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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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Wednesday, January 31, 2007 ~ 8:48 a.m., Dan Mitchell Wrote: One of the ways the Senate bill does this is to place a cap on the amount of "deferred compensation" that a company can award its top executives in a given year. The
cap is equal to $1 million or the executive's average salary for the previous five years, whichever is lower. But rather than simply tax any deferred compensation above that threshold as income, it imposes an
additional 20% penalty tax on deferred comp above the limit. The Joint Committee on Taxation predicts this provision will bring in $800 million over the next decade. We'll go out on a limb and predict it brings
in an amount closer to $0. Senate leaders describe this cap on deferred compensation as closing a loophole in the 1993 law that barred companies from deducting from their taxes more than $1 million of salary
paid to their CEO and other top execs. Never mind that employee salaries have always been a deductible business expense. This was the last time Democrats ran Congress, and thus the last time they could sock it
to the successful. That 1993 law has itself become a classic example of unintended consequences. The biggest "loophole" in that law was an exemption carved out for performance-based compensation, which
was meant to alleviate concerns about Congress setting pay rates in the private sector. Back then, even tub-thumping Senator Carl Levin said "I don't support the government setting CEO pay in the tax
code." Which he and his mates proceeded to do anyway. And businesses promptly responded by shifting CEO pay away from salary and toward stock options and bonuses to circumvent the cap. ...this time, a much
larger pool of people than CEOs could be hit by the new deferred comp cap. People who make a lot less than $1 million have occasion to defer some of their salary, and at many companies even middle managers can
do so. If this bill becomes law, those non-millionaires potentially face a 55% tax rate on the income they might otherwise have tried to defer. The tax code is riddled with provisions, such as the Alternative
Minimum Tax, the estate tax and any number of phaseouts and caps, that were sold politically as targeting only the "super-rich" but now capture taxpayers of far more modest means.
Wednesday, January 31, 2007 ~ 8:28 a.m., Dan Mitchell Wrote: The "tax gap" is the difference between what the Internal Revenue Service thinks taxpayers should be paying and what it collects. The IRS
currently estimates this at about $290 billion a year. Ask any Congressional chairman how he intends to close the deficit, expand the Medicare drug benefit, reform the Alternative Minimum Tax or subsidize
college education, and the answer is invariably "close the tax gap." Last year the Senate held some half-dozen hearings in search of this pot of
gold. ...We suppose politicians are allowed to dream. But it's worth recalling that Washington has searched for this revenue Atlantis for decades without success. ...Nina Olson, the IRS's taxpayer advocate, told
Congress last year that IRS auditors have found that an estimated 94% of noncompliance is the result of honest mistakes by tax filers who simply don't understand the 17,000-page beast of a tax code. One obvious
answer would be to simplify the code (more on that later). But this requires political will, so Congress naturally prefers the easier route of ratcheting up taxpayer regulation and enforcement. ...Our personal
favorite would require that Americans withhold taxes from any cash payments they make to such individual contractors as babysitters, gardeners or plumbers. They'll love that one in the suburbs. Implicit in all
these new plans is a much bigger IRS staff to monitor and chase tax miscreants. Here's another bad idea: Many doctors and lawyers who are incorporated under subchapter S will often pay themselves lower wages
but higher dividends, in order to reduce self-employment taxes. The law is vague on the limits of this practice, and it is undoubtedly abused. But
the Joint Tax Committee's preferred solution is to make all professional income -- even dividend payments -- subject to self-employment taxes;
this is nothing more than a backdoor tax hike. ...There is a better way. The more complicated a tax system, the more likely taxpayers won't
understand, or will try to dodge, the rules. Simple tax regimes, such as a single flat rate, encourage compliance and efficiency, not to mention economic growth. This has been the experience of many Eastern
European countries after they imposed a flat tax, and the U.S. had similar jumps in reported tax income from "the rich" following the 1986 tax reform that cut rates and closed loopholes.
Wednesday, January 31, 2007 ~ 7:13 a.m., Dan Mitchell Wrote: Both the McKinsey report and last year's interim report from the privately funded Committee on Capital Market Regulation reach the
same conclusion: Concern about an unpredictable and expensive legal lottery is a major impediment to listing securities in the U.S. The McKinsey report relates that, among the executives surveyed, litigation
risk ranked second in importance in deciding where to do business, after the availability of qualified workers. The CMR report released last
November put it this way: "Foreign companies commonly cite the U.S. enforcement system as the most important reason why they do not want
to list in the U.S. market." And a big part of "enforcement" in the U.S. is private litigation. That report also points out that securities class actions
are unknown in most of the international money centers competing with the U.S. for financial business. …The true costs of those provisions have
yet to be tested for the simple reason that it will take a recession or a stock-market correction to trigger the next round of attempts to turn
corporate miscalculations into income redistribution opportunities. So far, this ticking bomb inside Sarbox has received little notice compared to the very real costs of compliance with Section 404 on internal
controls.
Tuesday, January 30, 2007 ~ 10:30 a.m., Dan Mitchell Wrote: Why is health insurance so expensive? One explanation is that the extraordinary gains medical science has made over the last few decades
come with hefty price tags. The revolution in cardiac care, the myriad new drugs, the invention of CAT scanners and MRIs, the ability to transplant organs -- these and so many other lifesaving medical miracles
didn't come cheap. It stands to reason that insurance covering the cost of such miracles doesn't come cheap either. But wait -- does it stand to
reason? Information technology has exploded in recent decades too, yet computers have never been as affordable as they are now. Agriculture is far more advanced, and the quality and variety of food available to
consumers far greater, than they were 50 years ago, yet the real cost of food has plummeted. The price of a primitive color television in 1954 was equal to three months' wages for an average American worker;
today that worker gets a sparkling picture on a 25-inch screen for just three days of work. "Why is it," asks David Gratzer, a physician and
scholar at the Manhattan Institute, "that in every other field where enormous technological strides have been made, total costs have fallen
over time, but in health care they have increased?" The answer, he writes in The Cure, a lively and engrossing new book on the American health care mess, is simple: Health care costs so much because most of
us pay so little for it. And we pay so little -- out-of-pocket expenses amount to just 14 cents of every health dollar spent in this country --
because a third party nearly always picks up the tab. For most working Americans, that third party is an insurance company paid by their employers. (For the poor and elderly who rely on programs such as
Medicare and Medicaid, it's the government.) Why does it matter whether Americans pay for medical care directly or let insurers cover their bills? Because thrift and price awareness usually go out the window
when we're spending other people's money. Under the present setup, most Americans have little incentive to be economical consumers of health care. As a result, health care expenditures -- and insurance
premiums -- have been racing ahead at three and four times the rate of inflation. …To properly disentangle this snarl, Congress ought to end the
tax exclusion that causes it. Employers don't generally provide workers with homeowner's or auto insurance, or for that matter with food, clothing, or housing. Ideally, medical treatment would be handled no
differently, and Americans would benefit from a far more robust and competitive healthcare market than they do now.
Tuesday, January 30, 2007 ~ 10:11 a.m., Dan Mitchell Wrote: Zurich is poised for a further influx of foreign firms and workers after the relocation of Kraft Foods' European headquarters and the expansion
of Google this year. The moves earlier this month from the two United States giants offer further evidence that the region offers prime conditions for companies, according to the Greater Zurich Area
relocation service. …"The relocation of headquarters and the nice growth of Google that we have seen in the last couple of months shows that we have very good basic conditions in the region," commented
Greater Zurich Area chief executive Willi Meier. …A more controversial lure for foreign companies is the low corporate tax rates offered by many cantons in Switzerland. …The competition among cantons to set the
lowest business tax was intensified at the beginning of last year when Obwalden slashed its rates to a Swiss low of just 6.6 per cent. Obwalden
attracted 376 new firms in the first 11 months of 2006, three times more than in the previous year. But Meier insists the Zurich region is not afraid
of the increased competition. "The tax competition among Swiss cantons makes Switzerland as a whole more competitive on an international
basis. Kraft has chosen Zurich despite the fact that we don't have the lowest tax rate in Switzerland, but on an international scale its still a very competitive rate," he said.
Tuesday, January 30, 2007 ~ 9:24 a.m., Dan Mitchell Wrote: Prime Minister Mirek Topolánek's Cabinet, which won a slim vote of confidence Jan. 19, was voted into office thanks to an ambitious plan
centered on economic reforms. ... the government plans to pursue canceling taxes on dividends and capital gains, as well as inheritance and gift taxes and the property transfer tax. ... The Cabinet plans to
reduce the share of mandatory expenditures on the overall state budget from its current 70 percent to below 50 percent by 2010. ... The Cabinet's
weak support in the Parliament also makes it unlikely that the flat tax will be put in effect anytime soon.
Tuesday, January 30, 2007 ~ 9:02 a.m., Dan Mitchell Wrote: The Republican Party is in as critical shape as in 1974. It is so hopelessly confused it stands for precious little Americans find attractive. This is in
part due to the war in Iraq, but not entirely. After the November elections, a CNN poll astonishingly found more than 60 percent of Americans now believe the GOP to be the party of "big government."
After McCain-Feingold, prescription drug benefits, No Child Left Behind, the Patriot Act, lobbying scandals, bloated energy, farm and transportation bills and unrestricted growth of government along with
invasion of personal privacy, who can blame them? Just recently, locally elected Republican officials in the Northwest and Maine proposed banning cigarette smoking in cars with children under 18 years of age
and mandatory drug testing for all elected officials. Ignorance aside, stooging for cheap media aside, these ideological illiterates who proposed this nonsense are more dangerous to the GOP than Hillary
Clinton ever hoped to be. By making these proposed, clear violations of parental rights and the cherished right of privacy, they, incrementally, help redefine the GOP to the American people as "Police State
Republicans." ...The conservative movement can heal itself, if all factions are willing to compromise and give up their infatuation with government, power and access and again embrace Reagan's small
government, do-it-yourself philosophy.
Monday, January 29, 2007 ~ 2:58 p.m., Dan Mitchell Wrote: Data released last week from the Congressional Budget Office confirm that the tax cuts of 2003 keep soaking the rich, especially on their capital
gains. CBO and Congress's Joint Tax Committee originally estimated that reducing the capital gains rate to 15% from 20% would cost the Treasury $5.4 billion from 2003-2006. Whoops. Actual revenues
exceeded expectations by 68%, creating a $133 billion revenue bonanza for the feds. CBO's original forecast for 2006 was for $57 billion in capital gains revenues, but actual receipts were $110 billion. This
surprise windfall is one reason the budget deficit is also far lower than CBO predicted. The lower capital gains tax has raised stock values by
raising the after-tax return on capital investment. It has also given stock owners a greater incentive to sell their shares, and then reinvest the
proceeds, because the tax penalty on these transactions is lower. …The 2003 rate cut liberated hundreds of billions of dollars of capital for new
investment. By the way, the National Venture Capital Association reports that venture capitalists invested $25.5 billion in 2006, the biggest burst
of dealmaking since the stock market bubble burst in 2000. This is seed money for new companies and new jobs that will lift future tax revenues.
Monday, January 29, 2007 ~ 12:25 p.m., Dan Mitchell Wrote: Reclusive Kathmandu founder Jan Cameron has moved to Tasmania after spending more than 30 years in Christchurch, where she built a
$275 million business fortune. Starting with a small shop in Linwood, Cameron turned her outdoor-clothing and equipment venture into one of the country's best-known brands, with outlets in New Zealand, Australia
and Britain. The Press understands Cameron had looked at staying in New Zealand after selling Kathmandu last year and planned to donate a portion of her annual income from her investments to charities. But
under the New Zealand tax regime, all the money she gave away over an $1800 threshold would be taxed, so she opted to move to Australia, where there is no limit. ...PricewaterhouseCoopers tax specialist John
Shewan said he was not surprised by Cameron's decision. "It does underline how careful we need to be if we want to retain high-net-worth
individuals," he said. "We need to have a tax-friendly environment. Sadly, we don't have that at the moment." Shewan said Cameron would
pay no tax on her overseas investments under new Australian tax rules. "Australia has stolen a march on us in terms of attracting high-net-worth individuals," he said.
Monday, January 29, 2007 ~ 10:40 a.m., Dan Mitchell Wrote: Ironically, the president's call echoes a more severe proposal by his 2004 campaign opponent John Kerry - a recommendation that a National Center for Policy Analysis study found would not "reduce future U.S. dependence on foreign oil." The president's plan also proposes an expansion of the so-called Renewable Fuels Standard (RFS), which currently mandates that refineries produce 7.5 billion gallons of ethanol per year by 2012. But, as Heritage Foundation energy analyst Ben Lieberman points out, "if ethanol were a viable fuel, you wouldn't have to mandate it in the first place." Indeed, ethanol - whether made from corn or trendy cellulosic sources like switchgrass - is simply not viable as an alternative for the fundamental reason that a gallon of ethanol only goes 75 percent as far as a gallon of gas. ...For the farm lobby, the renewable mandate is easier to understand. It means money. Lots of money. To make ethanol price-competitive, the federal government subsidizes its production to the tune of 51 cents a gallon, costing U.S. taxpayers $4.1 billion a year. Fueled by the RFS, Big Ethanol producer Archer Daniels Midland rang up record 2006 profits that would make Big Oil blush. Now Bush is proposing to increase the mandate to a fanciful 35 billion gallons by 2017 (whether consumers buy it or not). And as the federal honey pot grows, it is naturally attracting more flies. http://www.cbsnews.com/stories/2007/01/24/opinion/main2393529.shtml Meanwhile, a Wall Street Journal column notes how the ethanol subsidy has a big negative impact on other users of corn, and even causes harm in other nations: What we have here is a classic political stampede rooted more in hope and self-interest than science or logic. ...federal and state subsidies for ethanol ran to about $6 billion last year, equivalent to roughly half its wholesale market price. Ethanol gets a 51-cent a gallon domestic subsidy, and there's another 54-cent a gallon tariff applied at the border against imported ethanol. Without those subsidies, hardly anyone would make the stuff, much less buy it--despite recent high oil prices. That's also why the percentage of the U.S. corn crop devoted to ethanol has risen to 20% from 3% in just five years, or about 8.6 million acres of farmland. Reaching the President's target of 35 billion gallons of renewable and alternative fuels by 2017 would, at present corn yields, require the entire U.S. corn harvest. No wonder, then, that the price of corn rose nearly 80% in 2006 alone. Corn growers and their Congressmen love this, and naturally they are planting as much as they can. ...for those of us who like our corn flakes in the morning, the higher price isn't such good news. It's even worse for cattle, poultry and hog farmers trying to adjust to suddenly exorbitant prices for feed corn--to pick just one industry example. The price of corn is making America's meat-packing industries, which are major exporters, less competitive. In Mexico, the price of corn tortillas--the dietary staple of the country's poorest--has risen by about 30% in recent months, leading to widespread protests and price controls. ...Thus is a Beltway fad translated into Third World woes. ...The scientific literature is also divided about whether the energy inputs required to produce ethanol actually exceed its energy output. It takes fertilizer to grow the corn, and fuel to ship and process it, and so forth. Even the most optimistic estimate says ethanol's net energy output is a marginal improvement of only 1.3 to one. For purposes of comparison, energy outputs from gasoline exceed inputs by an estimated 10 to one. And because corn-based ethanol is less efficient than ordinary gasoline, using it to fuel cars means you need more gas to drive the same number of miles. This is not exactly a route to "independence" from Mideast, Venezuelan or any other tainted source of oil. ...If cellulose is going to be an energy miracle--an agricultural cold fusion--far better to let the market figure that out. Not that any of these facts are likely to make much difference in the current Washington debate. The corn and sugar lobbies have their roots deep in both parties, and now they have the mantra of "energy independence" to invoke, however illusory it is. If anything, Congress may add to Mr. Bush's ethanol mandate requests. http://www.opinionjournal.com/weekend/hottopic/?id=110009587
Sunday, January 28, 2007 ~ 6:16 p.m., Dan Mitchell Wrote: The EU could soon be footing the bill for the free distribution of fruit and vegetables to schools, holiday camps and charities, as the European
Commission combines an overhaul of the fruit and vegetable sector with its fight against obesity. …the package also includes measures aimed at promoting a healthy diet, by promising farmers a 100 percent
reimbursement for fruit and vegetables delivered for free to charities, school canteens or children's holiday camps. …the EU will also cover 60
percent of the costs for producers' initiatives aimed at promoting the consumption of fruit and vegetables by children under 18 years of age.
