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www.freedomandprosperity.org |
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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Wednesday, February 28, 2007 ~ 9:13 p.m., Dan Mitchell Wrote: The U.S. is the only developed nation to tax its citizens abroad. Now China has picked up on Mr. Grassley's grand idea. From March 31, all mainland citizens working abroad
will be taxed on their world-wide income. That might give some comfort to U.S. protectionists worried about China's labor competitiveness, even though mainland employees aren't so far a huge force abroad. But as
America is now discovering, punitive taxation is an export that comes with a high price. Not surprisingly, French socialists are intrigued by this self-destructive form of double-taxation. A column in the American.com comments on Segolene Royal's interest in extending bad French tax laws to those who have escaped to friendlier jurisdictions: ...a report recently prepared for Royal's camp floated a creative proposal-a "citizen contribution" (read: tax) for all French citizens residing abroad. The
"contribution" would be designed to collect revenues from all French people residing abroad, irrespective of their reasons for leaving France: businessmen, families, retired workers, successful
artists, etc. would all be affected. Former finance Minister Dominique Strauss-Kahn laid out the rationale: "It is no longer acceptable that French citizens be able to escape taxes by installing themselves
outside of France. We propose to define a citizen contribution that will be paid in accordance with contributive capacities by each Frenchman residing abroad who does not pay taxes in France." ...If she
implements her Socialist rhetoric, like Mitterrand in the early 1980s, financial forces beyond her control will quickly force her to change. For France's sake, it is a situation she would do well to avoid.
Wednesday, February 28, 2007 ~ 7:48 p.m., Dan Mitchell Wrote: Anti-tax hawks in the state House have put a halt to Idaho''s plan to join a nationwide push aimed at eventually forcing Internet and catalog
companies to collect sales taxes when they sell to out-of-state customers. Wednesday''s vote was 37-to-32 against the plan, with foes arguing it was unconstitutional and would lead to tax increases on Internet
businesses that sell elsewhere. ...So far, 18 states, including Wyoming, have signed agreements to simplify their tax systems in this push. Idaho
won''t be the next one, after conservatives including Rep. Lenore Barrett, R-Challis, likened the Streamlined Sales Tax Project to "crawling into
bed with other states." "It''s a backdoor tax-increase waiting to happen," Barrett said during House debate. "It would allow member states to collude and destroy tax competition." A similar battle is taking place in Hawaii, and Grover Norquist of Americans for Tax Reform has an article asking legislators in that state to resist this proposed cartel that will hurt consumers and enrich politicians: The real motivation of SSUTA is to target businesses that are not physically located in the state and to export a state's tax burden. SSUTA
is a back-door tax increase. The implications of SSUTA go beyond the direct tax increase in coming years. Like any cartel, SSUTA would allow
states to collude to destroy tax competition. The incentive to keep tax rates moderate or foster competitiveness would be gone, and the pressures to raise taxes would lose their counter-balance.
Tuesday, February 27, 2007 ~ 3:44 p.m., Dan Mitchell Wrote: EU tax commissioner László Kovács is set to table a proposal to harmonize the minimum level of excise duties at EUR359 per 1000 litres
of diesel in 2012 and subsequently at EUR380 in 2014, a move which would see most EU states increasing their current rates. According to Mr Kovács' paper - seen by EUobserver - such a rise would stamp out
so-called fuel tourism, as big trucks now make detours from their routes to tank in a state where it is the cheapest, generating more greenhouse
gas emissions as well as losses to some EU states' coffers. Germans, for example, are willing to drive two to four additional kilometres for each
euro cent price differential compared to a neighbouring country in the case of gas oil. Fuel tourism cost Germany EUR1.9 billion in 2004. ...the current mood in Vilnius, with one Lithuanian diplomat saying the
Brussels proposal should be scrapped as it would translate into an overall increase in prices and inflation. "It could freeze Lithuania's euro
hopes", a diplomat told EUobserver, adding "taxes remain one's competitive edge and countries with high rates have taken a voluntary risk".
