
markets. Actually, there already is a global water market, worth about $400 million, according to The New York Times. Corporations across the world, many of them large international firms, are investing in
water-delivery businesses and water-related equipment companies. Yet governments still control — and mismanage — large quantities of water. They do so by failing to provide enough to those who need it, by
unwise subsidies that encourage waste and by inattention to infrastructure. Nothing minimizes waste or allocates resources more efficiently than prices arrived at in a free market. And nothing brings
willing sellers and buyers together like the profit motive. …Turning water into a market commodity won't be politically easy. Some would say it's impossible, given the many governments that have an aversion
to markets. Yet Mexico, Pakistan, India and Peru, where there's been armed conflict over water, are examples of somewhat unlikely nations that have founded water property rights and/or water markets. So has
Chile, which has shown that water markets "can improve the economic efficiency of water use and stimulate investment," economist Mateen
Thobani observed in a World Bank report. Investment, of course, leads to new businesses and jobs, both of which are desperately needed in poor nations where water is in short supply.
Saturday, August 19, 2006 ~5:30 p.m., Dan Mitchell Wrote: Just as Mayor Richard Daley and these columns predicted, the law recently passed by Chicago's City Council requiring a super-minimum
wage is driving big retailers out of the city. Target was the first big chain to react, recently cancelling plans to open a new superstore in a run-down area on the city's North side. Only a few months ago the
project was hailed by city leaders as an anchor for redeveloping that depressed neighborhood. Now it gets to stay depressed. Wal-Mart has also announced that its plans to build 20 new stores in the city over the
next five years are "on hold" until the wage issue is resolved. This isn't what the politicians said would happen when they mandated that certain
mostly non-union "big-box" retailers pay a minimum of $13 in wage and health benefits by 2010, or more than two-and-a-half times the national minimum wage. "This is a great day for working men and
women of Chicago," said Alderman Joseph Moore, who sponsored the ordinance but clearly doesn't think very far ahead, if he thinks at all.
The Council was warned that stores would flee to the suburbs or not be built. But instead it heeded such activists as Annette Bernhardt, chief
economist at New York University Law School, who claimed that "We're very confident that retailers want and need to be in Chicago." Whoops.
Saturday, August 19, 2006 ~ 2:27 p.m., Dan Mitchell Wrote: David Halpern, who advises the Prime Minister on social issues, said the redistribution of wealth is the key to a nation's contentment. …Mr
Halpern, who works in the Prime Minister's strategy unit, said that people are unhappy if they see others earning more than them. He argues if we want a happier society the Government should reduce the
gap between rich and poor.
Friday, August 18, 2006 ~ 11:17 a.m., Sven Larson Wrote: In the midst of tumultuous economic conditions, the Bush Administration, much like that of the Reagan Administration two
decades earlier, has stood by tax relief as the cornerstone of the federal government's answer to sagging economic conditions. Both tax reduction policies, Reagan's Economic Recovery Tax Act of 1981 and
the Bush tax cuts of 2001 and 2003, met stiff resistance from across the political aisle, but have been broadly credited by mainstream economists
as an economic "saving grace" through the spectrum of history. ...By all rights, economic conditions experienced under both Presidents should
have been poor. Reagan took office on the heels of crippling inflation throughout the preceding decade, a defense buildup coupled with
continued acrimony with the Soviet Union, the "Black Monday" stock market crash of 1987, and ongoing corporate corruption. Likewise,
Bush took office in 2001 as, to borrow a term coined by former Federal Reserve Chairman Alan Greenspan, the nation's economic "irrational
exuberance" was collapsing. The Bush economy later ran head on into the September 11 terror attacks, wars in Afghanistan and Iraq, the
seemingly overnight collapse of several corporate giants, Hurricane Katrina, and staggering jumps in oil prices. Nonetheless, the era of
"Reaganomics" and the first sixty-six months of George W. Bush's Presidential tenure have been marked by robust economic growth by historical standards. Economist Lawrence Kudlow points out that the
American economy grew approximately 20 percent during the 11 quarters following the signing of the 2003 tax cuts. This is tantamount to $2.2 trillion of wealth creation or tacking the entire Chinese economy
on to our own (Kramer, 2006). Unemployment figures reported by the U.S. Department of Labor have also indicated that claims of a "jobless
recovery" by political partisans are overwhelmingly more political grand-standing than reality. Since Bush inked his signature on the 2003
tax cuts, the country's unemployment rate has fallen from 6.1 to 4.8 percent (Economagic, 2006). Since August 2003, 5.4 million new jobs have been added to non-government payrolls (The White House, 2006).
Likewise, the sour economy during the early years of the 1980s was reversed as Reagan's stimulus package took hold. A deep recession spurred by rampant corporate bankruptcies and instability in the
banking industry peaked in late 1982 when the unemployment rate climbed to 10.2 percent. When Reagan's successor was sworn into office in January 1989, unemployment stood at only 5.4 percent (Economagic,
2006). When Reagan delivered his first inaugural address on January 20, 1981, the value of the S&P 500 stood at 206.863 and grew to 669.058 when he left office eight years later-representing roughly a 323
percent jump over just eight years (Economagic, 2006).
Friday, August 18, 2006 ~ 8:47 a.m., Dan Mitchell Wrote: Any satire about government boondoggles is soon upstaged by an actual government program that's more inane than anything comedians could
invent. After the 9/11 attacks, Congress passed a compassionate piece of legislation called the Supplemental Terrorist Relief Act. It was to give
low-interest loans to small businesses disrupted by the attacks, allowing them to rebuild. The loans were supposed to help hotels, retailers, and small service businesses in lower Manhattan. But, as usual, the
government passed your money out everywhere. Terrorist Relief Act loans went to Dunkin' Donuts shops in Connecticut, Pennsylvania, Georgia, Vermont, and Ohio. The manager of the Essex Junction, Vt.,
Dunkin' Donuts defended his loan, saying 9/11 affected his business. "Instead of getting probably a large coffee and a couple of doughnuts,"
Tony Silva said, his customers got "a small coffee and a doughnut." The Patriot Act was supposed to provide federal funding to states to equip
the fire, police, and EMS officers who serve at the front lines of a terrorist attack. But the congressmen who wrote the law apparently believed that patriotism starts at home. Money was allocated under a
complicated formula where each state, regardless of its size or location, got an equal slice of the pie before risk was even considered. One result
is that the police and fire departments in Casper, Wyo., (population 49,644), can talk to one another, and to their hospitals and EMS units, on a brand-new communications system. New York City (population
8,000,000) is still waiting for a similar system. Colchester, Vt., got $58,000 for a rescue vehicle capable of boring through concrete to search for victims in collapsed buildings. Colchester has a population of
18,000 souls and a severe shortage of big buildings. …Because our bloated government just cannot stop vomiting out the money. For years Medicaid has been spending millions of dollars on Viagra and other
erectile dysfunction drugs. The Clinton administration told states they had to pay, because the law requires that Medicaid pay for any FDA-approved drug deemed medically necessary. …Doctors are so
addicted to government funding that even insane and embarrassing subsidies are passionately defended. "Erectile dysfunction is not fun, it's
a disease," said Dr. Steven Lamb, who appears often on ABC. "It needs to be treated. It needs to be paid for." I gave him a hard time about it.
"Sex is a government entitlement now? Do you ever think about budgeting? What the taxpayer pays?" "What we're trained in is to be
your advocate," he said. "I do not take costs into account." Of course not. Government-funded medical programs invite doctors to declare
endless "needs" -- knowing someone else will bear the cost. Eventually there was outrage. Sadly, not merely because people woke up and
realized that government shouldn't fund Viagra. No, only when money was needed for Hurricane Katrina relief and it was revealed that the government was giving Viagra to child molesters did Congress allow
Medicare and Medicaid to stop paying for erections.
Friday, August 18, 2006 ~ 8:26 a.m., Dan Mitchell Wrote: Incentive-based tax relief is designed to enhance the incentives for working, saving, investing, and acting entrepreneurially. For example, a
reduction in marginal personal income tax rates and increases in the income thresholds at which the different rates apply, particularly for middle and upper-income earners, increases the benefits of undertaking
positive activities such as saving, investing, and starting a business. Similarly, declines in the effective tax rates on capital, including
reductions in corporate income tax rates and the outright elimination of corporate capital taxes, creates stronger incentives for people and firms
to invest. …Baylor and Beauséjour…estimated the benefits of different types of tax cuts and found that reductions in taxes on capital and investment yielded the largest benefits while reductions on consumption
taxes yielded the smallest. Specifically, they estimated that a $1.00 tax cut in the form of a reduction in consumption taxes yields a $0.10 benefit. On the other hand, reductions in business taxes, broadly
speaking, yield significantly larger benefits ranging from $0.40 for corporate income taxes to $1.40 for changes to depreciation expenses.