Saturday, January 27, 2007 ~ 1:58 p.m., Dan Mitchell Wrote: Ms. Royal's foray into these waters came, as much else in recent weeks, awkwardly. Socialist Party chief François Hollande, who is also Ms.
Royal's personal partner and the father of their four children, floated a plan to raise taxes on people earning above €4,000 a month. This was
quickly panned as a tax hike that soaks the middle classes. Taken by surprise, Ms. Royal tried to distance herself from his proposal, but her campaign was soon put on another back foot when details of their own
personal wealth were leaked to the press. …Mr. Sarkozy has taken advantage. Building on the momentum from his formal nomination by the ruling center-right party last week, and with an emerging lead in the
polls, he used a front-page interview in Tuesday's Le Monde to push for cuts in income taxes and -- the real whammy in France -- social charges.
His proposals are modest, but break a taboo in France -- something that this son of Hungarian and Jewish immigrants specializes in. …Mr. Sarkozy isn't a Thatcherite by a long stretch, nor would being one help
him in the eyes of French voters. He doesn't dare support revoking the 35-hour workweek; he wants only to relax the law, even though it is
widely seen as a failure. When he was briefly finance minister in 2004, he showed an interventionist streak that appeared to betray a lack of true understanding about how a market economy really works.
Friday, January 26, 2007 ~ 12:51 p.m., Dan Mitchell Wrote: In Georgia, Missouri and South Carolina, Governors and state legislatures are drafting serious proposals to repeal their income taxes to
promote economic development. St. Louis, one of America's most distressed cities, may overturn its wage/income tax as a way to spur urban revival. And in Michigan, the legislature is in the last stages of
phasing out its hated business income tax -- the most onerous in the land. "States are now in a ferocious competition to attract jobs and
businesses," says economist Arthur Laffer, who is advising several Governors and legislators on the issue, "and one of the best ways to win
this race is to abolish the state income tax." …The idea of financing state services without an income tax is hardly radical. Nine states today --
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming -- manage well without one. With a few exceptions, the non-income tax states are America's most
prosperous. Meanwhile, the high income tax states, which tend to be congregated in the Northeast, keep surrendering jobs, people, and voters to the South and West. State lawmakers also seem to have learned from
two of the most recent states to adopt an income tax: New Jersey and Connecticut. As recently as 1965 New Jersey had neither an income nor sales tax, but managed to balance its budget every year. Now it has both
taxes -- its income tax is the 5th highest in the nation -- but the state is facing what Stateline.org calls a "staggering budget deficit." Allied Van
Lines reports that the Garden State is now one of the leading places for people to flee. The latest state to adopt an income tax was Connecticut
in 1991, but a new report by the Yankee Institute reveals that the tax has been a calamity. The state has ranked last in employment growth since
1991, losing 240,000 of its native born citizens between 1991-2002. No other state has since enacted an income tax, and lawmakers in Georgia, Missouri and South Carolina say Connecticut is now the model for how
not to run a state economy.
Friday, January 26, 2007 ~ 11:11 a.m., Dan Mitchell Wrote: [Health care] spending appears to be increasing at an alarming rate, up 362% between 1984 and 2004, according to the Bureau of Economic Analysis. The
Kaiser report says that health spending as a share of gross domestic product went from 8.8% in 1980 to 15.2% in 2003. But is this really a crisis in
desperate need of a government solution? The short answer: No. Unless, of course, you also think that we have a recreation crisis, or a fitness club crisis,
or a computer crisis. After all, spending on these and other things went up just as fast, if not faster, than spending on health care. Recreation spending, for
example, was up 386% between 1984 and 2004. Spending on health clubs was up more than 300%; spending on computers rocketed 600%. Just because spending on health care is going up at a fast pace in the U.S. isn't
necessarily a sign that something is wrong. More likely it is a sign that we are a wealthy nation that, by and large, has taken care of the essentials of life. As a
result, we can afford to spend a bigger chunk of each extra dollar we make on former luxuries, like better vacations, a new laptop and gold-plated health care. The big difference, however, is the government-created third-party-payer crisis that has undermined market forces in health care. As explained by Michael Tanner and Michael Cannon (http://www.catostore.org/index.asp?fa=ProductDetails&method
Thursday, January 25, 2007 ~ 4:19 p.m., Dan Mitchell Wrote: Hallyday and Blunt are not unique in their desire to escape the high-tax regimes of their home countries. Switzerland has become a popular
haunt for a variety of sports starts, rock stars and tycoons, notably Michael Schumacher, the former Formula One world champion, and Boris Becker, the Grand Slam tennis champion, rock star Phil Collins
and Ingvar Kamprad, founder of the furniture chain Ikea. Well over 3,500 wealthy foreigners have taken advantage of fiscal deals offered by Swiss cantons, paying an average of CHF75,000 each in tax on earnings
of CHF300 million annually, according to Swissinfo. While individual deals vary, a typical agreement will see the individual pay tax on a multiple of the the value of their property or living expenses. Swiss
cantons are permitted an unusual amount of freedom from central government to set their own tax rates under the 2001 Tax Harmonisation Act which has established a direct link between voters
and tax policy and has helped to encourage tax competition within Switzerland for wealthy individuals and holding companies. At least eighteen out of Switzerland's 24 cantons planned to cut rates of taxation
in 2006, led by Obwalden, which cut corporate tax to 6.6% in January 2006, the lowest rate in Switzerland. Obwalden also cut tax for individuals earning over CHF300,000 by 1% to 2.35% and reduced
property tax. The system has also attracted criticism from the European Union. While Switzerland is not a member of the EU, it is party to a free
trade agreement with Brussels dating back to 1972 and the European Commission has told Berne that it thinks certain aspects of Switzerland's
tax system are "incompatible" with this agreement and distort trade within the EU. To date, EC pressure on Switzerland to change its tax
system has been firmly resisted by the Swiss government, with President Micheline Calmy-Rey telling the press whilst still Foreign Minister in
December that there is "absolutely no room for negotiation," regarding Swiss tax laws. Switzerland...has attracted millionaires ranging from the founder of Ikea, Ingvar Kamprad, to the former Formula One champion Michael
Schumacher... Foreigners with no local income pay Swiss tax according to their spending on rent or mortgages. ...nations including Luxembourg, Ireland and Monaco also offer tax breaks to lure rich immigrants,
Switzerland's system allows cantons to impose individual levies on residents' income and assets as well as companies' profits. "It's not a
question of justice or injustice; there's no just tax," said Jean- Daniel Gerber, head of the Swiss State Secretariat for Economic Affairs.
Thursday, January 25, 2007 ~ 1:41 p.m., Dan Mitchell Wrote: Today there are adults -- including educated adults -- who explain multimillion-dollar corporate executives' salaries as being due to
"greed." Think about it: I could become so greedy that I wanted a fortune twice the size of Bill Gates' -- but this greed would not increase
my income by one cent. ...One of the reasons why central planning sounds so good, but has failed so badly that even socialist and communist governments finally abandoned the idea by the end of the
20th century, is that nobody knows enough to second guess everybody else. Every time oil prices shoot up, there are cries of "greed" and
demands by politicians for an investigation of collusion by Big Oil. There have been more than a dozen investigations of oil companies over the
years, and none of them has turned up the collusion that is supposed to be responsible for high gas prices. Now that oil prices have dropped big
time, does that mean that oil companies have lost their "greed"? Or could it all be supply and demand -- a cause and effect explanation that
seems to be harder for some people to understand than emotions like "greed"?
Wednesday, January 24, 2007 ~ 1:15 p.m., Dan Mitchell Wrote: United States Senator Charles E. Schumer and New York City Mayor Michael R. Bloomberg have released a report which warns that New
York could lose its status as a global financial market within a decade without a major shift in public policy. Schumer, a New York Democrat, and Bloomberg, together with New York Governor Eliot Spitzer, warned
that New York's financial markets, stifled by stringent regulations, and high litigation risks, are in danger of losing businesses and high-skilled
workers to overseas competitors, relegating New York to regional market status and adversely impacting the US economy. ...Senator Schumer and Mayor Bloomberg commissioned the joint report,
"Sustaining New York's and the US's Global Financial Services Leadership," which sets out a series of recommendations to counter emerging threats to the United States' position as the world's financial
leader, with a two-tiered package of national and local measures aimed at removing impediments to financial services competitiveness both domestically and internationally. The report warned that the United
States would miss out on between $15 billion and $30 billion in financial services revenues annually by 2011 if the current situation goes unchanged. According to the joint report, while many of the causes are
due to improved markets abroad and sophisticated technology that has virtually eliminated barriers to the flow of capital, a significant number
of the causes for America's declining competitiveness are self-imposed. ...The report also noted that a complex and sometimes unresponsive regulatory framework has not only prompted many foreign firms to stay
out of the US markets, but also is forcing more business overseas because of the complexity and cost of doing business in US financial markets regardless of where they are located.
Wednesday, January 24, 2007 ~ 11:11 a.m., Dan Mitchell Wrote: Under current tax law, health insurance premiums are tax-exempt if the insurance is provided through an employer. Basically, the share of the
premium paid by the employer is not counted as worker income. So workers get a tax-free benefit, no matter how generous it is. At the same time, those who must buy insurance for themselves face a far more
limited tax break. The tax subsidy is enormous. A study published in the journal Health Affairs calculated the total at more than $208 billion for
2006, and rising fast - it has nearly doubled since 1996. Worse, the tax subsidy is hugely regressive, with the bulk going to the most well-off.
Those making more than $100,000 get an average tax break of $2,780, compared with just $725 for those earning $20,000 to $30,000... The economic distortions this system creates and the troubles it causes the
health care marketplace have long been recognized. Health care reform guru Alain Enthoven noted more than 20 years ago that the tax code
"reinforces the cost-increasing incentives in our health care financing system and weakens consumer cost-consciousness." ...Bush's plan isn't
perfect, and it hardly fixes all the government-caused distortions in the health care marketplace. But by recognizing one major source of the
problem, Bush is at least taking a step in the right direction toward a viable solution.
Wednesday, January 24, 2007 ~ 8:34 a.m., Dan Mitchell Wrote: Virginia was once a solidly conservative Republican state, but in recent years it has tilted Democratic. A big reason for the shift is the GOP's
recent love affair with higher taxes. In the 1990s Republican Governors George Allen and Jim Gilmore won sweeping victories running as tax cutters. Then in 2004 Richmond Republicans enacted the largest tax
increase in the commonwealth's history -- a $1 billion hike in sales and tobacco taxes. Now they are flirting with another tax hike even though
the state has a Blue Ridge Mountain-high $900 million budget surplus. ...The Republican plan would spend $1 billion more for roads and cost-inefficient transit programs and pay for it through borrowing,
raising taxes and fees on cars and trucks, and giving local governments authority to raise their assessments. ...Only 10 years ago the Virginia GOP was riding high after Jim Gilmore was elected Governor on a
wildly popular message: "End the Car Tax." Now the Virginia Republicans want to raise car taxes. Have they learned nothing from the party's implosion in Washington?
Tuesday, January 23, 2007 ~ 2:07 p.m., Dan Mitchell Wrote: Patrick Messeiller, director of tourism for Verbier, confirmed a report in the Swiss daily Le Matin that Blunt, who is a frequent visitor to the
mountain village, had registered with the tax office there. Blunt, 32, is the latest celebrity to move to the alpine nation. French rock legend Johnny Hallyday took up residence in nearby Gstaad last month.
Hallyday's move prompted a heated debate in France about rich people and multinational companies fleeing the country for Switzerland because of low taxation there.
Monday, January 22, 2007 ~ 12:31 p.m., Dan Mitchell Wrote: On February 1, 2006, President Kurmanbek Bakiyev of Kyrgyzstan (Kyrgyz Republic) signed into law modifications in the country's tax code
that established a 10% flat tax. Kyrgyzstan's flat tax replaced its current corporate tax of 20% and individual income tax rates between 10-20%.
Shortly thereafter, the president of neighboring Kazakhstan said that his country would consider a flat tax in 2007. ...On July 5, 2006, the people
of Macedonia voted to establish their own country. The inaugural session of the new parliament met on July 26. President Branko Crvenkovski appointed a new prime minister, Nikola Gruevski, leader of the rightist
VMRO-DPMNE, to establish a government. Gruevski announced a 100-point reform program. One of its main pillars is the flat tax. It was set at 12% beginning January 2007, and will be reduced to 10% a year in
2008. The flat tax will replace the current corporate tax of 15% and personal income tax rates between 15-24%. The government stated that the purpose of the low 10% flat tax is to make Macedonia a country with
one of the lowest tax rates in Europe in order to emulate the success of Estonia, Latvia, and Lithuania, which experienced strong economic growth after the adoption of their flat taxes. ...Montenegro, which
achieved independence in a referendum in May 2006, has implemented a corporate tax rate of 9%, reduced from two rates of 15% and 20%, giving it one of the lowest corporate rates in Europe. Montenegro taxes
personal income at graduated rates of 16% (€780-2,616 taxable income), 20% (€2,616-4,572), and 24% (over €4,572). It is likely that Montenegro
will join its neighbors with an across-the-board flat tax sometime in the near future. In Bulgaria, the standard rate of corporate income tax was
set at 15% in 2006. Effective January 1, 2007, the rate was cut to 10%. Personal income is taxed at three rates of 20% ($1,440-1,500 taxable income), 22 ($1,500-4,800), and 24% (over $4,800). If it forms a
government with a parliamentary majority in 2007, a center-right coalition of three parties—the Civic Democrats (ODS), the Christian Democrats (KDU-CSL), and Greens—plan to enact a flat tax of 17-19%
on companies and individuals. The flat tax would replace four brackets for individuals ranging from 12-32% and the corporate 24% tax. Since January 1, 2007, Iceland taxes all personal income at a flat rate of
35.73%, which consists of the central government's 22.75% tax rate and the municipal 12.98% tax rate. The central government surtax, levied at 7% during 1998-2003, gradually reduced to 2% in 2006, has now been
eliminated. Interest, dividends, capital gains, and rental income are taxed at a 10% flat rate. A wealth tax was abolished at the end of 2005. The corporate tax rate is 18%, down from 30% in 2001. The rate on
partnerships is down from 38% in 2001 to 26% in 2007. On November 29, 2006, Spain promulgated significant changes in its tax laws. Income derived from savings is subject to a flat rate of 18%. Effective January
1, 2007, the company tax rate of 35% was reduced to 32.5%, and will fall further to 30% in 2008.
Monday, January 22, 2007 ~ 10:22 a.m., Dan Mitchell Wrote: Senior bankers and leading politicians have attacked demands from the American Department of Justice for British bankers to hand over details
of their dealings with online gambling companies outlawed in the US. After calls on the British Government to spell out the limits of the US
authorities' reach, the Treasury said last night that it was monitoring the situation. ...Alan Duncan, Shadow Trade and Industry Secretary, said:
"There is growing suspicion that the US Department of Justice is using its muscle in a highly unpleasant manner, and is targeting financial
institutions beyond their own shores in a way that cannot be justified. I hope the Department will stop and review its approach so that its behaviour doesn't sour relations between us." Vince Cable, the Liberal
Democrat Treasury spokesman and a former chief economist for Shell, said: "This appears to be another case of extra-territorial and retrospective action from the US authorities that goes against two basic
principles of justice." A senior banking source, who asked not to be named because of the "immense legal complexity and sensitivity" of the issue said: "The US is saying to itself, 'We must get somebody', and in
the process it seems to think it can foist . . . US legislation, even individual state legislation, on anybody. ...Another banker said: "This is
a massive, ongoing fishing trip. Everyone — the bankers, the lawyers — who was involved in the IPOs or had ongoing business with these companies is in the same boat."