Monday, February 26, 2007 ~ 1:17 p.m., Dan Mitchell Wrote: The European Commission on Wednesday appeared to be trying to shrug off its reputation as a free-market bulwark, releasing a vision on the
future of the EU's single market which is notably sensitive to social concerns. ...The current team of commissioners led by Jose Manuel Barroso generally has a pro-market reputation, not least in Germany and
France ...The paper also states that "many European citizens have raised concerns about the perceived disruptive impacts of globalisation,"
adding that it is a "matter of social justice" to "anticipate and accompany change for the people and sectors directly affected by the
market opening." Brussels already runs the so-called Globalisation Adjustment Fund which was introduced by Mr Barroso in 2005 after French president Jacques Chirac criticised the EU for failing to respond
to massive lay-offs in France by US computer maker Hewlett-Packard.
Monday, February 26, 2007 ~ 12:22 p.m., Dan Mitchell Wrote: Neither unions nor minimum wage laws change the productivity of workers. All they can do is forbid the employer from paying less than
what the government or the unions want the employer to pay. When that is more than the labor in question produces, some workers who are perfectly capable become "unemployable" only because of wages set
above the level of their productivity. In the short run -- which is what matters to politicians and to union leaders, who both get elected in the
short run -- workers who are already on the payroll may get a windfall gain before the market adjusts. But, sooner or later, the chickens come home to roost. They have been coming home to roost big time in the
automobile industry, where hundreds of thousands of jobs have been lost over the years. ...Nothing will be easier politically than passing laws to
limit interest rates or make it harder for lenders to recover their money -- and nothing will cause credit to dry up faster to low-income people,
forcing some of them to have to turn to illegal loan sharks, who have their own methods of collecting. The underlying reality that politicians do
not want to face is that here, too, prices convey a reality that is not subject to political control. That reality is that it is far riskier to lend to some people than to others.
Monday, February 26, 2007 ~ 10:10 a.m., Dan Mitchell Wrote: The war of words was ignited by the French rock star Johnny Hallyday's decision in late 2006 to move to Gstaad, Switzerland, because he was
tired of France's exorbitant tax-rates. Mr. Hallyday joins an exodus of individuals and companies from France, Germany, Italy, and Austria taking advantage of Switzerland's 21 percent overall tax-rate and
considerably lower corporate tax-rates. Liechtenstein, Switzerland's tiny neighbor, maintains even lower tax-rates and has benefited from a
similar flight. For corporate tax-exiles in Switzerland, the situation is especially advantageous. Each canton sets its own corporate tax-rates. This has triggered intense competition between cantons anxious to
attract new businesses. In January 2006, for example, the central Swiss canton of Obwalden reduced its corporate tax-rate to 6.6 percent. Over 11 months, it attracted 376 new companies. No wonder large
corporations such as Google and IBM have located their European headquarters in Zurich. Outside Switzerland, the response has been extraordinary. Some French socialists have accused Switzerland of
"looting" its neighbors. This is somewhat strange, given that no-one is forcing these individuals and companies to move to Switzerland. Some
would suggest that the real "looters" are French governments of left and right who have raised taxes over the past 40 years to such levels that
even many relatively modestly well-off French citizens have left or invested their capital in off-shore tax-havens. ..."Tax-harmonization" in
the EU, incidentally, never means lowering tax-rates. It invariably involves raising taxes to the same high level. It was on this basis that, when faced with companies leaving Germany to base their headquarters
in 19 percent flat-tax Slovakia, Germany's ex-chancellor Gerhard Schroeder once accused Slovakia of "un-European" behavior. To be
truly European - apparently - means giving about half your income to the government.
Sunday, February 25, 2007 ~ 3:50 p.m., Dan Mitchell Wrote: When I purchased my Lexus, did I deal with the U.S. Congress, the Japanese Diet, George Bush and Shinzo Abe, or did I deal with Toyota and its intermediaries? If we erroneously think of international trade as occurring between the U.S. and Japanese governments, then all Americans, as voters, have a say-so. But what is the basis of anyone having a say-so when one American engages in peaceable, voluntary exchange with another person, be they Japanese, Korean, British, Chinese or another American? Likewise, the American people sometimes get stampeded into excessive regulation in order to save lives. But as Walter explains, people make cost-benefit calculations every day that indicate they understand tradeoffs: According to the National Highway Traffic Safety Administration, some 43,443 people were killed on the nation's highways in 2005. If Congress
were to enact a 10 miles per hour national speed limit, we'd save thousands of lives each year. You say, "Williams, that would be stupid
and impractical!" My response to you is: But look at all the lives that would be saved. What you really mean by stupid and impractical is that
preventing thousands of highway fatalities is not worth the cost and inconvenience that would result from having to poke along at 10 miles per hour. Of course, calling a 10 miles per hour law stupid and
impractical is a more socially acceptable way of saying those saved lives aren't worth it.