Thursday, August 17, 2006 ~ 5:19 p.m., Dan Mitchell Wrote: The closest thing to a lifetime sinecure in America is a federal government job, and now it turns out that it's also a very lucrative way
to make a living. New data from the U.S. Bureau of Economic Analysis confirm that the average federal civilian worker earns $106,579 a year in total compensation, or twice the $53,289 in wages and benefits for
the typical private worker. This federal pay premium costs taxpayers big bucks because Uncle Sam's annual payroll is now $200 billion a year. No wonder that, with a per capita income of $46,782 a year,
Washington, D.C. is the fourth richest among the nation's 360 metropolitan areas. And this pay disparity keeps widening. The Cato Institute's Chris Edwards tracks government compensation, and he finds
that in 1950 the average federal bureaucrat received $1.19 for every dollar that a private employee earned. By 1990 that ratio had risen to $1.51 and is now $2. In 2005 federal wages rose 5.8% compared to
3.3% in the private sector. …studies find that public sector workers enjoy a 20-30% pay bonus above comparably skilled private workers. And this differential does not account for one of the biggest benefits of a
government job: civil service rules giving virtual lifetime job security. Airline mechanics, auto workers and software designers must all worry about business-cycle downturns or changes in technology or
outsourcing, but Uncle Sam's 1.8 million civilian employees live in a recession-proof bubble. As for performance, Mr. Edwards reports that only one in 5,000 federal non-defense employees is fired for cause each
year. One federal manager recently told us of an administrative assistant who missed work "about half the time" thanks to an assortment of ailments, sick children and funerals for a mother who died
on three separate occasions. When the agency heads finally fired her, they were slapped with an anti-discrimination lawsuit and the half-time
worker pulling down a full-time salary was reinstated. Public-employee unions continue to say their members are underpaid, believe it or not.
But one market test is the voluntary quit rate of these workers, and data for recent years show that rate for federal employees is only one-fourth that in private sector occupations.
Thursday, August 17, 2006 ~ 5:03 p.m., Dan Mitchell Wrote: The secret sin of the middle class has always been a willingness to avoid paying taxes where possible: cash rather than cheques to the plumber,
not registering a nanny for national insurance. At the same time, there has been an intellectual movement arguing for lower taxes as a means of boosting economic growth, on the ostensible grounds that the
government is an inefficient and unproductive employer of capital. The money should, instead, be left in the hands of individuals. …The result is that legitimate tax avoidance - such as moving a company's
headquarters to an offshore tax haven - is no longer the stamp of a dubious or suspicious operation. Hedge funds operate from the likes of the Cayman Islands partly for regulatory reasons, but mainly to avoid
tax. They now control hundreds of billions of dollars, and are treated as utterly respectable. In the prevailing climate, it has become unusual to
expect anyone to feel guilt or shame about striving to reduce their taxes using legal means. But this week saw a rare example of just that, after
the band U2 announced plans to shift part of their business operations from their home country, Ireland, to the Netherlands, to take advantage of its lower taxes. …tax avoiders who 40 years ago may have been
regarded by some as sharp operators are now upheld as paragons of business virtue. Take Philip Green - in every degree a respectable businessman, the owner of the Bhs department store chain as well as
Topshop and other high-street mainstays. Except that Green does not own Bhs. His share in the business actually belongs to his wife, Tina, who happens to be a resident of Monaco. Luckily for Tina and Philip,
the government of Monaco does not require its residents to pay personal income tax. When the Greens paid themselves a salary of Ł1.2bn last year, had they been living in the UK they would have had to send a
cheque for at least Ł300m to the Inland Revenue. …the government could take its inspiration from a throwaway remark made by one of Green's former colleagues. Stuart Rose is now the head of Marks &
Spencer, but in 2002 he was the chief executive of Arcadia, the retail group bought by Green. As a result of the company's turnaround, Rose was paid Ł25m - landing himself with a Ł10m tax bill. He said
afterwards: "I thought of writing to the chancellor asking him to name a hospital after me." And why not? …In fact, why not extend the idea?
The government could publish lists of the top 100 taxpayers and honour them with an award bestowed by the Queen. Paying tax is, after all, a
public-spirited act in an era when the highest earners have the choice of living abroad or adopting legal strategems to avoid paying tax. Those
who don't avoid paying should be celebrated. It takes more than a short stretch of the imagination to see wealthy businesspeople badgering their
accountants to find more tax to pay in order to qualify for the top 100.
Wednesday, August 16, 2006 ~ 2:37 p.m., Sven Larson Wrote: UK home secretary John Reid is under growing pressure to restrict access for workers from Bulgaria and Romania, when the two countries
join the EU next year. When the EU enlarged last time in 2004, the UK together with Sweden and Ireland granted immediate and free access to workers from the new member state's workers. But the UK government
hugely miscalculated the number of workers that took the opportunity to come and work in Britain. It had expected up to 13,000 workers a year to move to the UK, but 600,000 have come since 2004. Now British
media have revealed that the government privately estimates between 60,000 and 140,000 Romanians and Bulgarians will arrive in Britain in the first year after the next EU enlargement. The figures prompted
former Labour minister Frank Field to demand that the UK's borders should be closed to the new arrivals. He said current immigration has serious effects on housing, healthcare and "the very nature of our
community," according to media reports.
Tuesday, August 15, 2006 ~ 11:09 a.m., Sven Larson Wrote: The government's medium-term fiscal programme rightly aims at maintaining fiscal balance, with a substantial surplus having been
achieved in the current upswing. However, while monetary tightening aimed at curbing inflation pressures continues, the fiscal stance, as measured by the change in the cyclically-adjusted primary balance, is
estimated to be loosening inappropriately in 2006. The main reason for this is substantial tax cuts decided in 2003 for structural reasons. With macroeconomic imbalances considerably wider than expected when the
2006 budget was adopted, a tightening of fiscal policy is required. The expansionary effect of tax cuts needs to be offset by additional spending
restraint so long as there is no clear evidence that the economy is cooling down.
Tuesday, August 15, 2006 ~ 8:33 a.m., Dan Mitchell Wrote: Colombia's President Alvaro Uribe, who was sworn in for an unprecedented second term on Monday, has vowed to continue pursuing
the government's policy of pro-business economic reforms, including cuts in corporate tax and the conclusion of a free trade deal with the United States. ...A central plank of Uribe's economic policy is a cut in
corporate tax by 6.5% to 32% by 2009. The official corporate tax rate in Columbia is currently about 38.4%, but temporary exemptions on corporate taxes for firms that reinvest their profits have lowered the
actual rate to 28.5%, a move which has led to rising levels of investment. However, a myriad of exemptions has made Colombia's corporate code increasingly complex, and the new tax bill will reduce
complexity by stripping out about 1,200 articles of the tax code to leave only about 200. Under the proposals, all exemptions will be ditched to create a level corporate tax playing field for every company.
Monday, August 14, 2006 ~ 8:58 a.m., Dan Mitchell Wrote: Twenty-five years ago this weekend, Ronald Reagan signed the Economic Recovery Tax Act. The bill cut personal income tax rates by
25% across the board, indexed tax brackets for inflation and reduced the corporate income tax rate. The anniversary is worth commemorating as a seminal moment that continues to influence policy
for the better in the U.S., and around the globe. The achievement of Reaganomics can only be fully understood by recalling the miserable state of affairs a quarter-century ago. Newsweek summarized the
national mood when it wrote in 1981 that Reagan "inherits the most dangerous economic crisis since Franklin Roosevelt took office 48 years
ago." ...The results have been better than even some of its supporters hoped. The Dow Jones Industrial Average first broke 1,000 in 1972, but
a decade later it was barely above 800 -- one of the worst and most enduring bear markets in history. In the 25 years since Reaganomics, however, the Dow has climbed to about 11,000, accounting for an
increase in national wealth on the order of $25 trillion. To match that increase in percentage terms, the Dow would have to rise to some 150,000 in the next quarter century. American living standards have
risen steadily, and U.S. businesses have created entire industries that didn't exist a generation ago. ...even the most ardent liberals don't propose to return to the top pre-Reagan income tax rate of 70%. They
also now understand that, at some point along the Laffer Curve, high rates begin to yield less tax revenue. The bipartisan consensus in favor of sound money has also held. Thus today, the top marginal personal
and corporate tax rates are 35%, compared with 70% and 48% in 1981. In the late 1970s the tax on dividends was 70% and the capital gains rate was 50%; now they're both 15%. These reductions have increased
the rate of return on capital, and hence some $3 trillion more was invested by foreigners in the U.S. between 1981 and 2005 than was invested by Americans abroad. One result: 40 million new jobs, more
than the rest of the industrialized world combined. The rest of the world, meanwhile, has followed the Gipper down the tax-cut curve. Daniel Mitchell of the Heritage Foundation finds that the average personal
income tax rate in the industrialized world is now 43%, versus 67% in 1980. The average top corporate tax rate has fallen to 29% from 48%. This decline in global tax rates has been the economic counterpart to
the fall of the Berlin Wall. Most of Eastern Europe has adopted flat tax rates of 25% or lower, and the Russians now have a flat income tax of 13%. In Old Europe, Ireland's corporate and personal income tax rate
cuts have helped generate the swiftest economic growth in the EU. Not bad for a President dismissed as a dreamy former actor. In his 1989 farewell address, Reagan said that "People say that I was a great
communicator. It would be more accurate to say that I communicated great ideas." He was right, and a remarkable global prosperity has followed in his wake. Link to CF&P's Ronald Reagan's Legacy web page
Monday, August 14, 2006 ~ 8:43 a.m., Dan Mitchell Wrote: A single tax rate for every earner would help poorly paid workers and families with children, according to an influential research group. It said
the controversial 'flat tax' system could be used to benefit those on low incomes and rescue their families from the welfare benefits trap. The backing for flat taxes from the Joseph Rowntree Foundation - whose
work is closely followed by Chancellor Gordon Brown - contradicts the long-time assumption of the political Left that simpler taxes would help only the wealthy. A flat tax has gathered support in recent years
following the success of the system in encouraging economic growth in Eastern Europe. Tories flirted with the idea last year.