Sunday, January 21, 2007 ~ 4:27 p.m., Dan Mitchell Wrote: ...scores of studies show no ties between graduate studies and teacher effectiveness. Even among researchers who see some value in some
master's programs, many urge dramatic reforms and an end to automatic stipends. "If we pay for credentials, teachers have an incentive to seek and schools have an incentive to provide easy
credentials," said Arthur Levine, a researcher who once headed Columbia University's Teachers College. "If, on the other hand, we only
pay for performance, teachers have an incentive to seek and schools have an incentive to provide excellent training." ...A roundup published
in 2003 by The Economic Journal, a publication of the international Royal Economic Society, unearthed 170 relevant studies. Of those, 15 concluded that master's programs helped teachers, nine found they hurt
them, and 146 found no effect. One of the largest such studies began a decade ago, when the Texas Education Agency and the University of Texas at Dallas began offering researchers continuing access to millions
of student records. That effort, a part of the Texas Schools Project, has found no correlation between master's degrees and student achievement.
"They're worthless. Case closed. Next question," said Eric Hanushek, a senior project researcher who also works at Stanford University.
...school districts have long paid premiums for teachers with master's degrees. And the premiums have led to a large increase in the share of American teachers with the degrees, from 26 percent in 1960 to 56
percent in 1995. In much of the nation, salary premiums for master's degrees exceed $5,000 a year... that money could make a tangible impact elsewhere, buying student laptops, tutoring sessions, field trips or
additional courses. ..."America has 3.2 million teachers who together make up the nation's most powerful political lobby, and more than half
of them hold master's degrees. They'll fight for that money," said Kate Walsh, president of the National Council on Teacher Quality, a Washington-based nonprofit that funds and reviews education research.
"The universities will fight, too," she said. "Master's programs are cash cows. Schools charge thousands a year in tuition for programs that cost
little to run. Ever wonder why ed schools don't publicize this research?"
Saturday, January 20, 2007 ~ 2:44 p.m., Dan Mitchell Wrote: ... the poorest 10% in America and in Denmark have about the same annual income (accounting for purchasing power parities and all social
income transfers). Not surprisingly, the top 10% of Americans are much better off than their Danish counterparts with an average income of
210% of the US median income compared to 123% in Denmark. "Rich" people in Denmark thus do not make much more than the median income
in the United States. As for the average industrial worker, the Danish Ministry of taxation estimates that American workers earn roughly 33% more than their Danish counterparts when accounting for purchasing
power parities and social transfers of income. Taken together, these numbers indicate that the 10% poorest in the United States have roughly the same standard of living as their Danish counterparts while the
remaining 90% of Americans are better off than the Danes. ... Danes tend to have fewer household amenities than Americans. A case in point:
my wife and I recently hosted a Danish friend at our home in Virginia. During the clean up after dinner, our guest was astonished by our garbage disposal, having never seen one or even heard of one before in
her life. ... on paper Danes and Europeans in general have much more free time than Americans. ...recent research from Sweden and Germany suggests that Americans have just as much leisure time as Germans and
Swedes when one accounts for the time spent on "do-it-yourself" services such as cooking, grocery shopping and home repair. While Americans
spend more time on the job, Swedes and Germans spend more time working at home performing basic services that Americans pay others to do for them. Anecdotal evidence suggests that the numbers from
Germany and Sweden apply to Denmark as well. For instance, Danes rarely go out to eat compared to Americans, and shopping for groceries, clothes and other everyday items requires more time in Denmark due to
smaller stores, higher prices, and a lower variety of goods. In addition, Danes tend to spend long hours stuck in public transportation due to the
high cost of cars and gasoline. ... As in most government-run healthcare systems, Danish patients face significant waiting times for many types of
treatment that Americans can get immediately. The United States is also ahead of Denmark when it comes to employing modern technology. For instance, America has 62.1 DTX scanners (for osteoporosis) per 1 million
people compared to 8.0 in Denmark. The ratio for MRI scanners is 27 to 10 in America's favor, and the ratio for CT scanners is 32 to 14.6, again
in America's favor. Furthermore, Americans have better access to many preventive drugs than Danes, who often have difficulties getting prescriptions until they show serious medical complications. ...
globalization and freer movement of labor within the European Union have given many young Danes opportunities to live and work in countries with lower tax-rates than Denmark. As more and more Danes
realize that high taxes are a bad deal, the political elites will either have to lower tax rates and cut social spending or face a massive exodus of
the people that suffer the most in the current system: Talented and hard-working citizens with high incomes. In fact, this mass exodus is already taking place. For instance, estimates of Danes living in London
vary between 35,000 and 70,000, which is roughly 1% of the total Danish population of 5.4 million. According to the leading Copenhagen business daily Břrsen, the average income of these Danish Londoners is
more than $100,000 per year. To put this number in perspective, imagine the reaction if 3 million high income Americans moved to London in search of greater economic freedom.
Friday, January 19, 2007 ~ 1:39 p.m., Dan Mitchell Wrote: Is Mr. Gore's world a worthwhile sacrifice? But it seems that critical questions are out of the question. It would have been great to ask him
why he only talks about a sea-level rise of 20 feet. In his movie he shows scary sequences of 20-feet flooding Florida, San Francisco, New York,
Holland, Calcutta, Beijing and Shanghai. But were realistic levels not dramatic enough? The U.N. climate panel expects only a foot of sea-level rise over this century. Moreover, sea levels actually climbed
that much over the past 150 years. Does Mr. Gore find it balanced to exaggerate the best scientific knowledge available by a factor of 20? Mr. Gore says that global warming will increase malaria and highlights
Nairobi as his key case. According to him, Nairobi was founded right where it was too cold for malaria to occur. However, with global warming advancing, he tells us that malaria is now appearing in the city.
Yet this is quite contrary to the World Health Organization's finding. Today Nairobi is considered free of malaria, but in the 1920s and '30s, when temperatures were lower than today, malaria epidemics occurred
regularly. Mr. Gore's is a convenient story, but isn't it against the facts? He considers Antarctica the canary in the mine, but again doesn't tell the
full story. He presents pictures from the 2% of Antarctica that is dramatically warming and ignores the 98% that has largely cooled over the past 35 years. The U.N. panel estimates that Antarctica will actually
increase its snow mass this century. Similarly, Mr. Gore points to shrinking sea ice in the Northern Hemisphere, but don't mention that sea ice in the Southern Hemisphere is increasing. Shouldn't we hear those
facts? Mr. Gore talks about how the higher temperatures of global warming kill people. He specifically mentions how the European heat wave of 2003 killed 35,000. But he entirely leaves out how global
warming also means less cold and saves lives. Moreover, the avoided cold deaths far outweigh the number of heat deaths. For the U.K. it is estimated that 2,000 more will die from global warming. But at the same
time 20,000 fewer will die of cold. Why does Mr. Gore tell only one side of the story?
Friday, January 19, 2007 ~ 12:12 p.m., Dan Mitchell Wrote: ...federal prosecutors in New York, jointly with the New York District Attorney, have just announced the indictment of the man who ran the
U.N.'s former Oil-for-Food program: Benon Sevan. Charged with conspiring to commit fraud and taking close to $160,000 in bribes related to Oil-for-Food deals, Sevan, if convicted, could face a prison
sentence of up to 50 years. The indictment is, in its way, a neat retort to attempts by Sevan's old boss, former Secretary-General Kofi Annan, to
downplay the landmark Oil-for-Food scam in terms of "If there was a scandal." ...So begins the next chapter in this saga spawned by the U.N.'s
lucrative and corrupt collaboration with one of the world's worst tyrants, the late Saddam Hussein. Advertised as a U.N.-run relief program for Saddam's U.N.-sanctioned Iraq, the 1996-2003 Oil-for-Food program
devolved into a worldwide extravaganza of kickbacks, smuggling, and bribes, fortifying Saddam with more than $17 billion in illicit funds, according to Senate investigators. ...At the U.N. itself, which ran
Oil-for-Food, and where Annan's Secretariat collected $1.4 billion from Iraq to cover the cost of administering the program, not a single official
ended up even fired. Sevan retired and has been collecting his full U.N. pension, despite allegations of bribery leveled against him in 2005 by
Paul Volcker's U.N.-authorized inquiry into Oil-for-Food. When I asked Annan's spokesman last year if the U.N. had paid Sevan's airfare and
moving expenses back to Cyprus, the answer was not "no." It was: "We do not usually disclose personal information on individual staff entitlements to the public."
Friday, January 19, 2007 ~ 11:27 a.m., Dan Mitchell Wrote: This isn't the first time Mr. Kennedy has found a Republican to carry water for him. In 1971, after Medicare spending had increased by more
than 70% in five years (although the number of people enrolled grew by only 6%), Richard Nixon declared a "health-care cost crisis" and worked
with Mr. Kennedy to propose mandatory employer-provided health insurance. The idea foundered, but a modified version now has been revived by Mr. Schwarzenegger, who wants to require that every person
buy health insurance, or be covered by an employer or the government. ...Liberals are overjoyed at the about-face by a governor who in 2005 vetoed a Democratic bill that would have merely expanded the state's
coverage of children, saying the $300 million price tag was too high. Assembly Speaker Fabian Nunez praises the governor's new proposal: "This is a plan Assembly Democrats could have written." ...Jason
Kinney, a Davis speechwriter, joked that he had decided "to finish the second term of [former Democratic Governor] Gray Davis." No one is laughing now. The behind-the-scenes architects of much of the
governor's plan were Ms. Kennedy and Mr. Zingale, who also served as Mr. Davis's director of managed health care. ...Gov. Schwarzenegger won landslide re-election in part by winning 91% of Republicans with an
ironclad pledge not to raise taxes. He pounded Phil Angelides, his Democratic opponent, for wanting to raise taxes by $7 billion to pay for universal health care. But now the estimated cost of the Schwarzenegger
plan to cover California's uninsured, including two million illegal aliens, is $12 billion. State subsidies for people to buy insurance will extend to
those earning up to $50,000 a year, more than California's median income. "He's creating a welfare state where more than half the people
are in the wagon being pulled than outside the wagon pulling," says one health-care analyst. As bad as the policy implications are, the governor's
plan may be fatally flawed, politically. He insists it doesn't raise taxes, despite billions in new charges on doctors, hospitals and employers. He
prefers to call the new revenue "in-lieu fees" and "coverage dividends." "He excoriated Phil Angelides, rightly, for proposing the same tax
increases he has put on the table," says GOP state Sen. Tom McClintock. "He is now pushing the second largest tax increase in California history.
I won't be able to trust anything he says." ...Arnold Schwarzenegger used to claim he admired Ronald Reagan most "because he stuck by his
principles when others wouldn't." But with his Rube Goldberg health plan Mr. Schwarzenegger has demonstrated that at his core he prefers roles more suited to Tricky Dick than the Gipper.
Friday, January 19, 2007 ~ 10:10 a.m., Dan Mitchell Wrote: Last month, Greenleaf, Idaho, adopted Ordinance 208, calling for its citizens to own guns and keep them ready in their homes in case of
emergency. ... While pro-gun laws like the one in Greenleaf are mostly symbolic, to the extent that they actually make a difference, it is likely to
be a positive one. Greenleaf is following in the footsteps of Kennesaw, Ga., which in 1982 passed a mandatory gun ownership law in response to a handgun ban passed in Morton Grove, Ill. Kennesaw's crime
dropped sharply, while Morton Grove's did not. To some degree, this is rational. Criminals, unsurprisingly, would rather break into a house where they aren't at risk of being shot. As David Kopel noted in a 2001
article in The Arizona Law Review, burglars report that they try to avoid homes where armed residents are likely to be present. We see this phenomenon internationally, too, with the United States having a lower
proportion of "hot" burglaries - break-ins where the burglars know the home to be occupied - than countries with restrictive gun laws. Likewise,
in the event of disasters that leave law enforcement overwhelmed, armed citizens can play an important role in stanching crime. Armed neighborhood watches deterred looting in parts of Houston and New
Orleans in the aftermath of Hurricanes Katrina and Rita. Precisely because an armed populace can serve as an effective backup for law enforcement, the ownership of firearms was widely mandated during
Colonial times, and the second Congress passed a statute in 1792 requiring adult male citizens to own guns. ... criminals are likely to suspect that towns with laws like these on the books will be
unsympathetic to malefactors in general, and to conclude that they will do better elsewhere. To the extent that's true, we're likely to see other
communities adopting similar laws so that criminals won't see them as attractive alternatives.
Thursday, January 18, 2007 ~ 1:42 p.m., Dan Mitchell Wrote: ...it turns out that the U.S. ran a trade surplus in nine of the 10 years of the Great Depression, with 1936 being the lone exception. During those
10 years, we had a significant trade surplus, with exports totaling $26.05 billion and imports totaling only $21.13 billion. So what do trade surpluses during a depression and trade deficits during an economic
boom prove, considering we've had trade deficits for most of our history? Professor Boudreaux says they prove absolutely nothing. Economies are far too complex to draw simplistic causal connections
between trade deficits and surpluses and economic welfare and growth. Despite all the criticism from abroad and the doom-mongers at home, the world finds our economy attractive. Just as we've been chomping at
the bit to buy foreign goods and services, foreigners have been chomping at the bit to invest trillions of dollars in the U.S. ...Here's a smell test.
Pretend you're a man from Mars knowing absolutely nothing about Earth and you're looking for a nice place to land. You find out that there's one country, say, country A, where earthlings from other
countries voluntarily invest and entrust trillions of dollars of their hard earnings. There are other countries where they're not nearly as willing to
make the same investment. Which one of those countries would you deem the most prosperous and with the greatest growth prospects? You'd pick
country A, which turns out to be the United States. As such, you'd be just like most of the world's population who, if free to do so, would invest and live in the U.S. ...I thought about my local supermarket. I buy stuff from the Food Emporium every week. I spend thousands of dollars a year there. But the
supermarket never buys anything from me. Not one thing. And yet that is no problem. It's better than no problem -- it's fantastic! Imagine if I could
only buy from the store to the extent that it needed my services. I'd starve. That would be barter, and mankind dumped barter for the money
economy eons ago precisely because it is so inconvenient. Trade statistics obscure reality. Individuals exchange only when each expects to benefit.
If they didn't expect it, they wouldn't trade. That's true even if one party is American and the other Chinese. Trade is trade. ...Foreigners trade
cool products (and capital goods) for paper money. They can do only three things with our dollars: buy American goods and services, save them, or invest in the United States (including buying U.S. government
debt). ... In other words, most of what foreigners don't spend here, they invest here. The trade deficit is mirrored by the capital-account surplus .
Should we be concerned that foreigners see the U.S. economy as a good place to invest their money? I can't see why. I think we should see it as a
wonderful thing: They trust America's future enough to invest in it. Investment creates new products and better jobs. ...the only way to shrink the trade deficit is for the government to prohibit us from buying
whatever we want. What the trade fearmongers don't say is that countries with trade surpluses often don't do very well. Japan had a trade surplus all during its long recession, which began in 1990 and is
only now ending.
Thursday, January 18, 2007 ~ 12:27 p.m., Dan Mitchell Wrote: The deficit has in fact declined by some $165 billion over the past two fiscal years, and according to the most recent data has continued to fall
in the first quarter of fiscal 2007. The latest Treasury estimates for January show that tax receipts in December were $18 billion higher than
a year earlier, helping to boost the budget surplus for the month to $40 billion, up from $11 billion a year ago. December is typically a good month for revenues due to year-end tax payments. Meanwhile, for the
first three months of fiscal 2007 through December, revenues climbed 8.1%, building on double-digit revenue increases in the previous two years. Corporate income taxes were up a remarkable 22.2% in the first
fiscal quarter, showing that the government continues to grab a nice chunk of the rising business profits that so many of our politicians like to
deplore. Individual income taxes rose 8.8%, thanks to strong wage and salary growth. Much of this revenue comes from "the rich," believe it or
not. In the most surprising budget news, federal spending was nearly flat in the first fiscal quarter. This was despite a 22.1% increase in Medicare
spending due largely to the new prescription drug benefit, and a 10.7% increase in defense. Those increases were offset by lower spending for flood insurance and disaster assistance compared with the peak of
post-Katrina payments a year ago. So the first quarter deficit was $85 billion, down sharply from $119 billion a year earlier.