Sunday, February 25, 2007 ~ 1:11 p.m., Dan Mitchell Wrote: Taxes take a bigger bite out of the Big Apple than any other urban area in the nation, according to an analysis released Wednesday. The
Independent Budget Office report said local government taxes absorb $9.02 of every $100 of taxable resources here. The rate is 47 percent more than the $6.16 average for the most populous U.S. cities. "No
other large city comes close," the report said. ...
Saturday, February 24, 2007 ~ 8:54 p.m., Dan Mitchell Wrote: As many as a quarter of all cigarettes smoked in Washington state are smuggled in from out of state or purchased tax-free online, by phone or
by mail from vendors. Contraband cigarettes cost the state an estimated $200 million a year in lost revenue. ... "Cigarette-tax evasion continues
to be a major problem in Washington state," Department of Revenue spokesman Mike Gowrylow said. "We believe everyone should pay a fair
share of taxes, and we have an obligation to pursue unpaid taxes." The state tax on a pack of cigarettes is nearly $2.03, the third-highest rate in the nation.
Friday, February 23, 2007 ~ 11:42 a.m., Dan Mitchell Wrote: Jim Flaherty, Canadian Minister of Finance, has announced that he will table the second budget of Canada's Conservative administration under
Prime Minister Stephen Harper on March 19, 2007. ...Key tax measures contained in the 2006 budget included the long-promised 1% cut in Goods and Services Tax to 6%, a 2% cut in the general corporate tax
rate by 2010, eliminating the corporate surtax on all corporations by 2008, axing the federal capital tax, and increasing the amount of income
eligible for the lowest rate of corporate tax for small businesses. In addition, this bottom rate will be reduced by 1% to 11% by 2009.
Friday, February 23, 2007 ~ 10:11 a.m., Dan Mitchell Wrote: San Francisco has six municipal golf courses -- and they are losing money. Now there is all sorts of hand-wringing over what to do about it.
An economist might see this as a non-problem. If the golf courses are losing money, then get rid of them. Given San Francisco's sky high land prices, selling the land that the golf courses are on would bring in
millions, if not billions, of dollars. ... Even the suggestion that the golf courses might be turned over to some private operator of golf courses
has caused opposition. One golfer declared: "Privatization would raise greens fees. Nobody could afford it." This is the kind of talk that has to
be taken seriously by elected officials, even if an economist would dismiss it as sheer nonsense. Have you ever heard of any business raising its
prices to the point where it no longer had any customers? ... The great allure of government programs in general for many people is that these
programs allow decisions to be made without having to worry about the constraints of prices, which confront people at every turn in a free
market. They see prices as just obstacles or nuisances, instead of seeing them as messages conveying underlying realities that are there, whether
or not prices are allowed to function. What prices are telling San Francisco is that municipal golf courses cost more than they are worth -- not in my opinion, but in the actions of people who are spending their
own hard-earned money.
Thursday, February 22, 2007 ~ 10:21 p.m., Dan Mitchell Wrote: EU industry ministers have dealt a blow to the European Commission's "better regulation" agenda by refusing binding targets to cut national
bureaucracy which accounts for half of the bloc's administrative costs. ... The commission believes red tape reduction would boost the EU economy with the equivalent of 3.5 percent of GDP and free up an
estimated EUR150 billion for investment. But although there has been a lot of rhetoric in favour of the initiative, it is proving difficult to implement both at EU and national level. ... While the UK, the
Netherlands, Sweden and Denmark argued in favour of the national red tape cuts, most other delegations were against any fixed goals. Mr Verheugen admitted the commission has no power to force the
governments into anything more than they have agreed - given that national legislation and competences are at stake.