Monday, August 14, 2006 ~ 8:11 a.m., Sven Larson Wrote: The U.S. tort system is undermining America's economy. Using the President's Council of Economic Advisers' methodology, we determined
excessive tort costs exceed $198 billion. That is equal to an additional yearly tax of $2,654 on a family of four. Some states have done more
than others to reign in excessive costs through tort reform. Econometric studies reviewed in chapter 5 show that tort reform increases productivity and employment, boosts state economic performance and
innovation, increases national output and personal incomes, and saves lives. A state's legal system influences business decisions such as where to open a new store, or whether to hire more employees, introduce a
new product, or build a new plant. States that ranked worse in this study are less likely to benefit in these areas. A poor tort system lowers the
standard of living for ordinary citizens through higher prices, higher taxes, lower wages, and less product innovation. Businesses that spend more each year on liability insurance have less money available for
research and development or health benefits for employees. The health-care industry is particularly hard-hit by tort lawsuits, which have driven the cost of health care higher as providers spend more on
medical-malpractice insurance and "defensive medicine" procedures. Consumers lose as a result.
Monday, August 14, 2006 ~ 8:08 a.m., Dan Mitchell Wrote: I study the impact of Medicare on the hospital sector. This was the single largest component of health spending at the time of Medicare's
introduction and of the subsequent growth in health spending. My estimates suggest that, in its first five years, the introduction of Medicare was associated with an increase in spending that was over six
times larger than what the estimates from the Rand Health Insurance Experiment would have predicted. They also suggest that the long-term impact of Medicare may have been even larger than its five-year
impact. …the introduction of Medicare appears to have had no impact on elderly mortality in its first ten years… My central estimate is that Medicare is associated with a 37 percent increase in real hospital
expenditures (for all ages) between 1965 and 1970. This estimate is over six times larger than what evidence from the impact of an individual's
health insurance on health spending would suggest. About half of the impact of Medicare on spending appears due to the induced entry of new hospitals, while the rest is due to growth in existing hospitals. This
induced hospital entry helps explain the disproportionately larger impact on health spending of market-wide changes in health insurance relative to individual-level changes.
Monday, August 14, 2006 ~ 7:46 a.m., Dan Mitchell Wrote: The alleged recent success of the Swedish economy has allowed welfare statists both inside and outside of Sweden to argue that high taxes and
an extensive welfare state are good for the economy. To fully understand this fallacy, we should review Sweden's economic history. Until the second half of the 19th century, Sweden was fairly poor. But
far-reaching free market reforms in the 1860s allowed Sweden to benefit from the spreading Industrial Revolution. And so, during the late 19th and early 20th centuries, Sweden saw its economy rapidly
industrializing, driven by the many Swedish inventors and entrepreneurs. … with just a few exceptions, nearly all large Swedish companies were started during the late 19th and early 20th centuries,
which was not only a period of strong growth, but also the time when the foundation for later economic growth was laid. Another factor which continued Swedish prosperity was the fact that Sweden was able
to stay out of both World Wars, and indeed all other wars as well. Sweden is in fact the country with the longest consecutive period of peace, having fought no war since 1809, when Sweden was invaded by
Russia, losing Finland to the invader. Sweden has thus enjoyed 5 more years of peace than Switzerland, which participated in the Napoleonic
wars in 1814. As a result of its free market policies, the resourcefulness of its people, and its successful avoidance of war, Sweden had the highest per-capita income growth in the world between 1870 and 1950,
by which time Sweden had become one of the world's richest countries, behind only the United States and Switzerland, and Denmark (who have since also fallen behind because of high taxes). … Until 1932,
government spending had been kept below 10% of GDP in Sweden, but the Social Democrats, under their leader Per Albin Hansson, wanted to
change this and remake Sweden into a "folkhem" ("people's home"), a term Swedish Social Democrats adopted from the Fascists in Italy. Even
in the early 1950s, Sweden was still one of the freest economies in the world, and government spending relative to GDP was in fact below the American level. But between 1950 and 1976, Sweden experienced an
expansion in government spending unprecedented during a period of peace, with government spending to GDP rising from about 20% in 1950 to more than 50% in 1975. Virtually every year, taxes were
increased while the welfare state expanded relentlessly, both in the form of a sharp increase in the number of government employees and ever more transfer payment benefits. … Sweden's growth had already started
to slip in relative terms, from well above average to just average. This changed in the 1970s after Olof Palme, from the left wing of the Social Democratic party became Prime Minister. Palme stepped up the
socialist transformation in Sweden, rapidly increasing anti-business regulations and sharply increased payroll taxes. The payroll-tax increases, along with increasing wage demands from unions, made
Swedish businesses highly uncompetitive on the global markets… we can see deep structural problems. The number of people employed is now 6% lower than in 1990, a weaker development than in any other
western economy. By contrast, even with the weak job growth in recent years (by American standards), employment in the United States is 20% higher than in 1990. And the number of people employed in Sweden is
actually lower than in 1980, too. You have to go back to the mid-1970s to find employment numbers lower than the current ones. While total employment has been roughly unchanged since 1975, it masks a
significant decline in male employment. And if you look only at the private sector, employment is now at a level lower than in 1950. Social Democrats still often claim that Sweden has a comparatively high
employment rate, but this claim is based on deceptive employment statistics that count as employed many who have been on long-term sick leave or in some other way on the receiving end of transfer payment
programs, even though they don't actually work. … The headline unemployment rate in Sweden is only 5–5.5%, but this number is extremely misleading as it only includes a small number of the people
who the government pays not to work. Many unemployed are sent to so-called "labor market political activities" — activities whose only
purpose is to reduce the official unemployment rate. If we ignore this ruse, unemployment is 8%. And if you also include the enormous number of early retirees and people who live off sickness benefits, the real
unemployment rate is more like 25%. Link to recent CF&P Foundation study on the Swedish Tax System
Sunday, August 13, 2006 ~ 7:12 p.m., Dan Mitchell Wrote: Tim Walberg pulled off the rare feat of defeating an incumbent Congressman (by a 53 percent to 47 percent margin). The message from
Michigan: the conservative base is tired of big-government Republicans. Schwarz of course was backed or praised by much of the GOP establishment and business lobbying community. He also received help
from liberal groups, labor unions, and the union-allied Republican Main Street Partnership. Schwarz's loss is one more indication of the large gulf between the Washington GOP establishment and Republicans
outside the Beltway. Just how out of touch that establishment can be is shown by the Republican Main Street Partnership laughably calling Schwarz a "Reagan Republican," despite the fact that Schwarz had one
of the worst fiscal records of any GOP Member in Congress. Walberg received enormous backing from the Club for Growth and was endorsed by leading conservative and free market PACs (including NTU's
affiliated PAC). Pat Toomey of the Club for Growth, which backed Mr. Walberg, says the main issues that concerned voters were "limited government and
economic freedom, specifically less spending and lower taxes, which is what Walberg stood for and Schwarz clearly stood against." By the way,
the Michigan election marked the first time the Club for Growth has defeated a Republican in a primary after several tries, a fact that underscores this year's anti-incumbent mood. The Club's next target is
liberal Rhode Island Senator Lincoln Chafee, who is facing a tough primary challenge from Cranston Mayor Stephen Laffey. Another antitax conservative prevailed in Colorado, where state Senator Doug
Lamborn won a six-man GOP primary for a House seat being vacated by Joel Hefley, who's retiring. Two of the leading contenders, Jeff Crank, a former Hefley aide, and Colorado Springs Mayor Lionel
Rivera, both had a record of supporting higher levies. Mr. Lamborn drove that message home by making tax-reduction the centerpiece of his campaign. "The problem with the GOP's drift on spending is seen all
across the country," says Mr. Toomey. "We saw it big time in Pennsylvania's primaries in May, and now we've seen it in Michigan and Colorado."