Thursday, January 18, 2007 ~ 12:08 p.m., Dan Mitchell Wrote: Democrats campaigned last fall on a pledge to lower the interest rate on subsidized student loans to 3.4% from the current 6.8%. "We will
broaden college opportunity," says Nancy Pelosi, the new House Speaker, "and we will begin by cutting interest rates for student loans in
half." It makes for a good sound bite, but on closer inspection the connection between lower interest rates and "college opportunity" is far
from clear. ...The interest rate doesn't affect whether a student can pay his or her tuition bill, which means that no one unable to afford college
today will suddenly be able to do so because of a reduction in the rate. Rather, lowering the rate will simply boost the federal subsidy for loan
repayments after graduation. That's because the financial institutions that handle these loans are guaranteed a rate of return, regardless of the
interest rate. Halving the rate that lenders can charge borrowers means larger government (read: taxpayer) subsidies for the banks. In other words, the Democratic loan proposal isn't really about making college
more affordable for low-income families. It's about expanding federal subsidies for college grads, including millions of middle-class men and women who will go on to do very well in life and hardly need such a
government handout.... The Democrat proposal also has the potential to exacerbate perverse incentives already associated with the government
student loan programs. Since 1992, tuition at public and private colleges has risen 86% and 52%, respectively. The only other segment of the economy where costs have outpaced inflation by similar leaps and
bounds is health care. And it's no coincidence that third parties foot the bill for big chunks of both higher ed and health care spending; this has
predictably increased demand relative to supply and resulted in prices rising faster than they would otherwise. Like any business, colleges will
charge as much as their customers are willing to pay. And you can be sure that, as quickly as student aid increases, colleges will raise tuition to
capture the additional funds. In the absence of all this subsidization, colleges would have to be more cautious about raising tuition because
their customers would be affected more directly. So the biggest winners from this latest subsidy will be the relatively well off professors and administrators who run higher education.
Thursday, January 18, 2007 ~ 10:50 a.m., Dan Mitchell Wrote: Forcing people to buy health insurance will not solve the problem of the uninsured, make America healthier or decrease the amount of money we
spend on health care. Such schemes will increase taxes, kill jobs and destroy private health care markets. They are also the next logical step
on the path to single-payer health care. ... Politicians justify these plans by alleging unfair cost shifts from the uninsured to the insured. Yet these
plans rely on massive cost shifts. In Massachusetts, federal taxpayer money will be shifted to providers. In California, the governor calls for
an increase in rates for providers from government insurance and then taxes some of this back with new taxes on physicians and hospitals. This
is simply a way to increase taxes on private plans and send the money to government plans. Schemes based on individual mandates will require new and extreme regulation of the private insurance market. Under
California's plan, insurers won't be able to turn down anyone based on health status or age, a policy that causes premiums to skyrocket. In 1993, premiums jumped 500% when New Jersey passed a similar regulation.
Wednesday, January 17, 2007 ~ 11:36 a.m., Andrew Quinlan Wrote: ... * Withdraw IRS regulation on bank deposit interest reporting. Three days before the Clinton administration left office, the Internal
Revenue Service proposed a regulation that would require U.S. banks to report the interest they pay to all foreigners with bank accounts in this
country, despite the fact that Congress deliberately has chosen not to tax deposit interest paid to foreigners in order to attract capital (according
to the latest Treasury data, foreigners have more than $3.5 trillion in U.S. financial institutions). The supposed goal of this rule was to catch
U.S. citizens who classify themselves as foreigners in order to avoid taxation. But there has been no evidence of such tax avoidance; it is more likely the Clinton administration wanted to help foreign
governments track--and tax--flight capital.
Wednesday, January 17, 2007 ~ 11:15 a.m., Dan Mitchell Wrote: Not only did the world-wide trend toward greater economic liberty hold steady over the past year, but the incomes of poor individuals across the
globe are rising as result. The world isn't only growing richer. The gap between the per-capita income of have-not populations and that of the developed world is narrowing. ...Neither another year of Islamic
terrorism, nor record high oil prices, nor fear mongering on Capitol Hill about the China peril have been able to reverse a gradual global shift
that reflects the basic human longing for individual liberty. While not all of mankind is participating in this advance, in those places where
freedom has increased, people are becoming decidedly better off. ...each region of the globe enjoys greater economic freedom than it did a decade
ago. Hong Kong, Singapore and Australia are the three freest economies in the world this year, in that order. The U.S. ranks No. 4. Among the 20
freest economies in the world, Europe holds 12 places. ...economically free countries enjoy significantly greater prosperity than those burdened by heavy government intervention. The per capita GDP of the top
quintile of countries, ranked according to economic freedom, is now almost $28,000 while the bottom quintile is less than $5,000. The associated higher GDP rates that come with economic freedom "seem to
create a virtuous cycle, triggering further improvements in economic freedom. Our 13 years of Index data strongly suggest that countries that
increase their levels of freedom experience faster growth rates," says the report.
Wednesday, January 17, 2007 ~ 10:40 a.m., Dan Mitchell Wrote: The new, higher wage floor applied to all of these United States and its territories -- save for the Pacific outpost of American Samoa. In the
immortal words of Congressman Patrick McHenry (R., N.C.), "There's something fishy going on here." It turns out that American Samoa has a
big fish and tuna canning industry, specifically operations run by StarKist and Chicken of the Sea. Both companies are headquartered in California, and StarKist's parent is located in none other than Ms.
Pelosi's own San Francisco district. So faster than you can say "middle class squeeze," Democrats rediscovered the eternal economic truth that
a higher minimum wage can cost jobs and granted Samoa its reprieve. They have a good point. In 2004, according to the Department of Labor, Samoan canneries directly employed some 4,800 people, or nearly 40%
of the work force. StarKist and Chicken of the Sea would have plenty of other low-wage locations to do their canning. The average hourly wage for the American Samoan canneries in 2004 was about $3.60. In
contrast, the average cannery wage in Thailand was 67 cents an hour and in the Philippines 66 cents. You don't have to go as far as American Samoa to discover other liberals who understand this -- at least when
they do the hiring. In 1995, the union-financed lobby, Acorn, sued California seeking exemption from the state's then-$4.25 minimum wage.
Acorn argued in its court brief that, "The more that Acorn must pay each individual outreach worker -- either because of minimum wage or
overtime requirements -- the fewer outreach workers it will be able to hire." As liberal economist Joseph Stiglitz once wrote: "A higher minimum wage does not seem a particularly useful way to help the
poor."
Wednesday, January 17, 2007 ~ 8:51 a.m., Dan Mitchell Wrote: French rock 'n' roll icon Johnny Hallyday has abandoned France to settle in a snow-dusted mountain chalet, joining a scattered flock of
superrich tax refugees in serene Switzerland. Numbering about 3,700, according to Swiss statistics, these millionaire and billionaire exiles are
variously coveted and resented in Switzerland, where local governments are competing in what critics scorn as a fierce race to the bottom to lure wealthy foreigners with individually negotiated tax breaks.
...Switzerland's 26 cantons wield enormous power over their own taxation systems, setting their own tax levels with local citizens weighing in at the ballot box. Their autonomy has allowed the flourishing of a
discreet, let's-make-a-deal tax system for rich foreigners who, unlike the Swiss themselves, are allowed to negotiate lump-sum tax agreements. The immigrants negotiate an annual payment amounting to five times
the monthly rental value of their Swiss homes. The deal has proved to be an irresistible call to the rich, drawing Ikea's billionaire founder, Ingvar
Kamprad, and close behind him in net worth, Viktor Vekselberg, a Russian aluminum and petroleum magnate and collector of jewel-studded Fabergé eggs. Mr. Kamprad, an 80-year-old Swede fabled
for his frugality and vintage Volvo, lives near Lausanne. But along with corporate titans, Switzerland is also home to an assortment of celebrities,
including the German racing champion Michael Schumacher, the cyclist Jan Ullrich, also of Germany, and the pop singers Phil Collins of England and Tina Turner of the United States. It is such a Mecca for
French athletes that when Mr. Hallyday started feeling political heat for his departure, the French tennis star Amelie Mauresmo defended Swiss tax migration from her Geneva redoubt in an interview with the Swiss
daily newspaper Le Matin: "To live in Geneva is a lifestyle choice along with financial reasons. Leading a normal existence in Paris is much more
complicated." ...Aside from tax advantages, she said, wealthy foreigners are attracted because the nation is considered safe, a particularly appealing factor for Latin Americans yearning to escape kidnapping
threats in their own countries. ...Mr. Schumacher...lives near Lake Geneva, a region that has drawn other wealthy racing drivers like Fernando Alonso and Alain Prost.
Wednesday, January 17, 2007 ~ 8:30 a.m., Dan Mitchell Wrote: Germany's state of parliamentary democracy is under threat from the European Union which is slowly taking away all the national
parliament's powers, the country's ex-president has said. In an article for newspaper Welt am Sonntag, Roman Herzog pointed out that between 1999 and 2004, 84 percent of the legal acts in Germany stemmed from
Brussels. "EU policies suffer to an alarming degree from a lack of democracy and a de facto suspension of the separation of powers." ...The
article continues by noting that Germany's own constitution foresees the parliament as the "central actor in the shaping of the political
community. Therefore the question has to be raised of whether Germany can still unreservedly be called a parliamentary democracy." ...Another
major innovation the EU needs, according to the paper, is a clear cut and definitive list of what the powers of the EU are and what the powers
of member states are - this was something rejected at the time by the drafters of the constitution because they feared it would put a halt to the EU's evolution.
Tuesday, January 16, 2007 ~ 8:53 a.m., Dan Mitchell Wrote: Treasury Secretary Hank Paulson has repeatedly said that everything is on the table for negotiations with the Democratic Congress. When Press
Secretary Tony Snow was asked whether the White House was ruling out a tax increase in Social Security reform, he replied, "No, I'm not." This is
all code for the administration's willingness to consider raising taxes in exchange for reductions in promised benefits. Such a tax increase would
likely lift or eliminate the cap on the amount of salary and wages subject to the payroll tax, currently at $94,200. Raising payroll taxes would prove devastating to working Americans, small business and the
economy as a whole. Worse, it would only serve as a short-term band-aid to Social Security's financial woes. ...eliminating the cap will increase taxes by $484 billion over five years. This 12.4 percentage point
marginal tax rate increase would hit middle-income families struggling to make ends meet, pay for college and save for retirement. Much of this
increase will be borne by three million small-business owners who pay both the employer and employee portion of the tax hike. ...Despite the fact that Republicans have already turned off millions of conservative
Americans by runaway federal spending, some conservatives are expressing support for a Republican tax increase. They believe that through shrewd negotiating, the administration will get Democrats to
agree to benefit reductions without a net tax increase, meaning a removal of the payroll cap could lead to a reduction in the payroll tax or the offering of tax credits to low-income workers. Such hope is folly
disguised. Democrats are not likely to agree to reductions in promised benefits without exacting an actual tax increases, unless of course, "tax
credits" are a thinly veiled attempt at passing a new entitlement for low-income workers through the tax code. We have been down this road before. In 1990, I was a young candidate for Congress when the last
Bush administration sided with a Democrat majority in Congress to pass the largest tax increase in history, all in the name of bipartisanship and compromise. This compromise ushered in economic recession and a
two-term Democratic administration in the White House. ...the administration needs to be clear that a Social Security compromise must reject tax increases of any kind. That means no increase in the payroll
tax rate and no change in the cap apart from the current indexing that already increases eligible income on an annual basis. Tell the Democratic Congress to read your lips, Mr. President: no new taxes. ...Social
Security reform must be properly understood. It is not about achieving solvency; it is about improving the system so that it offers a better deal
for younger Americans through personal savings accounts. Focusing on solvency will lead inevitably to tax increases and benefit cuts. Focusing
on personal retirement accounts improves the chance of enacting sound public policy that also makes the system solvent.
Tuesday, January 16, 2007 ~ 8:17 a.m., Dan Mitchell Wrote: Governor Schwarzenegger builds his proposal around an "individual mandate" that would require people to buy health insurance or face
penalties such as garnishment of wages. This compulsion is supposedly justified on grounds that treating "free riders" in emergency rooms is a
significant driver of overall health costs. But studies have shown that the cost of this problem is less than 3% of overall health-care spending. Far
worse are Mr. Schwarzenegger's proposals for California's employment and insurance markets. The Governor is proposing that businesses with 10 or more employees be required to provide insurance, or else pay 4%
of their taxable Social Security wages into a fund to subsidize insurance for the working uninsured. The likely reaction of many California businesses to this new and costly mandate: outsourcing to Nevada, or
India. Mr. Schwarzenegger goes far beyond the Romney plan in proposing to help pay for his scheme by taxing hospitals 4% and doctors 2% of their gross revenues. That's right, institutions operating at or near
a loss would have to pay the tax. ...the Governor calls it a "fee" or "dividend," rather than a tax. This is no doubt because the California
constitution requires that any new "tax" pass both houses of the legislature with two-thirds majorities. So call the elephant in the room a
hippo and hope the public buys it. We trust this Hollywood action stunt will be tested in court, if not in another referendum. ...It includes new
subsidies to help the uninsured obtain coverage, but at the same time it would impose new coverage mandates that would make insurance a lot more expensive. Two rules in particular have all but ruined the market
for individually owned coverage in every other state where they've been tried. The first is called "guaranteed issue," which means insurers are
required to write you a policy even if you wait until you're sick to ask for it. It is precisely this "guarantee" that many people use as an excuse to
remain "uninsured." Why not buy a new car rather than health insurance when you're healthy if you know you can always buy insurance if you get
cancer? The second rule is "community rating," which means insurance premiums cannot vary based on age or health status. This is akin to telling auto insurers that they can't charge higher premiums to
18-year-old males with a history of speeding tickets than they do 45-year-old mothers. Both rules raise the cost of insurance for everyone. This is all especially regrettable because California has had more
market-friendly insurance regulations than most other large states. And this has meant lower insurance premiums. According to eHealthinsurance.com, a single 35-year-old man in Beverly Hills can buy
decent coverage for as little as $69 a month. But Arnold's plan would move those rates in the direction of community-rated New York, where that same man would pay $416 for any coverage at all.
Tuesday, January 16, 2007 ~ 7:50 a.m., Dan Mitchell Wrote:
Monday, January 15, 2007 ~ 12:30 p.m., Dan Mitchell Wrote: One of the TJN's best-known leaders, Richard Murphy of Britain, recently chided an official of the Isle of Jersey (a low-tax jurisdiction) for refusing
his offer of a debate. Whereupon, Dan Mitchell, a senior fellow at the Heritage Foundation and a highly regarded tax economist, challenged Mr. Murphy to a debate. Mr. Murphy initially agreed, but demanded Mr.