Thursday, February 22, 2007 ~ 7:53 p.m., Dan Mitchell Wrote: You may want to steer clear of London. Thanks to a new U.K. ticket tax that took effect February 1, passengers who fly into or through London
airports will pay new taxes and fees that can add up to $159 to the cost of a ticket. This levy was the brainchild of Chancellor of the Exchequer
Gordon Brown and is being applied retroactively. So even if you bought your plane ticket last year, you'll get socked with the tax surcharge. The
tax has infuriated both U.S. and British airlines, to say nothing of their passengers. "It's a major league headache for all our air carriers who fly
to London and are trying to collect this retroactive tax," says Jim May of the U.S. Air Transport Association. A spokesman for British Airways,
which has been struggling financially, calls the new tax "completely unfair." Ryanair's Web site describes Mr. Brown as "greedy Gordon" and
his tax as "the great plane robbery." The new tax comes on the heels of other highly publicized problems at Heathrow, including a breakdown in
the baggage handling system and security delays. Consumeraffairs.com reports that one consequence is that more and more American travelers
are investigating Amsterdam as an alternative hub for discount flights in and out of Europe.
Wednesday, February 21, 2007 ~ 9:50 a.m., Dan Mitchell Wrote: A new survey shows that...[t]hree-quarters said they opposed any interference from Brussels... The poll of more than 1,000 people was
commissioned by the SonntagsZeitung newspaper. ...Many EU countries are angry that tax revenues are being lost as companies relocate to Switzerland - mainly to small cantons which offer low levies. ...The
survey results also hinted that the latest dispute has put the EU in a worse light among the Swiss. Only 41 per cent said they favoured providing financial aid for the latest EU member states, Romania and
Bulgaria, as requested by the EU earlier this year. ...[Swiss Finance Minister Merz] said Brussels would need unanimity from its member states to succeed with its attack on Switzerland's tax regime, but that, he
said, was unlikely since some EU countries also offer similar tax breaks. Merz said Switzerland did not want to set a dangerous precedent. "It
could reach the point where the EU demands that we double the rate of our Value Added Tax so it's in line with the EU average," he warned. Equally important, Swissinfo.org reports that cantonal governments also reject meddling by the European Commission. And since any change to Swiss policy would require approval from a majority of voters and a majority of cantons, the Euro-crats face an uphill battle in their campaign to hinder tax competition: Swiss cantons say the latest European Commission attack on Swiss corporate tax breaks will fail without a referendum to end the cantons'
financial independence. ...The report was presented to the Swiss federal authorities, but central government would be powerless to make the cantons cooperate even if ministers changed their position of defending
the system. "The Commission clearly does not understand our political system. The federal authorities have no say in this matter," Kurt Stalder,
secretary of the Conference of Cantonal Finance Directors, told swissinfo ahead of the EC report. "It is written into our laws that cantons set their own taxes and there must be a national referendum to
change this. The people have had numerous invitations to make a change in the last few years but they have always voted to accept the system." Stalder added that the 26 cantonal finance heads had voiced a
unanimous resolution to resist pressure from Europe during a recent meeting of the Commission.
Wednesday, February 21, 2007 ~ 9:12 a.m., Dan Mitchell Wrote: Brussels wants the rest of the world to adopt the European Union's regulations, the European Commission will say this week. A Commission
policy paper that examines the future of the Union's single market says European single market rules have inspired global standard-setting in
areas such as product safety, the environment, securities and corporate governance. ...The paper calls on the EU to encourage other jurisdictions to follow suit - for example by "promoting European
standards internationally through international organisation and bilateral agreements". ...The EU's drive to establish itself as the
pacesetter for worldwide business regulation could well lead the bloc into conflict with the US and other trading partners. US officials have often voiced concern about the Union's growing clout as a global
standard-setter, and the two sides have clashed over issues such as rules for the chemicals industry and the EU's stance on genetically modified
foods. ...The two sides have very different regulatory philosophies, with the EU placing a heavy emphasis on consumer protection and environmental legislation while the US tends to promote a more
market-based approach. Some critics of the European approach argue that the Union's stance on issues such as GM foods may also reflect a desire to protect the region's commercial interests.