Sunday, August 13, 2006 ~ 4:15 p.m., Sven Larson Wrote: Like their peers in many school districts in North Carolina, Wake County schools officials believe that there is a strong correlation
between the quality and size of school buildings and student performance. They often justify spending more on school buildings and buying larger pieces of land because they assume that these trimmings
will improve student performance. At the same time, parents and community leaders urge taxpayers to consent to such expenditures, believing that the future of the local public school system is at stake.
Nevertheless, the believe that school buildings have a significant effect on student performance lacks empirical evidence.
Saturday, August 12, 2006 ~ 6:24 p.m., Dan Mitchell Wrote: Why might core Republican voters be dispirited? The answer is obvious. Republicans promised voters a lean and efficient government, and they
delivered the opposite. The size of the government has increased more since Bush took office than it did during Lyndon Johnson's Great Society. This Republican government has been among the most liberal
with taxpayers' dollars of any in history. Part of the story is the war on terror, but there is much more to it. Republicans have governed as if
they could maintain a permanent majority by merely giving voters all the big-spending liberal programs that Democrats have always promised, like prescription drugs. They have out-liberaled the liberals.
Republicans took the strategy to new heights last week, when they made a sharp increase in the minimum wage a centerpiece of legislation that also would have reduced the death tax. The minimum wage has been the
bane of Republicans for as long as I can remember, because it strikes them at their ideological core. Republicans used to understand that the government should let free markets work and intervene as little as
possible. Now, their core election strategy is to abandon principle and be as socialist as possible. …Republicans should return to their roots. They should acknowledge that government has grown too much, and
promise to do something about it if re-elected. They can even blame the "compassionate conservative'' president in the process. In other words, take a page out of the Democrats' book, and run against Bush.
Friday, August 11, 2006 ~ 8:53 a.m., Dan Mitchell Wrote: …tax cuts were key to two of the most prosperous eras in American history: the 1920s and 1960s. He urged Kemp to emulate President John
F. Kennedy, who proposed an across the board tax-rate reduction in 1963 that was enacted by Lyndon Johnson in 1964. Together with the late Sen. William Roth, Kemp introduced a bill in 1977 to replicate the
Kennedy tax cut by reducing the top income-tax rate from 70 percent to 50 percent and the bottom rate from 14 percent to 10 percent. (Kennedy and Johnson had dropped the top rate from 91 percent to 70 percent
and the bottom rate from 20 percent to 14 percent.) Reagan adopted the Kemp-Roth-Mundell-Laffer-Wanniski idea, which came to be called supply-side economics, and made a big tax-rate reduction the
centerpiece of his economic program. Although mainstream economists all said it would be massively inflationary, voters no longer had much faith in their pronouncements because the economy had reached a crisis
situation by 1980. There was a sharp recession that year, but inflation and interest rates continued to rise to unprecedented levels. Immediately after taking office, Reagan began pushing his tax plan through
Congress. It finally came to fruition in early August 1981, and he signed it into law on the 13th. Contrary to the predictions of establishment
economists, it was not inflationary. On the contrary, inflation virtually collapsed, just as the supply-side economists expected. It fell from 13.5
percent in 1980 to 1.9 percent by 1985. Beforehand, virtually every economist in the United States would have said this was impossible. ... Mundell and Friedman were both awarded the Nobel Prize in economics
and Reagan was re-elected handily in 1984 as rewards for their insight and leadership. Their achievement should not be forgotten.
Friday, August 11, 2006 ~ 8:34 a.m., Dan Mitchell Wrote: The Flat Tax Revolution in Eastern Europe presents a challenge to Western Europe, as companies are bound to move to neighboring states
to avoid paying the near-confiscatory taxation (especially when you combine the income tax with corporate, capital gains and dividend taxes) levied in the "Old Europe" to support the Welfare State system.
Furthermore, whereas hiring an employee in the Old Europe more closely resembles a Catholic wedding, where no divorce is possible except in the most extreme cases (and even then, companies face union
strikes and negative media attention), in the formerly Communist states, one can hire an employee without the fear of being stuck with someone who's incompetent, lazy, unqualified (e.g., lied in the resume about
qualifications) or simply obsolete. Western Europe shutters at the thought of a person being obsolete (and, naturally, nobody in the Old Europe is lazy or incompetent), but if a business can replace a person
with a computer that can produce more in less time and with less expense, it becomes a necessity in order to keep up with the competition (imagine a horse-and-buggy mail delivery business competing with a
business providing emailing and faxing services). Likewise, if your competitor can save costs by operating in a country with lower taxation,
they will be able to price their goods cheaper, thus forcing you to either lose your profit margin, go out of business or move to a place that will
allow you to compete on a level playing field. However, lowering taxes is very difficult in Old Europe because much of the population is so dependent on the Welfare State that they can no longer imagine any
alternative and see the lowering of government spending as a sure way to increase poverty and cause other ills in every imaginable field, from
education to health care. Faced with a stark choice of fighting their electorate to force through unpopular reforms or stagnating economy with a constantly outflow of job-creating companies, Western Europe
hopes it has found the third way – attacking Eastern Europe and threatening it into raising taxes in line with Old Europe. After the Flat Tax was introduced in Slovakia, German Chancellor Gerhard
Schroeder reacted by accusing it of unfair competition for "dumping" tax rates to stimulate domestic economic growth and attract foreign investment. This charge has also been leveled against other East
European nations that are moving towards a free market. Responding to German Chancellor's attacks, Slovakian Finance Minister Ivan Miklos asserted, "I understand he's under pressure from German
investors and entrepreneurs who are criticising the high taxation and not optimal business environment in Germany."
Friday, August 11, 2006 ~ 8:12 a.m., Dan Mitchell Wrote: A survey has shown that 85 percent of the economists in Canada and 90 percent of the economists in the United States say that minimum wage
laws reduce employment. But you don't need a Ph.D. in economics to know that jacking up prices leads fewer people to buy. Those people include employers, who hire less labor when labor is made artificially
more expensive. It happens in France, it happens in South Africa, it happens in New Zealand. How surprised should we be when it happens in Chicago? The economic consequence of political largess -- whether in
the form of minimum wage laws or medical or other benefits mandated to be paid for by employers -- is to make labor artificially more expensive. Countries with generous employee benefits mandated by law
-- Germany and France, for example -- have chronically higher unemployment rates than unemployment rates in the United States, where jobs are created at a far higher rate than in Europe. There is no
free lunch. Higher labor costs mean fewer jobs. Place yourself in the position of an employer and ask: If a worker costs me, say, $7 in wages, plus mandated fringes such as Social Security,
unemployment compensation, sick and vacation leave, making the true hourly cost of hiring a worker $9 an hour, does it pay me to hire a worker who's so unfortunate to have skills that enable him to produce
only $5 or $6 worth of value per hour? Most employers would conclude that doing so would be a losing economic proposition.
Friday, August 11, 2006 ~ 7:30 a.m., Dan Mitchell Wrote: London currently handles $753bn in foreign currency every day, and trades more euros than all the other European capitals put together.
The City is pivotal in a whole range of other financial markets. A fifth of all international bank lending is made here. Worldwide insurance premiums worth Ł153bn were written in London in 2004 while Ł2,000bn
in metals contracts are traded annually. And London has taken a lead role in the newer financial sectors of hedge fund management, private equity and derivatives trading. …Every party needs to generate
goodwill in the City, since many of the businesses that operate here could relocate anywhere in the world if they saw significant benefit. Already a notable proportion of London's insurance market has slipped
away to Bermuda in recent years because the disparity in taxation became too large. …bankers and brokers are a hard lot and will want actions, not words from their politicians. What do we all want to see?