Mitchell debate in London or Jersey (Isle of), and pay all of the expenses for the debate, including Mr. Murphy's. Mr. Mitchell agreed, and then
Mr. Murphy reneged -- with the laughable excuse that Mr. Mitchell had not provided him with private financial information about thousands of
Heritage Foundation donors (information Mr. Mitchell did not have or, if he did, ethically could not disclose). Mr. Murphy and his "Network"
colleagues are funded by labor unions, Fabian socialist sympathizers and activists and indirectly by unaccountable international organizations that
directly benefit from big governments with high tax policies yet oppose personal privacy of private citizens. Clearly, Mr. Murphy was afraid (and
I think rightly so) that Mr. Mitchell would expose the fallacies and hypocrisies that are TJN's stock in trade. ...." The TJN uses time-worn
socialist rhetoric, such as saying it is "opposed" to "individualism" and "profit-motivated professionals." ...Many Nobel Prize-winning
economists, such as Milton Friedman, Gary Becker, James Buchanan and Vernon Smith, have spoken and written of the importance of tax competition for economic growth and opportunity, human liberty, and
civil society. Without tax competition, governments would abuse their power to tax and spend even more than they do now. Tax competition pressures governments to manage their financial affairs more
responsibly, and leads to less government waste and mismanagement. It is a fundamental human right for people to be able to flee, both physically and financially, oppressive high-tax regimes. TJN seeks to
deny people that basic human right in the name of "justice." CF&P Ress Release: Tax Justice Network's Murphy Refuses to Debate Dan Mitchell on Tax Competition: Strange Development Since
Murphy Just Boasted That No One Would Step into the Arena Against Him ~ December 27, 2006
Monday, January 15, 2007 ~ 8:55 a.m., Dan Mitchell Wrote: Gerson claims he is concerned about compassion and charitable benevolence. If he is, let him look at the glowing dynamism and strength
of the American civil society, which is so strong only because the U.S. government (unlike European governments) is still relatively small. The
civil society is the social glue that holds a society with individualist economic policies together: it is the informal network of neighborhood
associations, churches, charities, and philanthropic institutions that help good causes and those in need. ...Gerson claims that the government can
strengthen civil society, but as Europe shows, he has it backwards: it is the state, and not individualism, that destroys civil society and societal
compassion. ...When the government takes on "compassionate" social roles formerly fulfilled by the civil society, "justice" does not increase.
Rather, voluntary giving is replaced with coercion, warm human charity with cold handouts, sincere compassion with bureaucratic redistribution... Gerson conclude that small government conservatives
are opposed to charity and philanthropy-but they are not. They are opposed to state "philanthropy," which supplants the genuine
philanthropy of the civil society and which is not genuine philanthropy in any case. Perhaps President Reagan put it best when he proclaimed in
1981 that "The size of the federal budget is not an appropriate barometer of social conscience or charitable concern." Republicans like
Gerson are not fond of Reagan's small-government conservatism: in a bid to discredit Reagan, they go as far as to accuse him of straying from his small-government principles for the sake of political expediency.
Gerson's accusation of fiscal profligacy ("During the Reagan years, big government got bigger") should be taken with a big grain of salt and a
look at the statistics, which prove otherwise. As AEI's Veronique de Rugy notes, Reagan was the only President over the past forty years to have
cut inflation-adjusted non-defense spending. And, as de Rugy shows, in Departments as varied as Labor, Energy, and Education, Reagan aggressively cut spending. President Bush, by contrast, has massively
boosted spending on these departments and across the board.
Monday, January 15, 2007 ~ 8:19 a.m., Dan Mitchell Wrote: Luxembourg has defended Switzerland's position in the ongoing dispute between Bern and the European Union over corporate tax breaks. In an
interview with the Zurich-based Tages-Anzeiger newspaper on Tuesday, Luxembourg Finance Minister Luc Frieden said attacks on Swiss cantonal taxation stemmed from a "poor knowledge of the federal
system" and "jealousy". ..."When a growing number of individuals and companies leave a country, the country itself should try and improve its
own working and living environment rather than accuse others," Frieden told the Tages-Anzeiger. ... Switzerland has been embroiled in a corporate tax dispute with the EU since September 2005. Many EU
countries are angry that tax revenues are being lost as companies relocate to Switzerland to take advantage of lower levies. ...a French socialist politician and spokesman for presidential candidate Ségolčne
Royal - urged the EU to crack down on Swiss cantons that set low tax rates to entice companies and individuals to relocate from other countries. Montebourg also took a swipe at Luxembourg, Liechtenstein
and Monaco. "Those who make such statements are defending higher taxes," said Frieden. ...Merz hit back at claims that Switzerland's low tax
regime violates the terms of a 1972 Free Trade Agreement. "Attacking cantonal taxation is the same attacking Swiss sovereignty," he said. Merz commented that both Switzerland and Luxembourg had strong
financial centres and common interests. Frieden echoed this, saying Luxembourg would be "standing alongside Switzerland" if there had to be tougher EU discussions on taxation. René Matteotti, a tax law
professor at Bern University, told Swiss German public radio that this was the first time an EU member country had vocally supported the Swiss position on taxes.
Sunday, January 14, 2007 ~ 6:00 p.m., Dan Mitchell Wrote: Few details of her proposed pact between Europe, the U.S. and Canada have been released, but Berlin has indicated it would deal almost
exclusively with nontariff barriers. That leaves little to do besides "harmonizing" regulatory discrepancies among the three partners.
Harmonization should not be confused with liberalization. It tends to be another way of saying the highest taxes, the strictest standards and so
on. There is a degree of simplification involved, which can be useful for industry and perhaps consumers. But at what price? ...Regulatory cooperation is unworkable in many areas. Diesel-powered cars are much
more prevalent in Europe than in North America, for example, making it virtually impossible to create common rules for emissions -- even if that
were desirable. Safety standards for bumpers, on the other hand, tend to be stronger in the U.S. and Canada because larger vehicles are more common there. There's no reason for Europeans, zipping around in their
Smart cars, to clear the same bar. Regulatory competition, like tax competition, also keeps countries honest and consumers better off, while
harmonization does the opposite. The state recognizes this danger in its dealings with the private sector: When competing companies
"harmonize" their prices, it's called collusion. And when two firms want to "harmonize" their operations by merging, the government inspects
them thoroughly to make sure consumers and competition aren't hurt in the process.
Sunday, January 14, 2007 ~ 2:22 p.m., Dan Mitchell Wrote: ...the news that two more multinational companies are to relocate their headquarters from Great Britain to countries with lower taxes should
have set the alarm bells ringing across Whitehall. ...the British economy has moved dangerously close to a tipping point: more and more companies are now choosing to vote with their feet, sick of the excessive
tax rates, stifling red tape, bossy bureaucrats, crumbling infrastructure, rampant crime and desultory public services that have come to define
modern Britain. ...The Confederation of British Industry (CBI) has been in discussion with several other multinationals that are considering
moving their headquarters or operations out of Britain, largely because of the rising tax burden. Procter and Gamble and Colgate-Palmolive are among other firms that have decided to locate their European
headquarters in Switzerland. Many more companies are set to join this exodus: according to a survey of over 600 businesses for Lord Forsyth's Tax Reform Commission, 19% of companies are considering leaving
Britain because of the increasingly hostile business environment. ...the wonder is why more companies haven't already moved to Switzerland. In
Britain corporation tax is 30%, against a national average of 21.3% in Switzerland, a rate kept in check by tax competition between the cantons
(an idea that should, but sadly doesn't, appeal in post-devolution Britain). According to the World Bank, it takes a company in Britain 105 hours to
pay its taxes, compared to just 68 in Switzerland. ...In some cases, big British companies, such as Tesco, are having to hand over more than
half their profits to the exchequer, once national insurance, corporation tax, property tax and national insurance contributions are taken into
account. Over-zealous enforcement and needless complexity add another layer of costs; the tax base keeps on increasing, as Brown constantly rewrites the tax rules and clamps down on loopholes. Among the world's
20 largest economies, only notoriously bureaucratic India has a longer tax code than Britain. On top of this, Britain, unlike most of its competitors, bars companies from claiming relief on dividends earned by
overseas subsidiaries. It is little wonder that 66% of firms believe that the tax system is having a negative impact on Britain's international
competitiveness and that the country dropped another place to tenth in the World Economic Forum's global competitiveness ranking last year. In 2005-06, Britain came a shocking 67th out of 117 for tax complexity;
a deterioration in its position of 19 places in just one year. ...Comparing Britain's tax policy with that of the most forward-thinking European
nations has become almost embarrassing. The Irish (with their 12.5% corporation tax) and the Eastern Europeans - in the Czech Republic, Hungary and Slovakia corporation tax is respectively 24%, 16%, and
19% - remain ahead of the pack. A total of 10 Eastern European countries now boast a flat rate of income tax, with the most recent addition to the club being Macedonia, which has just introduced a single
rate of income and corporation tax of 12%. The rest of Europe is starting to follow their lead, as tax competition works its magic and forces even social-democratic governments to adapt to reality; some of
the developments on the continent have been truly remarkable, albeit barely noticed by the British chattering classes. The Austrians cut corporation tax from 34% to 25% in 2005. A week ago, corporation tax
in Holland was cut to 25.5%. Denmark has reduced its tax rate from 34% to 28%. In Finland it is now only 26%, compared to 29% in 2004. Between 1999 and 2004, the Portuguese reduced their rate from 37.4%
to 27.5%. ...Last year, the French cut their own corporation rate from 41.7% to 34.4%; even more depressingly from Britain's perspective, President Chirac has just pledged that France will reduce corporation
tax to 20% in five years with the long-term goal of getting it down to 10%. Coming from him, such a promise is not worth the paper it is written on; but it is nevertheless deeply galling that Chirac is now more
radical on tax than any British politician, including the Conservative Party... The situation is even worse when one considers government spending, which has surged from 37.5% of GDP in 2000 to 45.3% in
2007. In 2000 spending was 8.8 points less as a proportion of GDP in Britain than in the euro zone; today, it is just 1.6 points less. From being
1.6 points below the OECD average, spending is now 4.8 points above it. ...unless Britain urgently changes direction, the stream of companies
leaving will eventually turn into a torrent, with devastating consequences for jobs and the nation's prosperity.
Saturday, January 13, 2007 ~ 4:58 p.m., Dan Mitchell Wrote: When it comes to governmental abuse, "it can't happen here" really means "it is happening right now." Local governments are busily using
mechanisms in state law to threaten neighborhoods and abuse property owners, and the state Supreme Court has repeatedly let them get away with it. Shortly after Kelo, the Washington Supreme Court allowed the
Seattle Monorail to permanently condemn a piece of property it needed only temporarily for a construction staging area. Once the monorail had
completed that legitimate public use, it intended to sell the property at a premium to raise revenue. In this way, Washington courts now allow local governments to condemn more land than is necessary, for longer
than is necessary, in the hopes that the government can play real-estate speculator with whatever is left. The court also ruled that the meetings at
which a local government determines which property to condemn could take place essentially in secret, with the only notice for property owners being a posting on an obscure government Web site. The court ignored
the fact that computer usage among minorities, the elderly and the poor is significantly lower than in other segments of the population, and that it
is these communities that traditionally have been the target of eminent-domain abuse. ....So long as the government can manufacture a fig leaf of public use or possible public use for constitutional cover, local
governments can take private property to transfer to other private entities or deliberately target properties not upscale enough for the
bureaucrats' "vision." ...Regardless of strong constitutional protections for private property, governments and courts now view eminent domain
as an area where few if any restrictions exist. And not just in Washington. In probably the most appalling example, the U.S. Court of Appeals for the Second Circuit let stand a condemnation in which a
developer in the Port Chester, N.Y., demanded that Bart Didden give him either $800,000 or a 50% share in Mr. Didden's property, which was slated to be a CVS pharmacy--or the developer would have the village
condemn it. Mr. Didden refused; the next day, the village condemned his property to hand it over to the developer to construct a Walgreens.
Friday, January 12, 2007 ~ 8:47 a.m., Dan Mitchell Wrote: One big test of a new minority is to draw the right lesson from its drubbing at the polls. House Republicans have a long way to go, judging
by House Minority Leader John Boehner's decision this week to punish Arizona's Jeff Flake by tossing him off the Judiciary Committee. The offense? Porkbusting. Mr. Flake should be getting a promotion to the
leadership, given how prescient he was in warning his colleagues about the perils of their run-amok "earmarking." He and a few comrades
sponsored more than 40 House floor amendments last year to strip pork projects from spending bills. The National Taxpayers Union ranked him the most fiscally conservative member of the House. None of that sits
very well with his House colleagues, who blame Mr. Flake for shining public attention on their spendthrift ways. ...Meanwhile, Mr. Boehner has
asked California's Jerry Lewis to remain the ranking Republican on the Appropriations Committee. As Chairman, Mr. Lewis allowed 13,997 earmarks in the 2005 budget. He is also under investigation for
relationships with lobbyists amid allegations of "pay to play" earmarking. The Duke Cunningham payments-for-pork crimes happened on his watch. If Republicans truly believed in limited government, Mr.
Flake would be running Appropriations and Mr. Lewis would be a back-bencher. ...after only a few days in power...Majority Leader Harry Reid was caught pulling out every stop to kill his own party's plan for earmark
reform. To Speaker Nancy Pelosi's credit, House Democrats recently passed ethics legislation that included provisions making earmarks more transparent. The House bill included a broad definition of earmarks,
thereby making it harder to hide them in, say, last-minute conference reports. It also requires Members to file a public disclosure form when
they request an earmark, and to state that neither they nor their spouses will financially benefit. It's hard to argue that this is anything but elementary good government. Unless you are Harry Reid. The ethics
reform offered by Senate Democrats contained none of these tougher earmark provisions. So Senate Republicans, led by South Carolina's Jim DeMint, cheekily took the identical language of the House earmark bill
and offered it as an amendment to the Senate version. Numerous Democrats instantly denounced it, apparently unaware (or unconcerned) that the language had been sponsored by Ms. Pelosi. Democrat Dick
Durbin then moved to table the amendment, though he lost by 51 to 46. Of the 46 Senators who voted to banish Ms. Pelosi's reform, 38 of them were her fellow Democrats. The seven Republicans who went along with
Mr. Reid included some of the GOP's biggest spenders (Trent Lott) and Members of the Appropriations Committee, aka Earmark Central Station.
Friday, January 12, 2007 ~ 7:51 a.m., Dan Mitchell Wrote: Pelosi proposes to take money out of the hands of people whose investment and entrepreneurship create jobs, and to place it into the
hands of government, which creates only job-stifling bureaucracies. The idea that federal officials will do a better job spending money than the
people who earned it is not only offensive, but profoundly illogical. ... The evidence that Washington, D.C. bureaucrats can spend the bucks more effectively and productively than private money-makers is
non-existent-which is why major tax-rate cuts in the Coolidge, Kennedy, Reagan and George W. Bush administrations have all produced economic booms. The idea that higher rates for the super-rich would
mean lower rates for the rest of us is naďve, to say the least. ... the higher the tax rates, the more the incentive to dodge taxes. In Russia, where
Putin experimented with a flat rate of just 13%, the cynical tax collectors found themselves amazed by the tidal wave of new revenues from productive people who had previously avoided paying their taxes.
... Raising tax rates on the rich, on the other hand, gives an incentive to hide money and to practice tax avoidance to precisely that segment of
the population that's best able to escape their responsibilities - thanks to expert (and expensive) advice and financial flexibility. Higher rates also
encourage people to invest their time in devising elaborate schemes to avoid taxes, rather than working hard to earn more income, produce more jobs, and create more wealth. ... we want our most talented and
productive fellow citizens to work as hard as possible, because we understand that their efforts benefit the rest of us. Whether their excellence involves building companies, or directing movies, or throwing
an unhittable slider, we understand that part of the reason they do what they do is to earn financial recognition and reward. We also understand
that the best way to measure the size of government is to measure how much of private productivity that government consumes. If your boss takes back 90% of what you earn, then it's not outrageous to say that
you're a slave and he's your master. When the federal government used to impose a top tax rate of 90% that made the highest earners theoretical slaves to government - no wonder that they rebelled with all
sorts of loopholes and tax dodges to escape that slavery. If the government takes 35% of your productive efforts, you're still a slave for one third of the time or one third of the year-working hard to benefit
others, not yourself. The great majority of Americans understand that a federal bureaucracy that can claim one-third of our efforts and one-third of our time (before we even start worrying about state and local
obligations) has grown too large, too intrusive, too powerful to co-existence with free people and the ideals of liberty.