Wednesday, February 21, 2007 ~ 8:41 a.m., Dan Mitchell Wrote: You know the culture of spending on Capitol Hill is in bad repute when even legendary appropriator Robert Byrd of West Virginia is condemning
earmarks. This week Mr. Byrd proclaimed on the Senate floor that the just-completed 2007 budget "does not, does not, N-O-T, include
earmarks. We eliminate over 9,300 earmarks." We're about to find out if he and his comrades really mean it. On Thursday, White House budget director Rob Portman issued little-noticed guidance to all federal
departments and agencies that no Congressional requests for spending should be accommodated unless they are "specifically identified in
statutory text" -- which is to say, the law. This may sound like it ought to be regular practice, but it's a revolution in the Beltway. That's because,
in order to dodge the legislative earmark limits that Mr. Byrd has been bragging about, Members have been speed-dialing executive branch officials and asking them to fund their specific earmark requests out of
agency budgets even though they were purged from the larger budget bill. This Congressional lobbying can be hard for the average federal bureaucrat to refuse, since he doesn't want to offend those on Capitol
Hill who control his budget. ...this means the Fiscal 2007 federal budget could have the fewest number of these pork-barrel projects in many a
year. By the way, thanks to efforts late last year by GOP Senators Jim DeMint of South Carolina and Tom Coburn of Oklahoma to block a last-minute bipartisan spending splurge, the 2007 budget holds overall
federal appropriated spending to the rate of inflation; recent years have often seen three times that.
Tuesday, February 20, 2007 ~ 11:48 a.m., Dan Mitchell Wrote: Three senators proposed legislation that would target what they say is $100 billion a year in tax revenue lost each year because of overseas tax
havens, in part by forcing hedge funds to track their foreign investors. The measure would impose tougher requirements on U.S. taxpayers using offshore secrecy jurisdictions, give the U.S. Treasury the authority
to take action against foreign jurisdictions that impede tax enforcement, stiffen penalties against abusers and close offshore trust loopholes,
according to a summary of the bill released by Michigan Democrat Carl M. Levin. ..."We cannot tolerate tax cheats offloading their unpaid taxes
onto the backs of honest taxpayers," Levin said in a joint statement with co-sponsors Norm Coleman (R-Minn.) and Barack Obama (D-Ill.).
"Offshore tax havens have declared economic war on honest taxpayers by helping tax cheats hide income and assets that should be taxed in the
same way as other Americans." The Treasury Department and top lawmakers in both houses of Congress have made a priority this year reducing the so-called tax gap, the difference between what individuals
and companies owe and what they pay. The IRS said a study of 2001 tax returns shows the tax gap is about $345 billion a year, only $55 billion of which is recovered.
Tuesday, February 20, 2007 ~ 11:03 a.m., Dan Mitchell Wrote: President Bush is not "cutting" Medicare spending-all the media hype notwithstanding... the President has not been suddenly seized by fiscal
conservatism fever and did not, in fact, propose any spending cuts. Under the President's proposal, federal spending on Medicare and Medicaid is set to increase by $84 billion from 2006 to 2008. That
spending increase is certainly not a cut-even when including inflation, it represents a generous increase in entitlement spending. Newsweek
confused cutting the rate of spending growth with cutting spending itself. The President's proposals reveal an interesting picture: instead of growing at a 6.5% rate, the President would have Medicare grow at a
5.6% rate. Medicaid was set to grow at 7.3%; the President has proposed a 7.1% rate of growth. ...It's useful to place this spending restraint in perspective: entitlements face a looming $43 trillion shortage
over the next 60 years, and unless entitlement spending is curbed, those programs are headed straight for bankruptcy. What's fascinating is that
if the President's modest Medicare plans were realized, $8 trillion dollars would already be shaved off of Medicare's future liability. It's a hopeful
reminder that moderate fiscal restraint can, over time, accomplish a great deal of good.
Tuesday, February 20, 2007 ~ 9:37 a.m., Dan Mitchell Wrote: State Farm, the nation's largest home insurer, announced this week that it would no longer be writing new homeowner or commercial policies in
Mississippi. Magnolia Staters wondering whom to thank for their rising insurance bills, assuming they can get insurance at all, should direct their
catcalls at Attorney General Jim Hood. Mr. Hood should have seen this coming back in September of 2005, when he launched his populist campaign against insurers. In the wake of Hurricane Katrina, private
insurers began invoking their entirely legal "flood exclusions" and refusing to pay for any damage that wasn't caused by wind. These
exclusions had been clearly written into contracts, yet Mr. Hood declared them "unconscionable" and sued the industry. ...State Farm joins
Allstate, which last year also stopped writing policies along Mississippi's coast. Together, the two insurers make up 40.5% of the Mississippi market. Homeowners looking for coverage will now have fewer
companies to choose from, with higher premiums the likely result. If the rest of the industry follows suit and also exits Mississippi, consumers
could have no choice at all. Surrounding states such as Florida, which have begun to follow Mr. Hood down the insurance-bashing path, might want to reverse course before their own consumers end up staring down
the next hurricane with no coverage. As for Mr. Hood, he and his buddies in the tort bar have provided an exquisite illustration of how political and legal predation against business ends up harming the little
guy.