The first is better regulation. The City is becoming bogged down in expensive bureaucracy. The regulatory regime has too much box ticking, too little focus on basic principle and an inclination to
"gold-plate" every new Brussels directive. Misconceived regulation can hurt financial markets: just look at what Sarbanes-Oxley has done for
New York. Labour laws are becoming more "Europeanised" and being used opportunistically and sometimes cynically by disgruntled employees. All this complexity creates extra cost, which erodes
competitive advantage. Compliance and legal costs are rising faster than any others in many firms. Taxation is another critical factor. Without tax competitiveness, the City will wither. Personal tax rates are
broadly acceptable but NI and corporate taxes are too high and stamp duty on share trading should be abolished. Tax legislation is now absurdly complex. On July 11, the London Stock Exchange (LSE) affirmed that it drew 50 international initial public offerings (IPOs) from 15 different countries
in the first half of 2006. Compare that to the combined 15 international IPOs offered on the Nasdaq and New York Stock Exchange in the similar period. At the root of this recent and startling shift is the 2002
Sarbanes-Oxley Act. Imposed after the fall of Enron and WorldCom, this law has hamstrung our public companies and forced them to buck their tradition of innovation by becoming too cautious and careful. …
Congress acted without prudence or prescience. Its overreaching caused long-term negative economic consequences — at an estimated cost of $1
trillion, according to Dr. Ivy Zhang, now of the University of Minnesota — that are even greater than the initial damage. … Major companies in
China, Russia, and even Saudi Arabia have all decided against offerings in the U.S. since the inception of Sarbox. The law also has caused mass
de-listings from U.S. exchanges as businesses have opted for one-way tickets to markets in London, Belgium, Paris, and Hong Kong. In addition to the LSE's declaration, a recent survey by European audit
firm Mazars revealed that almost one-fifth of European companies currently listed on U.S. exchanges are looking for an exit strategy. There's a clear winner here, and it's not America. The blame falls
squarely on the burdensome shoulders of Sarbox and the corresponding inaction of the Securities and Exchange Commission.
Thursday, August 10, 2006 ~ 11:08 a.m., Sven Larson Wrote: When Evo Morales became Bolivia's president in January of 2006, he quickly nationalized the country's oil and gas sectors and directly
affected sizeable investments by Petrobrás. His next target may well be Brazilian soybean farmers, who are much more dispersed in the country,
both in terms of income and geographic position. In June, the Bolivian government announced its new "Agrarian Revolution", which is to be
carried out through a review of land ownership deeds by the State, based on allegations of non-compliance with the social objectives of land ownership. The outcome could be the expulsion of all foreign
landowners from a stretch 50 kilometers inside the Bolivian border, where there are at least 200 properties owned by Brazilians. ... What Evo Morales is pursuing is the nationalization of between 11 and 14
million hectares, or about 11 percent of arable lands in Bolivia, which would be distributed among landless peasants, indigenous communities and landless Bolivians who are willing to work the land.
Thursday, August 10, 2006 ~ 9:44 a.m., Sven Larson Wrote: By denying me the chance to speak with this family, school district officials not only silenced me, but showed their complete insensitivity to
parents' desires. Who are they to decide what information should - or should not - reach the hands of parents? Obviously, some parents wish to consider educational alternatives beyond the single choice being
offered by the JCPS. Who can blame them? That same bureaucracy has been ignoring them for decades, and failing schools are all they have to show for it. For the "huge public disturbance" of the private
conversation with this boy, I was told "the principal" wanted me to leave the premises and threatened with arrest if I remained. This despite
the fact that I had remained outside the building, did not disturb the meeting inside and followed all requests. I was guilty only of expressing an opinion different from JCPS policies about the steps needed to
improve Kentucky's public schools. The only threat I posed was that JCPS officials might have to answer to parents about why they refuse to offer them the freedom to choose which school best suits their child.
Thursday, August 10, 2006 ~ 8:33 a.m., Dan Mitchell Wrote: Last week the City Council voted 35-14 to impose a hyper-minimum wage on "big-box" retail stores with more than $1 billion of sales. The
new law will require the likes of Wal-Mart, Target, Costco, and Home Depot to pay every worker -- regardless of experience, education or skill -- a minimum wage of $13 an hour by 2010 ($10 in salary and $3 in
health benefits). At least another dozen cities, including Washington, D.C., are considering copy-cat laws. This means major U.S. cities are preparing to require minimum wages more than double the national
minimum of $5.15 an hour. Incredible. The very places with the highest unemployment and lowest skilled workers are enacting laws designed to
destroy their pool of entry level jobs. Not so long ago, desperate cities were trying to lure businesses by declaring themselves low-tax and low-regulation enterprise zones. Now with these wage and benefit
mandates, the cities are declaring themselves anti-enterprise zones. …If the law does hold up, the biggest losers will be the poor who will pay
higher prices. A study by the economics firm Global Insight calculates that the presence of Wal-Mart and other low-price retailers saves working families on average more than $2,000 a year. MIT professor
Jerry Hausman has found that, although Wal-Mart does slightly reduce wage rates in nearby areas, its lower prices swamp that effect. The biggest beneficiaries are families with incomes of less than $10,000 for
whom "a super center makes a 30 percent difference in what they can buy." What we have here is what liberals used to call the "red-lining" of
poor neighborhoods, though this time by the left itself. Liberal advocates have long complained that banks, grocery stores and retailers charge higher prices or refuse to do business in inner cities. But now the
very superstores that offer lower prices are being treated as unwelcome.
Wednesday, August 9, 2006 ~ 8:55 a.m., Dan Mitchell Wrote: At this nation's founding, nearly nine out of 10 workers were employed in agriculture. By 1900 that fell to fewer than four in 10. Today, fewer
than one in every 100 workers is in agriculture, and less than 1% of gross domestic product is attributable to agriculture. Yet this country
spends billions upon billions of dollars subsidizing a system that makes almost everyone in the world worse off. Our system is so complicated —
i.e. rigged — that it's almost impossible to know how much agricultural subsidies cost U.S. taxpayers. But we know from the Washington Post's recent reporting that since 2000 the U.S. government paid out $1.3
billion to "farmers" who don't farm. They were simply "compensated" for owning land previously used for farming. A Houston surgeon
received nearly $500,000 to alleviate his hardship. Cash payments have cost $172 billion over the last decade, and $25 billion in 2005 alone, nearly 50% more than what was paid to families receiving welfare. But
those sorts of numbers barely tell the story of our appallingly immoral agricultural corporatism. Subsidies combined with trade barriers (another term for subsidy) prop up the price of food for consumers at
home and hurt farmers abroad. …Our farm subsidies alone — forget trade barriers — cost developing countries $24 billion every year, according to the National Center for Policy Analysis. Letting poor
nations prosper would be worth a lot more than the equivalent amount in foreign aid. But Big Agriculture likes foreign aid because it allows for the dumping of wheat and other crops on the world market, which
perpetuates the cycle of dependency.
Wednesday, August 9, 2006 ~ 8:16 a.m., Dan Mitchell Wrote: The House of Representatives voted 245 to 159 to pass the Internet Gambling Prohibition Act… There is absolutely no constitutional
authority for this disgusting abuse of federal power. But most Americans, who think Congress has a right to do anything for which they can get a majority vote, ignore the clearly written constitutional
restraints on Congress. The key restraint here is the Tenth Amendment, which holds that all powers not enumerated in the Constitution belong
to the people and the states. …If the Internet Gambling Prohibition Act is approved, it will become a precedent for congressional control over
other aspects of the Internet and an important loss in our liberty. Let's follow the money and ask who benefits should the law be passed. What about legal gambling establishments in Las Vegas, Atlantic City and
elsewhere? From their revenue point of view, they'd be happy to see less online gambling competition. What about federal, state and local governments? Online gambling, most of which is offshore, doesn't
create any tax revenue for them. The bill focuses on online games such as poker, blackjack and sports betting but exempts taxable state-regulated gambling such as lotteries and horse racing. If people
want to gamble online, they are going to gamble online. The only thing the act will accomplish is, like Prohibition, make criminals out of otherwise law-abiding people. It will turn banks and other financial
institutions into government snoops.
Wednesday, August 9, 2006 ~ 8:00 a.m., Sven Larson Wrote: EU citizens can save thousands of euros by buying a car in another member state, according to the European Commission's new car price
report released on Tuesday (1 August). All it takes is a bit of shopping around in countries where the price of a car before taxes is lower, such as Denmark or Hungary. Once back home with the new purchase, EU
citizens are only liable to pay their local tax and could save thousands on the import. The best deals on new cars before tax in the 25-nation EU are in Denmark and Hungary, the twice-yearly report showed, while
the Czech Republic is the most expensive. Despite this, prices are generally lower in the EU's new, eastern European member states than in the old members, said the study. In the eurozone, Finland and Greece
have the lowest prices before tax and Germany has the highest.