Friday, January 12, 2007 ~ 7:34 a.m., Dan Mitchell Wrote: We all want the poor to make more money. So if government can raise wages by decree, why are the popular proposals so stingy? What good is
a measly buck or two extra? Let's really do something for the poor. Let's raise the minimum wage to $20 an hour. Even better, $50! Or maybe we
should take a deep breath and think like economists for a change. The law of supply and demand, which operates whether we like it or not, says
that when the price of something goes up, people buy less of it. That's why environmentalists like higher gasoline taxes, and anti-smoking activists back higher cigarette taxes. The law of supply and demand
works in the labor market, too. If government mandates a higher minimum wage, some workers will get a raise. Some. But something else will happen. Employers will hire fewer low-skilled workers. Others will
let some current workers go. Some will choose not to expand their businesses. A few will close altogether. If an employer believes a worker creates only about $5.15 worth of value on the job, he won't pay $7,
even if the government demands it. ... Legal wage minimums kill all kinds of entry-level jobs, particularly those that would teach young people basic work habits and the benefits of effort. That's why there are
no kids cleaning your windows at gas stations or working as ushers at movie theaters. Those jobs are extinct now because they are worth less than the legislated minimum. Who is helped by that? Let's face it. The
higher minimum wage is a feel-good law. A slight increase will pass because politicians and poverty activists will be able to say they have
"done something" for the poor, while the victims of the policy go unnoticed. Those who can't find jobs because they produce too little are
not likely to blame the law or the politicians who tried to "help" them. Then the resulting unemployment will justify expansion of the welfare state. If the price of gas went up by 40%, people would buy less gas. Similarly, if the wages businesses must pay low skilled workers increased by the
proposed 40%, then companies will buy (i.e. hire) fewer workers. ... Two firms want to hire John. The first offers him a job that pays $7.25 an
hour but provides no useful training. The second pays $5.25 an hour, but offers training and could someday lead to a management position. This
training is costly for the firm to provide, but the firm is willing to give John the training since it is paying him only $5.25 an hour. A $7.25 an hour minimum wage could, however, stop the second employer from
giving John his costly on-the-job training. If the business couldn't pay a lower salary in return for providing training, then the firm most likely
wouldn't give John the training. ... even in the extremely unlikely case that a higher minimum wage doesn't reduce overall employment, it will
likely reduce employment among our nation's lowest skilled individuals.
Thursday, January 11, 2007 ~ 8:41 a.m., Dan Mitchell Wrote: As Congress reconvenes, pledges of "fiscal responsibility" abound. Let me boldly predict: On retirement spending, this Congress will do nothing,
just as previous Congresses have done nothing. Nancy Pelosi promises to "build a better future for all of America's children." If she were serious,
she would back cuts in Social Security and Medicare. President Bush calls "entitlement spending" the central budget problem. If he were
serious, he, too, would propose cuts in Social Security and Medicare. They are not serious, because few Americans -- particularly prospective baby-boom retirees -- want them to be. There is a consensus against
candor, because there is no constituency for candor. It's no secret that the 65-and-over population will double by 2030 (to almost 72 million, or
20 percent of the total population), but hardly anyone wants to face the implications. ...Preserving present retirement benefits automatically
imposes huge costs on the young -- costs that are economically unsound and socially unjust. The tax increases required by 2030 could hit 50 percent, if other spending is maintained as a share of national income.
...With his rhetorical skills, Clinton might have raised public understanding. Instead, he lowered it by falsely denouncing the Republicans for attempting to "destroy" Medicare. The first refuge of
good Democrats is to accuse the Republicans of conspiring against old folks by trying to dismantle Social Security and Medicare. And Bush's credibility is shot, because he made the problem worse. His Medicare
drug benefit increases spending, and though it could have been justified as part of a grand bargain that reduced other benefits, its isolated enactment was a political giveaway.
Thursday, January 11, 2007 ~ 8:20 a.m., Dan Mitchell Wrote: The Democrats tend to favor solutions involving regulations, government spending and taxes, and Senate President Pro Tem Don
Perata's proposal -- the main contending Democrat plan -- hits the trifecta. It would require employers to provide health insurance; give them the option of paying a tax instead of providing health insurance;
and increase spending by expanding both the Medi-Cal and Healthy Families programs, which provide care to low-income children -- including children of illegal immigrants and the disabled. Mr.
Schwarzenegger's solution hits the trifecta also. He would require employers with 10 or more workers to provide health insurance or pay a 4% tax on all wages covered by Social Security: Look for employers with
10 to 12 employees to get creative about outsourcing. And look as well, as Harvard economist Jonathan Gruber has documented, for wages to fall in firms that offer health insurance because of the mandate. Gov.
Schwarzenegger would throw in a 2% tax on doctors and a 4% tax on hospitals to help fund Medi-Cal, California's name for Medicaid. And he would expand Medi-Cal to adults earning as much as 100% above the
poverty line and to children, even those here illegally, in poor and middle-income families. He hopes, by doing this, to shift $5 billion of Medi-Cal's annual cost to the federal government. There are two
problems with such solutions. First, they infringe on economic freedom, preventing, in Robert Nozick's phrase, "capitalist acts between
consenting adults." Second, government solutions rarely work. ...In the last few decades, state governments, the main regulators of health insurance in the individual and small-group markets, have mandated
coverages for many kinds of health care. According to the Council for Affordable Health Insurance (CAHI), a pro-market association of insurance carriers, there were 1,843 state mandates in 2006. Among the
most common, and most expensive, mandates are chiropractic care, treatment for alcoholism and drug abuse, and mental health benefits. California's government mandates coverage for all of the above, as well
as for many other benefits, including, for example, infertility treatment -- a very expensive benefit. Abolishing these mandates would allow people
who don't want to be covered for these things to buy cheaper insurance, while still allowing those who want them to buy and pay for them. Would
such an approach work? That's like asking whether, if the government currently required new cars to have CD players, eliminating that requirement would lower the price of a car. Of course it would work.
...There is one other way to deregulate: The California government could allow any Californian to buy health insurance from any willing insurer in
any state and be subject to the regulations of that state. That way, people could shop for the degree of paternalism they want. If they want insurance from a state that requires many coverages, they could do so
and pay the high premiums that result. If they want bare-bones coverage, they could do so also. The result would surely be that some of the current
uninsured would buy insurance. Were I in the market for individual insurance and given the choice, I would not bother paying for coverage for alcohol or drug abuse. If a version of Gov. Schwarzenegger's plan
passes, the only thing certain is that there will be more regulation, more government spending and more taxes. A better path would be to deregulate, and thus achieve some increase in the number of insured --
without new spending or taxes or regulation.
Thursday, January 11, 2007 ~ 7:52 a.m., Dan Mitchell Wrote: As promised in the elections, the government is introducing a 12% flat rate personal income and profit tax. Currently, progressive personal tax
rates -- 15%, 18% and 24% -- are in place. The profit tax rate is 15%, property tax 3%, and VAT 15%. The authorities say they plan to go even
further, cutting the flat tax rate to 10% in 2008. Experts and financial institutions say that the new tax system is likely to have a positive impact
on the economy, especially in terms of increased foreign investment. Tax collection will become more efficient, making tax evasion more difficult.
Similar tax overhauls in other countries, particularly the Baltic states, have shown favourable results. The gray economy is reduced as businesses find the benefits of avoiding taxation are small compared to
the risk. Under pressure from trade unions and other interest groups, the government decided in the process to abandon plans to introduce a flat
tax and instead streamlined the current system of progressive personal income tax and lowered the corporate income tax rate. The pillar of the
tax reform package is the income tax act, which is aimed at reducing the tax burden by increasing the general tax relief and reducing progressivity. The act replaces the previous five tax brackets with three
and reduces the top rate from 50% to 41%. The remaining two brackets have been set at 16% and 27% respectively. The corporate income tax act envisaged the gradual reduction of the corporate income tax rate
from 25% to 20% from this year to 2010.
Thursday, January 11, 2007 ~ 7:14 a.m., Dan Mitchell Wrote: The Democrats long ago staked out an uncompromising position on Social Security that took the president's call for private accounts off the
table. That leaves only two options: increase taxes or cut benefits — or, more likely, both. …To prop up the failing program, Pelosi will presumably choose the higher tax option which will be presented as yet
another Democratic "soak the rich" plan. Payroll tax hikes from the Democrats aren't that shocking. Less expected, though, is President Bush's assertion that he is willing to consider going along with the plan.
… Does he really interpret the abysmal showing of the Republicans in last November's elections to be a mandate for raising taxes? … repealing the wage cap would result in the single largest tax increase
ever in the history of the United States. The negative impact on the economy would be astounding. By the end of 2011, GDP would be a staggering $136 billion dollars below current estimates. Consumer
spending would drop $160 billion. Investment would decrease by $36 billion per year. … According to Americans for Tax Reform, just raising
the cap to $150,000 would increase the combined employee/employer tax by $7,400. According to Wall Street economist Michael Darda, eliminating the ceiling on payroll taxes would boost the top marginal tax
rate to 47.6 percent — up from 35 percent. Since most small-business owners pay at the individual rate, they would be looking at a massive tax increase on their employees as well as on their own incomes. … The
American economy has grown faster this past year than the economy of any other industrialized country. President Bush was right to declare
payroll-tax increases off the table. Raising taxes isn't bipartisanship — it's bad policy.
Wednesday, January 10, 2007 ~ 8:55 a.m., Dan Mitchell Wrote: French Prime Minister Dominique de Villepin introduced a legal right to housing, responding to growing protests over homelessness. ``It's a
principle which puts the right to housing at the same level as the right to health care or education,'' de Villepin said in a press conference in Paris
today. ...President Jacques Chirac ordered the housing right during his New Year's eve address Dec. 31. De Villepin said the cabinet will approve
a law Jan. 17 providing an extra 120,000 housing units per year through 2012. The legislation, which must be voted by parliament before it adjourns ahead of the elections Feb. 22, will take effect from 2008 for
street sleepers and 2012 for people in shelters. Paris has as many as 5,000 people living on the streets, according to a government report
published Aug. 9. That's in addition to 26,630 homeless people in shelters in the Paris region. London has 1,500 homeless people on the streets, and Madrid 700, according to Brussels-based European Federation of
National Organisations Working with the Homeless.
Wednesday, January 10, 2007 ~ 8:30 a.m., Dan Mitchell Wrote: EU governments should stop blaming the euro for economic difficulties and should make their own labour markets more flexible and curb
budget deficits instead, economic think-tank the OECD has said. ...The report challenges claims that the euro has led to disappointing economic growth in some states, while at the same time limiting national
governments' means to react to economic downturns. "In the public debate, the union's poor performance in these two areas has often been blamed on the single currency itself. However, this criticism is
misguided," according to the OECD paper. "The economic problems are mainly structural; the solutions therefore are largely in the hands of
individual member governments. Thus, the primary policy challenge for the euro area is to improve growth and resilience by boosting economic
flexibility." The think-tank urges eurozone capitals to loosen lay-off rules, boost wage flexibility by making less use of collective wage agreements, reduce red tape barriers for labour mobility and open
services and financial markets.
Tuesday, January 9, 2007 ~ 8:50 a.m., Dan Mitchell Wrote: The next two years will consist of the Democrat leadership in Congress and their allies in the establishment press trying every possible stratagem
to trick George Bush and the Republicans in Congress into raising taxes. … Republicans have fallen for this trick before. George H.W. Bush raised
taxes in 1990. It cost him his presidency in 1992. Even Ronald Reagan in 1982 was tricked into raising taxes with a promise from Tip O'Neill that
the democrats would cut spending by three dollars for every dollar of tax hike. Never happened. The Great Communicator got conned. The Democrats have a secret—OK, not so secret—weapon in this fight. The
establishment press will praise any Republican willing to discuss a tax hike as bi-partisan, statesmanlike. Flowers. Gifts of free television time.
Press as good as John McCain gets when he voted against the Bush tax cuts and called for gun control. Assurances that CBS will still respect you
in the morning. … Democrats will spend the next two years proving that they are more corrupt and bigger spenders than the Republicans. Their
goal, their only hope, will be to trick the Republicans into doing what President George H.W. Bush did when he went to Andrews Air Force Base in 1990 and negotiated a "budget deal" that raised taxes. It is easy
to beat someone in a race if they commit suicide along the way.
Tuesday, January 9, 2007 ~ 8:22 a.m., Dan Mitchell Wrote: A better approach would be a 2% surcharge, 1% from the employee and 1% from the employer, on all earnings above the maximum wage base
(like the Medicare tax). In 2012, for example, that would mean 12.4% on the first $113,000 in earnings and 2% on all earnings above that amount.
Tuesday, January 9, 2007 ~ 8:09 a.m., Dan Mitchell Wrote: Tax inspectors are to be given new powers allowing them to tap taxpayers' telephones and plant bugs inside their homes and offices. …
lawyers and accountants argue that the move could breach human rights and have condemned ministers for "creeping authoritarianism". Harry Travers, a solicitor who specialises in defending clients targeted by the
Inland Revenue, said the new powers were a possible breach of the European Convention on Human Rights. The treaty says that interfering
with private and family life is only permissible if it is "necessary" for the prevention of disorder or crime. "A number of Customs and Excise prosecutions have spectacularly collapsed in recent years due to the
abuse by officers of their powers, not because their powers were inadequate," said Travers. "This is just another example of creeping authoritarianism on the part of this government." … Mark Fairhurst,
head of forensics at accountants PKF, said: "HMRC claims it will use the new powers proportionately, but our experience suggests its officers often take an unnecessarily heavy-handed approach with some taxpayers
who are eventually proven innocent." Tax inspectors are being offered bonuses of up to Ł 2,000 to squeeze more money out of workers. … The bonuses will enrage families and
businesses who are already paying record amounts to the Treasury. … One of the biggest nightmares is when HMRC decides to launch a special investigation to find out whether or not somebody has paid enough tax.
Latest figures show that it had a target to launch 91,899 investigations into individuals in 2005/06, but more than 100,000 were started. Matthew Elliott, chief executive of the Taxpayers' Alliance, said: 'This
incentive scheme could easily lead to a growth in the sort of petty, borderline inquiries that people find so irritating and time-consuming. … One of the country's leading tax experts, Mike Warburton from the
accountants Grant Thornton, said: 'It is entirely wrong to reward tax inspectors for collecting more tax than a person should pay, just because
he bullied them into doing it. … News of the bonuses will enrage families who feel that they are already being crippled by record tax bills leaving
many struggling to cope. Families are being squeezed harder than ever before by higher taxes from income tax and National Insurance to other
'stealth' taxes such as stamp duty. In 1997, the average worker paid an income tax bill of about Ł2,900. Today, the average worker pays nearly Ł5,000.
Tuesday, January 9, 2007 ~ 7:58 a.m., Dan Mitchell Wrote: ...one program deserves special commendation for achieving the trifecta of bad governance: regressive transfers, inefficiency, and inhibited
innovation. I refer to the Essential Air Service (EAS) program of the Department of Transportation, which subsidizes scheduled air service to
rural communities far from major airline hubs. These routes are the back roads of skies, serving unknown hamlets like Show Low, Arizona, Thief
River Falls, Minnesota, and Greenbrier, West Virginia They are generally poorly traveled, costing American taxpayers millions every year to
subsidize. (Environmentalists would point out that the extra flights pump tons of carbon dioxide into the atmosphere.) The New York Times reported in October 2006 that some destinations, such as Brookings,
South Dakota, or Kingman, Nevada, serve less than ten passengers daily. Since EAS requires subsidized airlines to fly at least two daily roundtrips
to each destination, that means that there can be as many crew members as passengers on the least-trafficked flights. The entire program cost over $110 million last year--$148 for every roundtrip outside Alaska,
whose EAS subsidies are documented on a separate balance sheet. ...It benefits people who live in small towns in the West and the Midwest and who can afford air travel on their own. Those who cannot afford air
travel end up helping pay for the flights anyway through their taxes. It is also a form of corporate welfare, providing transfers to corporations
offering an unprofitable service. ...If the flights made economic sense, the program wouldn't have to subsidize them. ...Raytheon and several
regional airlines are top contributors to Regional Aviation Partners, a Washington, D.C., lobbying group that strives to maintain and expand the EAS program. The EAS subsidies reward the rent-seeking behavior
of Raytheon and the regional airlines. ...EAS subsidies are bad business: they inhibit innovation and preserve a flawed status quo. The first
subsidies created incentives for flying otherwise unprofitable routes; their continued existence has locked airlines into these routes, with capital tied up in planes for which no alternate use exists. The other
powerful backer for keeping the subsidies--besides Raytheon and the regional airlines--is a network of small-town chambers of commerce, remote airport agencies, and rural congressmen.