Monday, February 19, 2007 ~ 12:42 p.m., Dan Mitchell Wrote: The Commission, on 13 February, accused Switzerland of offering unfair company-tax advantages that it says amounts to illegal state aid, in
order to lure multinationals away from the EU. ...Member states are likely to give strong backing to the Commission, as frustration has grown with the increasing number of multinationals, including General
Motors, Kraft Foods and Procter & Gamble, deserting their EU headquarters to set up in Switzerland. Tax competition is also a problem within the EU, with countries like Ireland and Luxembourg luring
companies away from high-tax France and Germany thanks to their low business tax rates. But, a Commission move to harmonise tax systems across the EU is being fiercely resisted by low-tax member states. Needless to say, the Swiss-EC fight has nothing to do with trade and everything to do with tax competition. Politicians from high-tax nations despise fiscal rivalry since it forces them to lower tax rates (or at least not to raise rates even further) in an effort to prevent the loss of jobs and capital. Switzerland is a beneficiary of this liberalizing process, both because its overall tax burden is low compared to the rest of Europe, but also because the nation has a genuine federal system, meaning that regional (cantonal) and local governments must compete to offer the most attractive fiscal policies. A recent paper (http://www.freedomandprosperity.org/Papers/swiss/swiss.shtml) published by the Center for Freedom and Prosperity explains the role of intra-national tax competition, and a report from Euro2day.gr shows that Swiss leaders understand the valuable role of their federal structure: Zug has been particularly exposed. "We don't understand why the Commission has made these accusations now," says Peter Hegglin, the
cantonal finance minister. ...Like most Swiss, Mr Hegglin emphasises the role of tax competition as a cornerstone of Switzerland's extreme form of
devolution, where individual cantons and communities set their own levies, and as an instrument to ensure lean, efficient government. "Tax competition is something that is so deeply ingrained in Switzerland
internally that the government has little leeway to negotiate anything," says Walter Kielholz, chairman of Credit Suisse. ...Zug is now the hub for
companies from global commodities traders, such as Glencore, to the regional headquarters of leading pharmaceuticals groups. Nord Stream, the Russian dominated consortium planning a new gas pipeline under the
Baltic, is the latest of many arrivals. Zug's appeal lies in its proximity to Zurich, its lawyers, accountants and consultants - and its modest taxes.
All companies must pay Switzerland's nationwide 8.5 per cent federal profits tax. Some others also face cantonal and municipal levies, taking the total to 16-16.5 per cent. Last but not least. A letter-to-the-editor of the Financial Times mockingly asks whether the bureaucrats in Brussels will extend their complaint about Switzerland's tax laws to other policies: The Swiss know many more ways of unfair competition to lure successful businesses to settle there. Take my own typical recent travel experience:
Queueing for check-in and security control at Kastrup airport, Copenhagen: 2hr 15min. Queueing at Birmingham international airport: 1hr 45min. I always avoid using Heathrow and BA because it is even
worse. No queueing at Geneva airport, check-in and security control completed in less than 20 minutes. ...In the UK or Sweden the whole rail system breaks down if 5cm of snow falls. The Swiss trains run 90 per
cent on time, even if it is snowing! Another example of unfair efficiency. The political system with its direct democracy is less corrupt in Switzerland than in the UK, Germany and Sweden. Is this not an
outrageous example of unfair competition? Because of low taxes the Swiss public services must be well organised and more efficient than in Scandinavia and the UK. The efficiency of public services together with
reasonable taxes is Switzerland's most important advantage.
Monday, February 19, 2007 ~ 12:11 a.m., Dan Mitchell Wrote: The Socialist candidate for President of France, Ségolčne Royal, recently presented her Election Manifesto with 100 proposals. It includes an
increase in the minimum wage, higher taxes, more regulations in the labor market, expanded public welfare contributions, subsidised jobs for the young and nationalisation of companies. She promises to fight
globalisation and free-market reform. …the figures for unemployment don't show the whole picture. There are at least as many people of working age as the formally unemployed that don't work, but they are
called something else, like early retired. The total number of people who are excluded is very high, and they are so for a long time. This is especially true for young workers and immigrants. What's more, a
comparison between the more free-market US, and the EU, is revealing. The share of the working-age population employed in EU countries is
only 64 per cent; in the US, it is 72 per cent. In 2004, only 13 percent of unemployed workers in the US were unable to find a new job within 12
months; in the EU, the figure was 44 percent. In the EU, average youth unemployment is 17 percent. In the US, it is 10 percent. …The freer a country's economy is, the wealthier it is - and unemployment is lower.