Tuesday, August 8, 2006 ~ 8:38 a.m., Dan Mitchell Wrote: Understanding how individuals shift labor supply and income over time in response to wage and tax rate changes is crucial for numerous
economic questions. Estimates of intertemporal labor supply elasticities and taxable income elasticities have important implications for life cycle
labor supply, aggregate employment fluctuations and business cycles, efficiency costs of taxation, and the design of optimal tax and transfer
systems. …We focus primarily on tax rate changes arising from the loss of a dependent exemption. Using the SIPP, we estimate a significant elasticity of family labor income of 0.75 for families with base year
earnings between $35,000 and $85,000. Our estimates using the tax panel data are almost identical. These estimates are at the high end of the range found in previous work. This may be because studies
examining unanticipated changes tend to confound substitution and income effects, which would result in downward biased estimates. …Most of our estimates of taxable income elasticities are unfortunately
imprecise as a result of data limitations. In theory, however, our estimates of labor income elasticities from the SIPP data should be lower bounds on the true elasticities of taxable income. The high-end
estimates then imply substantial behavioral responses to taxation.
Tuesday, August 8, 2006 ~ 8:12 a.m., Dan Mitchell Wrote: If Washington were truly interested in knowing why Americans, from the richest to the most meager of wage earners, cheat or try to avoid taxes,
it wouldn't have to look any further than the more than 65,000 pages that make up the federal tax code and the inconceivable 582 tax forms. But that's just today. Both of those numbers regularly grow as Congress
rewards and punishes special interests as politics dictates. The tax code is a patchwork of needless complexity, filled with loopholes, exceptions
and byzantine rules that confound the Internal Revenue Service's own agents, who give out the wrong information about half the time when taxpayers call in with questions. It is an operating manual for social
engineering and a nightmare so terrifying that more than six in 10 U.S. taxpayers use professional help to prepare their returns. They spent
$265 billion in 2005 just to comply with the filing process — yet Money Magazine reports that there's a 99% chance that professionally prepared returns are not fully correct. …The tax code's progressivity —
part of Congress' social engineering and a (possibly) unwitting tribute to Marxism — is a prime factor in cheating, or maybe better said, is the cause for many mistakes. As the smartest and hardest-working
Americans earn more money, the progressivity of the code raises their tax rates, so they naturally try to find ways to keep their tax bills down.
Imagine their frustration at working ever harder then having bigger bites taken out of their earnings by the federal government. Eventually
the rich look to the code and its labyrinthine rules to slow the flow of their earnings into the Treasury. And the harder they work to keep their
tax bills down, the greater the chance for errors that look like cheating — and for real cheating itself. In the last five tax years, an average of
69 to 70 hours a year has gone into completing and filing of each 1040 form, which has a 131-page instruction book, along with the 1040's various schedules and work sheets; that's up about 20% from the
mid-1990s. Total hours estimated in preparing taxes, keeping records and trying to figure out the web of rules is perhaps as much as 6.5 billion a year. …The only way to end the cheating and the honest
mistakes is to change the system, from its foundation up to the top. No Washington-style reform will work. What's needed is an entirely new system that is so straightforward that it can be neither misunderstood
nor mangled. Rates should be as low and as flat as possible.
Tuesday, August 8, 2006 ~ 8:07 a.m., Dan Mitchell Wrote: Consistent with previous findings, the regressions suggest that corporate taxation has a significant impact on FDI location choices,
and that forward-looking measures based on tax codes - including bilateral arrangements and features of foreign income taxation - capture this impact more effectively than simple statutory rates. In
keeping with the literature, the largest impact is recorded for AETR, which account for taxation in infra-marginal investment, while exemption or credit systems do not significantly affect the estimated tax
elasticities. Moving to an exemption system tends, however, to increase FDI stocks. …when proxies are included for a range of border, product
and labour market policies or for .tax diversion. of FDI to similar host countries, the results are at variance with the mainstream literature: much smaller tax elasticity estimates were found.
Tuesday, August 8, 2006 ~ 7:50 a.m., Dan Mitchell Wrote: It would be difficult to exaggerate the predictions of doom hurled against the Republican welfare reform bill signed by President Bill
Clinton on Aug. 22, 1996. …The left, led by senior Democrats in Congress, the editorial pages of many of the nation's leading newspapers, the Catholic bishops, child advocates in Washington and
the professoriate, had assaulted the bill in terms that are rare, even by today's coarse standards. Democrats speaking on the floor of the House
labeled the bill "harsh," "cruel" and "mean-spirited." They claimed that it "attacked," "punished" and "lashed out at" children. Columnist Bob
Herbert said the bill conducted a "jihad" against the poor, made "war on kids" and "deliberately inflict[ed] harm" on children and the poor.
Sen. Frank Lautenberg said poor children would be reduced to "begging for money, begging for food, and . . . engaging in prostitution." …In the
decade that has passed since the 1996 reforms, the welfare rolls have plummeted by nearly 60%, the first sustained decline since the program was enacted in 1935. Equally important, the employment of single
mothers heading families reached the highest level ever. As a group, mothers heading families with incomes of less than about $21,000 per year increased their earnings every year between 1994 and 2000 while
simultaneously receiving less money from welfare payments. In inflation-adjusted dollars, they were about 25% better off in 2000 than in 1994, despite the fall in their welfare income. Over the same period,
the child-poverty level enjoyed its most sustained decline since the early 1970s; and both black-child poverty and poverty among female-headed families reached their lowest level ever. Even after four years of
increases following the recession of 2001, the child poverty level is still 20% lower than it was before the decline began. Similarly, measures of consumption and hunger show that the material conditions of
low-income, female-headed families have improved. …welfare reform showed that work -- even low-wage work -- provides a more durable foundation for social policy than handouts.
Monday, August 7, 2006 ~ 8:43 a.m., Dan Mitchell Wrote: It is a measure of the German government's economic ineptitude that even when it finally decides to do something sensible like cutting
corporate taxes, it does so in a way that is likely to do as much harm as good. …Corporate taxes are to fall to slightly below 30%. According to Morgan Stanley Research, the plan would move Germany from the
highest corporate tax rate in Europe to the middle of the pack. …But here's the catch. Berlin has come up with some hare-brained ideas to fill
the gap in revenues that the government fears will result from the tax cut. Few politicians seem to grasp that cutting rates may actually spur
growth and, as a result, revenues. Finance Minister Peer Steinbrück, a Social Democrat, wants to limit the ability of companies to deduct interest payments, leasing rates and license fees from their taxable
income. The American Chamber of Commerce warns that the Steinbrück proposal would create a tax system "unique in the world" and would be "damaging for Germany as a business location."
…Unfortunately, alternative proposals floated to "finance" the tax cuts, such as raising payroll taxes or property taxes, aren't going to improve
the investment climate in Germany either. Another idea is to tax interest payments above a cap of €1 million. This would still violate the general
principle that only net profits should be taxed. In extreme cases, it would still allow the absurd situation in which even a company that's losing money would have to pay taxes because its interest payments
can't be counted as expenses.
Monday, August 7, 2006 ~ 8:11 a.m., Sven Larson Wrote: Australia has slammed the EU for playing a major role in the collapse last month of international talks on liberalising world trade. "Why are
the negotiations stuck? The simple but familiar answer is that rich WTO Members do not want to substantially open their agricultural markets,"
said trade minister Mark Vaile on Thursday according to Today Online. "The European Union's offer to cut agricultural tariffs by 51 percent
might sound reasonable, but its tariffs are so high that it would make very little difference. Carve-outs for sensitive products would have
weakened the result further," he continued. ... "The bottom line is that we will only reach a consensus when we have an outcome that delivers
substantial new trade opportunities," said Mr Vaile who is in September organising a meeting of the 18-member Cairns Group focussed on breathing life back into the WTO talks.
Monday, August 7, 2006 ~ 7:50 a.m., Dan Mitchell Wrote: The new drug plan has a ridiculously low deductible of $250 and a co-payment of just 25 percent on drug bills from $251 to $2,250. Then
there is no insurance at all for the next $2,850. Since this scheme covers three-fourths of routine drug bills, which is hugely expensive, there was
nothing to spare for unexpectedly large expenses. Politicians figured more votes could be bought by covering the little stuff, because there
are many seniors with yearly drug bills below $2,250 and relatively few with more serious expenses. …As Michael Kinsley rightly noted, the new
drug benefit was enacted "without even a theory about how it will be paid for." We have a special payroll tax earmarked for Medicare, yet no
congressman dared suggest that increased Medicare benefits ought to be even partly financed by an increased Medicare tax. Many of us oldsters were quite willing and able to buy catastrophic drug insurance
without all these unfinanced subsidies. The trouble was, it wasn't legal. A year after repealing its 1988 catastrophic catastrophe, Congress moved in the opposite direction and prohibited the sale or purchase of
insurance for major prescription drug expenses. …any politically viable repair is likely to require two cheap and simple changes. First, allow people who switched from a Medigap policy with drug coverage return
to such a policy if they absolutely despise their experience with Part D. Second, allow anyone of any age to buy (and insurance companies to
sell) a less-generous "catastrophic" policy to cover 80 percent of drug bills in excess of $5,100 a year on mutually agreeable terms with no
federal subsidy. In other words, give freedom a chance. It works.