Tuesday, January 9, 2007 ~ 7:45 a.m., Dan Mitchell Wrote: Kraft Foods, the American multinational, is joining the flight of US corporations that are moving their European headquarters to
Switzerland in search of efficient transport, lower taxes and an easier lifestyle. ...The US firm, which owns a portfolio of famous brands, such as Philadelphia cream cheese, Kenco coffee and Terry's Chocolate
Orange, is following in the footsteps of Procter & Gamble and Colgate-Palmolive, which have shifted their European headquarters to Switzerland to take advantage of its tax regime... Biogen Idec, a US
pharmaceutical company, recently decamped from Paris to Zug, a canton which boasts nil corporate tax. The knife was twisted further when Johnny Hallyday, the French rock star, revealed that he would
move his residence to Gstaad because he was "fed up" with French taxes. ...Switzerland vigorously supports tax competition and not just on
an international basis. Even within Switzerland, which has a dual federal and cantonal tax structure, cantons are encouraged to compete on tax rates. The cantons have the greatest spending burden and the biggest
scope to compete for international dollars and tax rates vary. Some of the lowest rates found in mountain regions, such as Zug and Schwyz, which have attracted a number of large and tax-shy corporations, such
as Xstrata, the mining group.
Monday, January 8, 2007 ~ 8:51 a.m., Dan Mitchell Wrote: French President Jacques Chirac has said that he envisages a cut in the country's corporate tax rate to as low as 20% within five years, which
would give France one of the lowest rates of corporate tax in the European Union. In his New Year address, Chirac predicted that the corporate tax rate, currently 33%, would fall to its lowest level for 25
years by the end of 2007. "Fiscal competitivity compared to other countries is the major challenge," the president said. Chirac also called
for additional tax incentives for companies which share their profits equally between shareholders and employees. Such firms should be allowed to pay a special corporate tax rate of 10%, he stated.
Monday, January 8, 2007 ~ 8:40 a.m., Dan Mitchell Wrote: If we had never entered the 'Common Market' back in 1973, would we now, as the Europhiles like to tell us, be just an impoverished little island
standing sadly alone on the edge of Europe, gazing in envy at the success of the great project we were so foolish not to join? Or is it possible that
we might in 2007 be living in a Britain significantly richer, happier, freer, more democratic, more selfrespecting and more at ease with itself than it
is today? ...The most obvious thing we didn't gain from entering the Common Market was the one benefit we were told was our main reason for joining. ...The promise was that, by going into partnership with them,
we might learn the secret of their newfound dynamism... The paradox was that when, in the 1980s, we did eventually rediscover the secret of economic success, in that transformation which took place under Mrs
Thatcher, this had nothing whatever to do with our membership of what had by then become the 'European Community'. Britain's renaissance, which by the late 1990s had made us again the fourth-largest economy in
the world, was entirely home-grown. And by this time that original equation which had drawn us into 'Europe' in the first place had been almost entirely reversed. It was now those Continental countries whose
economies were suffocating under all the problems Britain had solved by her own efforts in the 1980s... In hindsight, we can now see that, had we
remained outside the European project, as it has become increasingly sunk in economic gloom, we could have remained a natural part of what has become the most dynamic sector of the global economy. ...The
ultimate proof of how well we might have survived outside the EU is that, even today, both Norway and Switzerland, two of the richest countries in Europe, export a higher percentage of their products to the
EU than we do, without having had to join it. ...The real sacrifice we have made in submitting to the EU's system of 'supranational government' is that of the right to decide so many of our own laws and
policies. If we had never joined we would still have the right to decide our own immigration policy and who should have the right to settle and
work in the United Kingdom. If we had never joined, we might still have the most efficient and prosperous agriculture in Europe, as we did before
we had to submit to the cockeyed rules of a Common Agricultural Policy drawn up primarily to serve the interests of France. If we had never
joined we might still have the most successful fishing industry in Europe, as we did before we had to hand over our fishing waters, once the richest
and most efficiently managed in the world, to a Common Fisheries Policy which has seen the destruction of our fishing fleet and produced an ecological disaster. ...perhaps the greatest prize we might have
retained if we had stayed out is that we might have avoided the subtly demoralising effect membership of this vast, ramshackle organisation has had on our democracy and the whole way we are governed. Not the
least reason why our Parliament and politicians are these days held in such unprecedentedly low esteem is that so much of the power they once exercised on our behalf has drained away, to faceless armies of
technocrats we cannot any longer call to account. ...When we consider the countless ways in which our country's life and institutions have been
damaged by our membership of the 'European project', it is hard not to conclude that the decision to join it may have been the greatest political blunder in Britain's history.
Monday, January 8, 2007 ~ 8:13 a.m., Dan Mitchell Wrote: Job growth exceeding expectations at 167,000 and the jobless rate held at a very low 4.5%, despite a slowdown in manufacturing and
construction. Since the Bush tax cuts on dividends and capital gains passed in mid-2003, the economy has created 7.2 million new jobs according to the survey of business establishments, and an additional 1.2
million in the more variable household survey. ...average hourly non-supervisory wages have now climbed 4.2% over the past 12 months, or twice the official rate of inflation. With flat or falling energy prices,
and a tight labor market, real wages are also starting to show impressive gains. Meanwhile, tax revenues continue to roll into the Treasury and
state coffers. Federal receipts rose by 14.6% in fiscal 2005, another 11.8% in 2006, and kept rising by 9% in this year's first two months despite slower GDP growth. ...This record is so impressive that liberal
critics have been forced to ignore it and focus on other alleged outrages, such as "inequality," or CEO pay, or some vague prediction of future
doom. And, yes, the future is unpredictable. But in the field of economics there are few more definitive tests than the results from the tax cuts of
2003. Critics predicted disaster, supporters the opposite, and the supporters can point to more than three years of prosperity as vindication -- despite $70 oil and $3 gasoline, and lately despite the
worst housing slowdown in 15 years.
Monday, January 8, 2007 ~ 7:48 a.m., Dan Mitchell Wrote: China has moved a step closer to adopting a radical flat tax after the Standing Committee of the Tenth National People's Congress began
discussing whether to adopt a single rate for corporation tax over Christmas. In the first instance, the flat tax would apply to company tax and would probably be charged at 25%, lower than in Britain,
harmonising the current range of rates and the distinction made between Chinese and foreign companies. If deemed successful, the experiment is
likely to be extended to other taxes, including income tax. The Chinese authorities have been watching closely as growing numbers of Eastern
European economies, including Russia, have adopted versions of the flat tax, a system whereby income tax, corporation tax and sometimes even value added tax are all charged a one single, low rate, with no
exceptions or exemptions. A radical move by the Chinese would cause problems for high-tax jurisdictions such as Britain and the euro zone,
which might find it hard to retain skilled labour and capital. The Chinese ministry of finance has already gone as far as to invite foreign flat tax
specialists to brief officials on how such a system could work for China; the main flat tax textbooks have been translated into Mandarin.
Sunday, January 7, 2007 ~ 2:58 p.m., Dan Mitchell Wrote: ...students are eligible to receive $4,050 in Pell Grants per year and up to $23,000 per undergrad degree in Stafford Loans (the two main sources
of federal student aid). ...That's a whole lot of green college administrators can play with-$39,200 to be exact-when calculating the sticker price. What incentives do schools have to be price-friendly and
economically resourceful when the opposite behavior will multiply its piggybank? The government's "helping hand" gives colleges a perverse
market incentive to inflate costs. Think that's far-fetched? Consider that congressional spending for higher education jumped 686 percent between 1973 and 2005, the Office of Postsecondary Education tells us.
Taxpayers shelled out $72.4 billion in 2005 compared to just $9.2 billion (in 2005 dollars) in 1973. Outlays rose 95 percent from 1995 to 2005
alone. Yet this soaring spending has not brought prices down-instead, it's goosed them up. Tuition's grown more than twice as fast as inflation over the last 30 years... Ohio University Professor Richard Vedder
saliently noted that from 1977 to 2000 only twenty-one cents out of each increased dollar spent per student actually covered teaching. So where's
the money being squandered? Administrative salaries and fringe benefits, for starters. Those two categories jumped 26- and 31 percent respectively over the past 5 years, even though the consumer price index
only increased by 14 percent. Another reason: bloated staffs and needless vice presidents, deans, provosts, and campus life directors-many of whom are pocketing salaries that average $195,000 a year and
controlling six- and seven-figure budgets, reports the Chronicle.
Sunday, January 7, 2007 ~ 1:16 a.m., Dan Mitchell Wrote: Fundamentally, personal income comes from two sources: the private sector and the public sector. The distinction between the two sectors is
important because only the private sector creates new income. The public sector simply redistributes existing income and/or wealth. Chart 1 shows that in Maine, the share of personal income generated by the
private sector in 2005, declined to an all-time low of 66.2 percent, from the peak of 92.4 percent in 1929, a 28.4 percent drop. Maine now has one of the smallest (41st largest) private sector shares of personal
income in the country. Since 2000, over 100 percent of the growth in Maine's personal income came from the public sector as the private sector shrank over the period.
Saturday, January 6, 2007 ~ 9:37 p.m., Dan Mitchell Wrote: Mary Baker and Ruth Neikirk love to cook. What's more, they love to cook for poor people. They do it frequently, preparing meals at home and
bringing them to their church in Virginia. "I love it," Mary says. "I can take a little bit of something, like a soup bone? And I can make a
whooole pot of something. Tastes good. With some cornbread you got 'em a meal!" The people they cook for love it too. But there's a problem.
It was "criminal activity." The Fairfax County health department points out that -- horrors -- Mary and Ruth are actually preparing food and
serving it to people! Without a license! ...The health department said it was just looking out for the homeless. But did the officials ever think
about where street people eat when they don't eat at these churches? "They've never stopped me from eating out of a dumpster or a trash can," says James, an astute homeless man who understands Henry
Hazlitt's "economics in one lesson," namely, look for the secondary results of government policy. The government can close down the church
kitchens, but that'll only send the poor to the garbage cans. Is that better?
Saturday, January 6, 2007 ~ 6:44 p.m., Dan Mitchell Wrote: Cheese is to be treated as junk food under new advertising rules for children's television. Commercials promoting it will be banned during
children's TV programmes and those with a large proportion of young viewers. ...Much to the disgust of its makers, cheese is to be regarded in the same light as crisps, sugary cereals and cheeseburgers. ...The
National Farmers' Union described the decision as ' nannying gone mad'. 'To suggest there is anything inherently harmful about cheese is absurd,'
spokesman Anthony Gibson said. 'There is no such thing as a bad food. It is just how much of it you eat, in what balance and how much exercise
you take.' ...Other foods banned from advertising during children's TV include: Marmite, Flora Lite, half-fat cheddar, Dairylea triangles, bran
flakes, camembert, sugar-coated puffed wheat, instant hot oat cereal, Jaffa cakes, reduced calorie mayonnaise, multi-grain hoop cereal, half-fat creme fraiche, takeaway chicken nuggets, potato waffles, Greek
yoghurt (from sheep's milk), ham, sausages, bacon rashers, low-fat spreads, peanuts, cashew nuts, pistachio-nuts, peanut butter, raisins, sultanas, currants, low-fat potato crisps, olive oil, butter, pizza,
hamburgers, tomato ketchup, chocolate, brown sauce, cola and lemonade.
Friday, January 5, 2007 ~ 7:54 a.m., Dan Mitchell Wrote: Even though some of this technology existed in the 1970s, the economic environment of those times was not conducive to its rapid development
or deployment. Tax rates were high and regulation was stifling. This held back innovation, creativity and productivity. To offset this malaise, many
macroeconomists counted on the Fed to hold interest rates low by printing more money, which only stoked inflation. The resulting stagflation created a lousy environment for new inventions. In the early
1980s, tax rates were cut, government interference in the economy was reduced, and the Fed followed a tight money policy. As stagflation was
cured, entrepreneurs got to work. In garages, basements and cinderblock buildings, today's technology promptly came to life even before its full
usefulness was understood. It took more than a decade for the Internet and email to become real consumer products. It was the supply of this technology that fueled its growth, not the demand for it. Despite
evidence from the past 30 years, a majority of the analysis and press coverage of our economy still focuses on demand as the driver of wealth
creation. ...our trade deficit with China is not a significant problem. The dollars sent across the Pacific rebound as investment or spending on
goods and services, such as the recent $3- to $4-billion contract with Westinghouse Electric Co. to build nuclear-power plants in China. While
many fear that China might stop investing in the U.S., or sell its current investment holdings, this is misplaced worry. If China traded its dollars
for euros, then whoever stood on the other side of that transaction would hold those dollars -- facing the same choices of buying from, or investing
in, America. Foreign investment reflects the strength of the U.S. as a safe and sound economy.
Friday, January 5, 2007 ~ 7:00 a.m., Dan Mitchell Wrote: Unless you've been hibernating for the winter, you have no doubt heard the many alarms about global warming. Now even the Bush
Administration is getting into the act, at least judging from last week's decision by Interior Secretary Dirk Kempthorne to recommend that the
majestic polar bear be listed as "threatened" under the Endangered Species Act. The closer you inspect this decision, however, the more it
looks like the triumph of politics over science. ...The "endangered" designation is based less on the actual number of bears in Alaska than on
"projections into the future," Mr. Vickery said, adding that these "projection models" are "tricky business." ...Apparently so, because
there are in fact more polar bears in the world now than there were 40 years ago... The main threat to polar bears in recent decades has been from hunting, with estimates as low as 5,000 to 10,000 bears in the
1950s and 1960s. But thanks to conservation efforts, and some cross-border cooperation among the U.S., Canada and Russia, the best estimate today is that the polar bear population is 20,000 to 25,000.
...the real story here is a human one, namely about the politics of global warming. Once a plant or animal is listed under the Endangered Species
Act, the government must also come up with an elaborate plan to protect its habitat. If the polar bear is endangered by warmer temperatures, then
the environmentalist demand will be that the government do something to address that climate change. Faster than you can say Al Gore, this would lead to lawsuits and cries in Congress demanding federal
mandates to reduce greenhouse gas emissions. ...With that much at stake, Mr. Kempthorne could have shown a stiffer backbone in resisting this political pressure. At the very least he now has an obligation to
ensure that Interior's year-long study be based on real science and the actual polar bear population, rather than rely on computer projections. Any government decision to limit greenhouse gases deserves to be
debated in the open, where the public can understand the consequences, not legislated by the back door via the Endangered Species Act.
Thursday, January 4, 2007 ~ 9:00 a.m., Dan Mitchell Wrote: A federal minimum wage is an idea whose time came in 1938, when public confidence in markets was at a nadir and the federal government's
confidence in itself was at an apogee. This, in spite of the fact that, with the 19 percent unemployment and the economy contracting by 6.2
percent in 1938, the New Deal's frenetic attempts had failed to end, and perhaps had prolonged, the Depression. ...But the minimum wage should be the same everywhere: $0. Labor is a commodity; governments make
messes when they decree commodities' prices. Washington, which has its hands full delivering the mail and defending the shores, should let the market do well what Washington does poorly. But that is a good idea
whose time will never come again.
Thursday, January 4, 2007 ~ 8:53 a.m., Dan Mitchell Wrote: A century ago, Americans spent 43 percent of their incomes on food and 14 percent on clothing. By 2002, those shares were 13 percent and 4
percent. Meanwhile, family incomes (after inflation) had exploded. Filling the spending gap are all the things we take for granted -- cars, TVs, travel, telephones, the Internet. Home ownership has zipped to
almost 70 percent of households. ...Labor productivity is measured as output per hour worked. Whatever enables people to produce more in a
given time (machinery, skills, organization) boosts productivity. That in turn raises our incomes -- or gives us more leisure. It also promotes domestic tranquility by muffling the competition between government
and personal spending. Slow productivity growth virtually ensures a collision between the heavy costs of retiring baby boomers -- mostly for Social Security and Medicare -- and younger workers' living standards.