Monday, August 7, 2006 ~ 7:35 a.m., Dan Mitchell Wrote: The comprehensive tabulation showed that in those 14 hearings, 1,014 witnesses appeared to argue in favor of programs and only 7 spoke
against them, an imbalance of 145 to 1. In its approach to budget making, Congress was blatantly violating the elementary rule of sound decisionmaking—the need to hear from both sides. As a result, it was
bound to be making unsound decisions. Like juries that would always vote "guilty" if they heard only the prosecution's case, lawmakers were blindly voting "yes" for spending every time. …Another issue typically
ignored in Washington is the overhead cost of taxation. Tax dollars do not float effortlessly into the Treasury. The tax system imposes an enormous cost on taxpayers and the economy, which one can think of as
the "fundraising cost" of federal dollars. Economists have made estimates of the different types of overhead costs of the tax system. Depending on the tax, these estimates range from 29 cents to $1.65 for
each dollar of tax collected. A useful overall figure, which combines all the different tax system costs, is 65 cents for every dollar collected. This
cost should be taken into account in any cost/benefit analysis of government action. To my knowledge, no administrator or Washington policy analyst has ever included full tax system overhead costs in a
program evaluation or cost/benefit analysis. …In addition to federal employees, Washington has a second built-in cheering section for spending programs. That section is made up of lobbyists, trade
associations, and nonprofit groups. While the public tends to see these groups as "outside" experts, in most cases they are actually insiders, dependent on federal funds. The government has a multitude of grant
programs distributing hundreds of billions of dollars to state and local governments, universities, think tanks, charities, unions, and advocacy
groups. These grants create an army of spending advocates who contact members of Congress, provide testimony at hearings, and feed the press "expert" opinion and comment.
Sunday, August 6, 2006 ~ 2:53 p.m., Sven Larson Wrote: The Comptroller General of the United States warns the nation will go broke within a generation - unless it takes radical steps now to rein in
out-of-control federal spending. In an exclusive interview with NewsMax, Comptroller David M. Walker, explained his mission: Save America from the brink of financial disaster. Walker has revealed
America's collision course in computer simulations that show balancing the budget in 2040 (under the status quo of spending like there's no tomorrow) could require cutting total federal spending by an incredible
60 percent - or raising federal taxes 200 percent over today's level. ... Walker has won plaudits from both Republicans and Democrats for his no-nonsense straight talk about the nation's current economic crisis.
Saturday, August 5, 2006 ~ 4:47 p.m., Sven Larson Wrote: There's a major retailer that rejects taxpayer subsidies? As strange as it might seem in Pennsylvania, it's true. Gander Mountain -- a major
retailer of outdoor sporting goods -- opposes tax breaks for retailers and is critical of those who accept them. The nation's third largest
outdoor retailer, behind Cabela's and Bass Pro Shops, has launched a national campaign to oppose government subsidies in the retail industry.
Gander's CEO says that government handouts are "anti-competitive and fundamentally inappropriate." Too bad more retailers, developers
and government officials don't subscribe to these sentiments. ...Clearly, the nation would be better off if there were more retailers like Gander
Mountain. They have quietly built themselves up to the number three outdoor retailer in the nation and have done so without taxpayer subsidies. Gander Mountain has invested in Pennsylvania with eleven
stores across the state including four in the Pittsburgh area. ...It cannot be repeated too often. State and county development officials should
stop subsidizing retailers. The benefits promised by developers almost never materialize and taxpayers are often left to pay for another failed
development. In common parlance this is known as a "lose-lose" situation. Of course in a state where job growth is anemic, throwing money at retail is what passes for economic development.
Friday, August 4, 2006 ~ 10:29 a.m., Sven Larson Wrote: Recent cuts in higher rates of personal income tax and the widening of thresholds address concerns about the tax burden on skilled workers
raised in the previous Survey and are to be welcomed. Indeed, as discussed further below, the extent of these changes are such that the priority for any future tax cuts should now be at the lower end to
address the problem of "low wage traps". This would build upon measures in recent years to reduce benefit withdrawal taper rates in the
Family Tax Benefit system and the targeted tax relief recently provided to low income earners.
Friday, August 4, 2006 ~ 8:45 a.m., Dan Mitchell Wrote: Millions of men...in the prime of their lives, between 30 and 55 - have dropped out of regular work. They are turning down jobs they think
beneath them or are unable to find work for which they are qualified, even as an expanding economy offers opportunities to work. About 13 percent of American men in this age group are not working, up from 5
percent in the late 1960's. The difference represents 4 million men who would be working today if the employment rate had remained where it
was in the 1950's and 60's. ...men fall back on wives or family members. But the fastest growing source of help is a patchwork system of government support, the main one being federal disability insurance,
which is financed by Social Security payroll taxes. The disability stipends range up to $1,000 a month and, after the first two years, Medicare
kicks in, giving access to health insurance that for many missing men no longer comes with the low-wage jobs available to them. No federal entitlement program is growing as quickly, with more than 6.5 million
men and women now receiving monthly disability payments, up from 3 million in 1990. About 25 percent of the missing men are collecting this insurance. ...in some cases, the illnesses are not so serious that they
would prevent people from working if a well-paying job with benefits were an option. The disability program, in turn, is an obstacle to working again. Taking a job holds the risk of demonstrating that one
can earn a living and is thus no longer entitled to the monthly payments. But staying out of work has consequences. Skills deteriorate, along with
the desire for a paying job and the habits that it requires. ...This same trend is evident in other industrialized countries. In the European Union,
14 percent of men between 25 and 54 were not working last year, up from 7 percent in 1975, according to the Organization for Economic Cooperation and Development. Over the same period in Japan, the
proportion of such men rose to 8 percent from 4 percent.
Thursday, August 3, 2006 ~ 8:50 a.m., Dan Mitchell Wrote: Fanny is one of many French graduates who have crossed the channel to live in the UK. Like others, she had only planned to come for a while,
but ended up staying. …Despite having no business experience, starting a firm in the UK was easy, says Fanny, whose firm is branching out to offer British food as well. Doing the same in France would be
impossible, or at best a bureaucratic headache, she adds. It is this sense of opportunity that attracts French 20 and 30-somethings to Britain. Many of them are dispirited with the way things are done in France.
…Earlier this year, French Finance Minister Thierry Breton bemoaned the country's "significant lack of economic culture". Which goes some
way to explain why 15,000 move to the UK every year. …Top students go to the Grandes Ecoles - professional universities in a different league
to the standard universities. These high flying-students are academically well-educated, but they are not entrepreneurial, according to Guillaume
Rigal, who left France to study for a Masters of Business Administration (MBA) at London Business School. "The best brains in France end up
working for the state" he says. …Job security is often deemed a sacred part of French life, yet this perception might be based on myth. French
workers say short-term contracts, which offer no job security at all, are the norm for the young in France.
Thursday, August 3, 2006 ~ 8:33 a.m., Sven Larson Wrote: Michigan residents are fleeing the Great Lakes State. A staggering 65 percent of United Van Lines 2006 client moves involving Michigan are
outbound - the highest of any state in the union, eclipsing North Dakota, which was number one in 2005. Since 1977, United Van Lines has published an annual survey of its client moves throughout the 48
contiguous states and Washington, D.C. Last January, as part of his work co-writing the paper, "Demography is Destiny," Mackinac Center Adjunct Scholar Michael Hicks performed a statistical analysis of
United Van Lines and U.S. Census data and found the two to be highly correlated. In other words, United Van Lines moves are an accurate representation of population changes as a whole. There is probably no
single metric for measuring quality of life issues better than migration patterns. This has profound implications for Michigan because our people are leaving and, according to United Van Lines, doing so at an
increasing percentage rate. In 2003, 2004 and 2005, Michigan's outbound rate increased by 0.4 percent, 2.8 percent, and 3.0 percent respectively. In the first six months of 2006, Michigan's outbound rate is
up 1.9 percent. At this pace, Michigan could conceivably break its record of 66.9 percent in 1981, a year when the state suffered double-digit unemployment. According to United Van Lines, states with
leading in-migration are in the West and South: Oregon, North and South Carolina, Nevada and Georgia round out the top five. There are many reasons people move, but it is probably easiest to sum all of them
up with one word: opportunity. Consider just one possible variable in the opportunity equation. In December 2005, economist Richard K. Vedder wrote that a historic migration is taking place from high-tax
states to low-tax states. In the 1990s, according to Vedder, 2.8 million people moved to the 10 states with the lowest overall state and local tax
burden, while 2.1 million departed the 10 states with the highest. Moreover, according to Vedder, even studies that take into consideration a wide array of other variables, such as sunshine, show
that "the negative tax migration relationship exists." In other words, taxes may burden state economies in a way that limits opportunities.
Thursday, August 3, 2006 ~ 7:41 a.m., Dan Mitchell Wrote: The Swiss-based Japanese translator of the global best-selling 'Harry Potter' series is reportedly facing a multi-million dollar claim for unpaid
taxes by Japan's tax authorities. Although Yuko Matsuoka claims to spend most of her time living in Switzerland, the Japanese tax authorities are of the view that she remains a Japanese resident for tax
purposes, and have issued her with a bill for back taxes of about 700 million yen (US$6 million) on 3.5 billion yen of undeclared income in the
three years to 2004, according to reports in the Japanese media. Yuko Matsuoka won the rights to translate the Harry Potter novels into Japanese in 1999, but she has been registered as a Swiss resident since
2001. She argues that it is to the Swiss government, not the Japanese, that she pays tax. …n Switzerland, tax is levied at federal, cantonal and communal level, but the total rate does not usually exceed 30%.
However, there is considerable variation in tax rates between the Swiss cantons, and wealthy non-nationals are able to cut fiscal deals with
cantonal authorities if they are not engaged in any substantial economic activity in the country. By contrast, in Japan, Matsuoka faces paying about 50% of her income in tax, reports have suggested.
Wednesday, August 2, 2006 ~ 12:41 p.m., Sven Larson Wrote: The Ohio Supreme Court explicitly rejected the U.S. Supreme Court's infamous Kelo decision of June 2005, in which that Court held that local
governments can take property from one person and transfer it to another because the new owner might produce more taxes or more jobs than the current one-so-called "economic development." Second, the
Ohio Supreme Court ruled that state courts must apply "heightened scrutiny" to uses of eminent domain, especially when the property is
being taken for use by another private party; according to the Court, lower Ohio courts should not simply rubber-stamp decisions by local government to take property. Next, the Court held that statutes
authorizing the taking of property cannot be vague. The "deteriorating" standard used by Norwood "is a standardless
standard," and the Court rejected it. Finally, the Court struck down Ohio's statute that allowed property to be taken even before an appeals court ruled that the taking was legal.
Wednesday, August 2, 2006 ~ 8:37 a.m., Dan Mitchell Wrote: Slovak Prime Minister Robert Fico asked parliament on Tuesday for a vote of confidence in his government, which wants to balance building
of a welfare state with the need to cut the fiscal deficit for euro adoption. (http://servedby.advertising.com/click/site=0000721552/mnum=000037
4497/genr=1/tkdt=B0P0R1T0/cstr=14880766=_44d01528,7327398297 ,721552^374497^1^0,1_/bnum=14880766) Fico's leftist party Smer
created a coalition government with the far right nationalists and the party of former ruler Vladimir Meciar after winning a June 17 election,
in which he beat centre-right former Prime Minister Mikulas Dzurinda. House speaker Pavol Paska said he expected the vote to take place on Thursday. The vote, required by the constitution, should be a formality
as the ruling coalition holds a comfortable majority of 85 seats in the 150-seat parliament. ...The government also plans to introduce a lower
value added tax (VAT) rate for selected goods and services, a move that will reduce budget income at the time when Slovakia needs to cut the
fiscal deficit to become eligible for euro adoption. Fico told parliament concrete details of the lower VAT bracket and other government steps, such as a one-off Christmas benefit for pensioners, would depend on
availability of state budget funds given the deficit limit set by EU's rules. The programme sees a higher income tax rate for wealthier Slovaks,
moving away from the flat tax system introduced by Dzurinda in line with Fico's promises to bring more solidarity into the tax system. The corporate tax will remain at 19 percent, Fico said, although special tax
measures may apply to dominant utilities.
Wednesday, August 2, 2006 ~ 8:14 a.m., Dan Mitchell Wrote: The Rolling Stones have paid just 1.6 per cent tax on their earnings of Ł242million over the past 20 years, it has emerged. Documents
published in Holland show that Sir Mick Jagger, Charlie Watts and Keith Richards used offshore trusts and companies to ensure tax breaks. Of the fortune they have accumulated since 1986 for royalties, they
have paid just Ł3.9 million in taxes. … Their fortunes have been secretly invested in the country for the past 35 years. The trusts will control the
rights to the Stones' music, performances, merchandise and films. Under Dutch law, certain information must be made public – allowing details
of their extraordinary tax break to emerge. …Under Dutch law, there is no direct tax on royalties. They have been tax exiles ever since - meaning they cannot make Britain their main home. … U2 were
obviously so impressed by the Stones's fiscal arrangements that the Irish rock band now share the group's Dutch financial director, Jan Favie.
Wednesday, August 2, 2006 ~ 7:45 a.m., Dan Mitchell Wrote: In the heady days following their 1994 congressional election triumph, many Republicans were gleefully anticipating a renewal of Ronald
Reagan's unfinished crusade to cut the federal government down to size - once and for all. But some of the more thoughtful incoming freshmen,
such as former Reagan staffer Christopher Cox of California, were also aware of the temptations that awaited the first House GOP majority in 40 years. "The big risk is that we will seek to use the national
government to achieve conservative objectives rather than using our mandate to reduce the size and power of government," Cox warned in January 1995. …Slivinski, director of budget studies at the Cato
Institute, briskly charts the ebb and flow of Republican efforts to curb the growth of the federal government. He begins with the Reagan revolution of the 1980s, followed by the betrayal of small-government
conservatism under President George H.W. Bush. Clinton's defeat of Bush I led to the Newt Gingrich-led House takeover of 1994. Yet it wasn't long before that triumph gave way to an era Slivinski
summarizes as "Gingrich and the Boys Go Native." …So why haven't more Republicans figured out that they can win by standing firm for
fiscally conservative principles? Slivinski's answer will resonate with anyone who has ever worked in Congress - or, for that matter, the New
York state Legislature. He sees the problem as one of "nature vs. nurture": Some congressmen are elected with a natural inclination to
cut government, "but over time, it's the environment - the culture that surrounds Congress - that makes the crucial difference." Washington's
culture of spending - the vast throng of lobbyists and interest groups seeking a piece of the tax-funded pie - can nurture big spending appetites in the most naturally abstemious of politicians. …As Slivinski
sees it, the moral of the story is that absolute power corrupted the erstwhile party of small government. Divided control of Washington gave us lower rates of spending growth, the 1986 tax reform, the
base-closure act of 1990 and welfare reform in 1996, he points out. Republican control of both houses of Congress and the White House has given us an $18 trillion unfunded liability for a vastly expanded
Medicare program.
Tuesday, August 1, 2006 ~ 11:19 a.m., Sven Larson Wrote: After decades of setbacks in education, countries in Sub-Saharan Africa are sending more children to school and taking steps to improve
education quality. But the region still needs help from wealthy nations to achieve universal education by 2015, says a global partnership of donors and developing countries. "We have seen that progress is
possible when political will and resources come together," says Desmond Birmingham, the new head of the global compact on education, known as the Fast Track Initiative (FTI). "Our challenge is
to help poor countries sustain the increases while improving quality and ensuring that all children complete their schooling," he adds. Despite
the fact that the international community sees education as essential to economic growth, poverty reduction, and fighting diseases such as AIDS, there is still much more to be done to accelerate progress in
education, according to FTI. "If we are to achieve the 2015 Millennium Development Goal of universal primary education, both donor and
developing countries must dramatically step up their financial, political and technical assistance contributions," Bermingham says.
Tuesday, August 1, 2006 ~ 9:34 a.m., Sven Larson Wrote: Italy has lifted the barriers to workers from central and eastern European member states bringing the total number of EU states with
free movement of labour to 18. Rome announced the decision to lift the restrictions, in place since the bloc's big bang enlargement to the east in
May 2004, on Friday. "We have put an end to discrimination against the new EU countries," said Enrico Letta, a cabinet under secretary,
according to Reuters. Italy also announced it would start a quota of 350,000 non-EU citizens who would now be able to legalise their status in Italy. The move was welcomed by Brussels with European
Commission president Jose Manuel Barroso saying that he "warmly congratulated" Italy on its announcement. Meanwhile, the UK, which along with Ireland and Sweden never had labour barriers for eastern
member states in the first place, has announced record immigration figures.
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