Thursday, January 4, 2007 ~ 8:15 a.m., Dan Mitchell Wrote: For decades the incumbent cable TV providers enjoyed a virtual monopoly in most markets. Of late, the Bells have been attempting to
crash this party with their own video offerings, but they're facing all kinds of barriers to entry. At the behest of the cable industry, county commissions, city governments and other so-called local franchising
authorities have slow-rolled approval or made unrelated demands -- such as the construction of a public swimming pool, parking garage or in-kind cash payments -- a condition for allowing phone companies to offer
cable. ...The FCC's action is an attempt to streamline this process and eliminate the shake-downs that municipalities have been using to circumvent the 5% franchise fee cap. ...In places where traditional cable
providers do face competition from phone companies, rates are falling. According to FCC Chairman Kevin Martin, studies by his agency as well
as the Government Accounting Office have "concluded that the average monthly cable rate is significantly lower only in areas with another
wire-based competitor." In the wake of the FCC's party-line 3-2 ruling, in which the agency's two Democrats dissented, the cable lobby is
complaining that phone companies are receiving preferential treatment. Democratic Commissioner Jonathan Adelstein told reporters that the
decision "undermines" local authority, by which he means poaching by thousands of local politicians.
Thursday, January 4, 2007 ~ 7:40 a.m., Dan Mitchell Wrote: Decades worth of evidence have shown more money is not the answer to improving the quality of education in America. This month, the American
Legislative Exchange Council -- the largest U.S. nonpartisan group of state legislators -- released the 2006 Report Card on American Education concluding that "despite substantial increases in resources
being spent on primary and secondary education over the past two decades -- per pupil expenditures have increased by 77.4 percent (after adjusting for inflation) -- student performance has improved only
slightly." ...ALEC's 2006 Report Card reveals that New Jersey is the second-highest spender per pupil at $13,674 in the country (an amount that could cover a top-notch private school's tuition), has the
fourth-smallest average class size in the country and pays more for its teachers than 47 other states do. For the students trapped in New
Jersey's 96 failing schools, these efforts have not helped. Giving parents more control over their children's education starts fundamentally at
school selection. Upper class Americans have enjoyed the power to send their kids to the school of their choice for generations. Why not afford all
American parents the same opportunity? Research has shown that when parents, regardless of income, can enroll their kids in schools of their choosing kids perform better.
Wednesday, January 3, 2007 ~ 8:47 a.m., Dan Mitchell Wrote: People who think that they, or the government, ought to be deciding how much income people make are in effect saying that they know the value
of people's output better than those who use that output and pay for it with their own money. How did Bill Gates get his fortune? Not by
someone deciding how much Bill Gates was worth to "society," but by innumerable people around the world deciding whether what Microsoft
offered them was worth what Microsoft charged. ...We can each decide for ourselves whether what Microsoft offers is worth it to us. That is all
we are competent to decide -- and only for ourselves individually, when spending our own money. The idea that we should pool our collective
ignorance and then decide how much it is "fair" for Gates or anybody else to earn in total income is as ridiculous as it is dangerous, for it
means arming politicians with the arbitrary power to decide everyone's economic fate. Do we want our own family's living standards to be at the
mercy of politicians? Are we so eaten up with envy that we will risk that, in order to keep Gates from having "too much" money, paid by people
who voluntarily bought Microsoft's products? ...The same reliance on ignorance applies at the other end of the economic scale. People who know nothing about retailing, nothing about labor markets and nothing
about economics are loudly demanding that the local, state or federal government "do something" about the low pay of Wal-Mart's employees.
Those employees know what their alternative job opportunities are and other employers know what their productivity would be worth to them. If the workers themselves choose Wal-Mart as their best option, what
qualifies us to say that either their choice or Wal-Mart's choice was wrong? ...Is the whole economic system of supply and demand, on which the nation's prosperity is based, to be disrupted whenever moral
exhibitionists have a need to feel puffed up about themselves? Thomas Sowell: Liberty generates growth, not natural resources Thomas Sowell: Wealth creation should be the key goal, not wealth redistribution
Wednesday, January 3, 2007 ~ 8:23 a.m., Dan Mitchell Wrote: Ahead of planned elections in the Czech Republic, a centre-right coalition of three parties has dusted off plans for a flat tax which were abandoned
by last year's minority government in the face of opposition from the Social Democrats. The representatives of the Civic Democrats, the Christian Democrats and the Greens said after Christmas talks that they
would introduce a 17% to 19% flat tax if they win the elections, to apply both to companies and to individuals. The tax system proposed by the new government, besides setting a flat tax rate, would reduce the overall percent of tax burden from 37 percent
to 34 percent - but it will also make reductions in the number of legal deductions, so as to offset the impact of the state's reduced tax revenues.
The three parties also agreed to push for an abolition of taxes on stock dividends, inheritance, gifts, property transfers and farm land.
Wednesday, January 3, 2007 ~ 7:54 a.m., Dan Mitchell Wrote: ...former Vice President Al Gore declares global warming is a "moral issue." It is, but for very different reasons than Mr. Gore professes.
...Energy poverty is a scourge, shortening the lives and impairing the health of untold millions of people around the globe. An estimated 1.6
billion people lack access to electricity, and some 2.4 billion people still rely on biomass -- wood, crop waste and dung -- for cooking and heating.
Daily indoor air pollution in energy-poor countries is much dirtier than outdoor air in the world's most polluted cities, and kills about 2.8 million
people a year, most of them women and children. Reliance on biomass also takes a heavy toll on forests and wildlife habitat. There is no known
way to meet the developing world's energy needs without increasing use of CO2-emitting fossil fuels. Forcing developing countries to go on an energy diet would condemn them to decades of continuing poverty,
backwardness and misery. ...Even in the United States, high energy prices inflict hardship on low-income households. Millions of families already feel pinched by the high cost of gasoline, natural gas, and home
heating oil. A Kyoto-style system would push energy prices even higher. Does the new Congress really want to take credit for pushing U.S. gasoline prices to record highs? ...The perils of global warming are
speculative. Those of energy poverty are all too real. Global warming is indeed a moral issue, because global-warming policies have enormous potential to harm poor people.
Wednesday, January 3, 2007 ~ 7:30 a.m., Dan Mitchell Wrote: Nothing exposes the myth of Cuba's vaunted health care system quite like the news that ailing dictator Fidel Castro refuses to use it. Instead,
he prefers care from Spain. What hypocrisy. ...what a sorry spectacle, given the claims of Castro and his apologists that communist health care
is a humane and superior alternative to that in the capitalist world of double-entry bookkeeping, where health care is not free but something of
value. ...the NIH's American Journal of Public Health found that 33% of all Cuban refugee children have intestinal parasites, 21% have lead poisoning and all have higher-than-normal levels of disease. A separate
by Baylor University found that Cuban refugees' primary risks are malnutrition, tuberculosis and dengue fever. Meanwhile, during the 1996 Atlanta Olympics, elite Cuban athletes showed the highest use of the
Olympic system's free health clinics. Medics reported that Cuban athletes' long-neglected health needs went as far as a lack of even simple dentistry. Castro, however, has no such problems. Ordinary Cubans may
get abysmal care, but under the country's two-tier medical system, the communist party elite do. And if you are Castro, you can tap services from the capitalist world.
Tuesday, January 2, 2007 ~ 8:59 a.m., Dan Mitchell Wrote: American commercial shipping is but a puny remnant of its former self. In 1948, more than a third of the world's merchant fleet flew the stars
and stripes; today that figure is down to 2 percent. Half a century ago, America built more ships than any other nation, and New York City
could boast that it was the world's busiest seaport. Sliding from the top since the 1980s, New York now barely ranks among the top 20. ...A major factor in the decline of American shipping has been an antiquated
law that prevents American coastal shippers from buying ships made in other countries. By amending this law and, at the same time, encouraging the development of domestic coastal shipping, Congress
could help restore America's status as a great and proud maritime nation. ...To revive the maritime trade, Congress should give shipping companies as much choice in buying ships as their land-based rivals have
when buying trucks and train cars. Freed from the restraints of the Merchant Marine Acts, commercial shippers could not only begin to resume their position in global trade but also handle much more of the
freight that moves within our borders.
Tuesday, January 2, 2007 ~ 8:43 a.m., Dan Mitchell Wrote: British tycoon Richard Branson may have a large ego. But is he a threat to American national security? The Department of Transportation seems
to think so, and this week it tentatively rejected a bid to put his famous brand name on a U.S. based airline that would be known as Virgin America. The decision is surprising given that barely a month ago DOT
seemed to be in the process of relaxing antiquated rules that require that U.S.-based airlines be 75% U.S.-owned or "controlled." But under
pressure from airline unions and protectionist-minded U.S. carriers, new Transportation Secretary Mary Peters put a stop to that policy shift. And
now DOT says that although Virgin America was structured to comply with the 75% rule, "Virgin America's close relationship with the U.K.-based Virgin Group indicates that the carrier is not under the
actual control of U.S. citizens." Scary? Well, not really. In fact, it's hard to think of an industry where consumers stand to benefit more from truly
global competition than airlines, and if ownership restrictions ever made sense from a national security standpoint it was in the context of the
Cold War. Today the ownership rules are exactly what Mr. Branson has called them: "pure protectionism." In addition to the consumers who
won't benefit if Virgin America doesn't get the go-ahead, there's also the matter of the 3,000 jobs Virgin America wants to create at its planned San Francisco hub.
Tuesday, January 2, 2007 ~ 8:14 a.m., Dan Mitchell Wrote: A three-judge federal court recently tugged a thread that may begin the unraveling of the fabric of murky laws and regulations that traduce the
First Amendment by suppressing political speech. Divided 2-1, the court held -- unremarkably, you might think -- that issue advocacy ads can run
during an election, when they matter most. This decision will strike zealous (there is no other kind) advocates of ever-tighter regulation of political speech (campaign finance ``reformers'') as ominous. Why?
Because it partially emancipates millions of Americans who incorporate thousands of groups to advocate their causes, groups such as the ACLU
and the NRA. And Wisconsin Right to Life. It is another organization by which people assemble (see the First Amendment) to speak (see it again)
in order to seek redress of grievances (the Amendment, one more time). ...the reformers' zeal for regulating speech is undiminished. The Federal
Election Commission recently fined some ``527'' groups (named for the tax code provision under which they organize) $630,000. Their offense? Issue advocacy in 2004 that, ``taken as a whole,'' could ``only be
interpreted by a reasonable person as containing the advocacy of the election or defeat'' of a federal candidate. Editorial writers at The New York Times and The Washington Post, ever eager to regulate political
advocacy not done by newspaper editorial writers, approved, although the Times thought the fines insufficient, and although the Post, calling the current law ``murky,'' thought the FEC should have enforced the
murkiness quicker. ...When, as surely it will, the Supreme Court considers that question, it can begin undoing the damage it did affirming McCain-Feingold and licensing government to ration political speech.
Tuesday, January 2, 2007 ~ 7:34 a.m., Dan Mitchell Wrote: People in the media, in academia and among the intelligentsia in general who are obsessed with "disparities" in income and wealth usually show
not the slightest interest in how that income and wealth were produced in the first place. They are hot to redistribute the existing income and
wealth but seem wholly unaware that how you do that today can affect how much income and wealth will be produced tomorrow. Any number of schemes for redistributing wealth have ended up redistributing
poverty in a number of countries. ...Progressives are in the business of complaining and denouncing -- as a prelude to seeking sweeping powers
to control other people's lives, in the name of curing the ills of society. The last thing they want is to discover and discuss how millions of people
rose out of poverty by entirely different methods, often by freeing economies from the control of people with sweeping power over other people's lives.
Monday, January 1, 2007 ~ 4:50 p.m., Dan Mitchell Wrote: On Monday Macedonia imposes flat tax, the Macedonian MIA agency announces. ... Flat tax, which is imposed in many European states,
stipulates flat rate for corporation tax and income tax for natural persons. The rate of the income tax for natural persons will be 12% from Monday. The rate of the corporation tax will be decreased from 15% to
12 %. The 12% rate will be in force till the end of 2007. The rates of the two taxes are planned to be 10% from Jan. 1st 2008.
Monday, January 1, 2007 ~ 3:59 p.m., Dan Mitchell Wrote: What upset the government was that the Heart Attack Grill waitresses call themselves "nurses." The waitresses dress like nurses -- although in
some cases like nurses you'd see only in an X-rated movie. After customers eat the fatty food, they can ask their "nurse" to wheel them
out to their car in a wheelchair -- just like at the hospital. The customers like the gimmick, and the nurse-waitresses like working there, but the
Arizona Board of Nursing says the restaurant violates state law. According to an intimidating letter from the office of the attorney general, only a person who holds a valid license to practice nursing may
use the title "nurse." ...People at the restaurant told us that the state nursing board's complaint was ridiculous. "I really think they need to
grow a sense of humor," one waitress said. A male customer added, "It's pretty plain they're not nurses." ...At the moment, reason has prevailed.
After "20/20" and other camera crews showed up to film the waitresses and try to talk to the state nursing board, Arizona officials decided not to take any action against the Heart Attack Grill.
Monday, January 1, 2007 ~ 1:14 p.m., Dan Mitchell Wrote: Natural resources in Uruguay and Venezuela are worth several times as much per capita as natural resources in Japan and Switzerland. But
income per capita in Japan and Switzerland is about double that of Uruguay and several times that of Venezuela. Nobody likes to see poverty in a world where technology and economic know-how already
exist that could give everyone everywhere a decent standard of living. All you have to do is change people. But have you ever tried to do that?
The quick fix is to transfer wealth. But more than half a century of trying to do that with "foreign aid" has left a dismal record of failure and even
retrogression in Third World countries. Some countries have themselves made changes that lifted them from poverty to prosperity. Indeed, the
affluent countries of today were once living in poverty. But they didn't do it with quick fixes or by turning a dangerous power over to politicians.
Monday, January 1, 2007 ~ 10:41 a.m., Dan Mitchell Wrote: What liberals dearly want is to raise the payroll tax cap. Under current law, Americans pay a 12.4% Social Security tax on all wages up to
$94,200 in 2006, and the cap rises each year with inflation. (There is also an uncapped 2.9% Medicare payroll tax on top of that.) So why not lift
the cap a little more, say the taxers, perhaps to $150,000 if the trade-off is benefit cuts that will prevent even larger tax increases in the future?
...Such a payroll tax hike would also eviscerate Mr. Bush's most impressive domestic achievement: the pro-growth tax cuts. If the tax cap were eliminated entirely, the President would be signing into law one of
the largest tax hikes in U.S. history, or more than $1.3 trillion in new taxes over the first 10 years alone. About seven million families with an
income of less than $150,000 a year would be hit with a tax increase of up to $6,000 a year. This would also be a major tax hike on small-business employers, who pay half of the payroll levy (workers pay
the other half themselves). ...But wouldn't this all be worth it if we could take those future, unfunded liabilities off the books? Only if you think a
tax increase now is worth a promise to cut benefits later. No one serious thinks those benefits will be paid anyway, so why make young current
workers pay twice for the sins of their fathers? ...As for the politics, Republicans might take note that AARP, the liberal senior lobby, is
already calling a tax increase essential to a "balanced plan" for Social Security. And in a perverse way they're right: Such a plan would raise
taxes on moderate-income Republican voters in return for cutting the benefits on those same Republicans. No wonder Democrats like the idea. A tax increase of any kind with GOP fingerprints would remove the one
big political brand advantage that Republicans still have over Democrats. It would make it far easier for Hillary Rodham Clinton to propose another tax increase in 2008 because GOP credibility in fighting
the idea would be nil--just as it was in 1992 after Mr. Bush's father raised taxes as part of his "deficit reduction" deal with George Mitchell. If
Republicans now let themselves get sucked into a payroll tax increase, they'll deserve the same fate.
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