When Ms. Royal gambles with populist policies that do in the opposite direction, she is playing with fire - literally.
Monday, February 19, 2007 ~ 11:50 a.m., Dan Mitchell Wrote: This same competitive cooperation has been firing the economic engine of Europe for 50 years, when those first six countries took the historic
step of uniting their economic fortunes. And there is other evidence throughout the world for the benefit of international openness. Like the U.S., Australia is also a tale of competition among member states; in
addition, Australia had to reform once the U.K. joined the EU. The five wealthy countries of Eastern Asia -- Taiwan, Singapore, Japan, South
Korea and Hong Kong -- were not so well off just a few decades ago, but their subsequent commitment to export markets and international competition put them on an upward trajectory that has improved the
lives of millions of people. And what of Latin America? Unfortunately, the region provides a case study in the perils of protectionism. Recent research by my Minneapolis Fed colleagues, Lee Ohanian and Jim
Schmitz, and two co-authors, shows that from 1950 to 2001, per capita GDP for Europe increased 68% relative to the U.S.; Asia increased by 244%, while Latin America decreased by 21%. This is all the more
striking when we realize that Latin America's per capita GDP actually exceeded Asia's by 75% in 1950. The authors provide much evidence to support their claim that competitive barriers are to blame for Latin
America's retarded growth.
Monday, February 19, 2007 ~ 11:00 a.m., Dan Mitchell Wrote: Nicolas Sarkozy will push for a European tax on "speculative movements" by financial groups, such as hedge funds, if he wins this
year's French presidential elections. ...his plan to tax financial flows is likely to dismay US and UK financial groups, as well as parts of the
French business community, which largely prefers him to Ms Royal. ...His comments echo the traditional Gaullist suspicion of capitalism and financial investors, for which Mr Chirac has become well known. Mr
Sarkozy's attack on speculative finance mirrors the views of some business leaders. Claude Bébéar, chairman of insurer Axa, France's
biggest institutional investor, yesterday pilloried the "dictatorship of the market" and the "short-term interests" of hedge funds. ...[Sarkozy's]
record as finance minister was notably dirigiste. He intervened to save Alstom, the engineering group, from bankruptcy and brokered an all-French merger of Aventis and Sanofi to avert a takeover by
Switzerland's Novartis. ...Mr Sarkozy admitted he was watching Germany's three percentage point increase in VAT with interest. The story also notes that Sarkozy also was an interventionist finance minister. The net result is that France almost surely will continue to stagnate, regardless of who replaces Jacques Chirac.
Sunday, February 18, 2007 ~ 1:37 p.m., Dan Mitchell Wrote: One phenomenon that is almost unique to humans is deferred gratification-in other words, patient anticipation of a reward. Dr
Reyes-Garcia and her colleagues therefore guessed that as the Tsimane' became more enmeshed in modern society, the more patient of them would do better than the less. The Tsimane's traditional subsistence
economy depends on folk knowledge and learned skills that have quick pay-offs. Formal schooling does not pay off for years, but opens the door
to bigger potential incomes. To test their idea, the researchers offered all 151 adults in two Tsimane' villages a choice between receiving a small
amount of money or food immediately, getting a larger amount if they were willing to wait a week, and getting a larger amount still in exchange for several months' wait for payment. They found that the
more education a villager had, the longer he was willing to delay gratification in return for a bigger reward. Five years later, Dr Reyes-Garcia and her colleagues came back again. They re-interviewed
100 of their volunteers (the other 51 were unavailable for one reason or another) and found that those who had shown most patience in the original experiment had also seen their incomes increase more than those
of their less patient counterparts. The effect was relatively small-the incomes of the patient had grown 1% a year faster than those of the
impatient. Over a lifetime, though, that adds up to a significant amount of inequality. The patient, then, could take their place alongside the lucky, the smart and the violent at the top of society's heap. These results are similar to research in advanced societies. All other things equal, successful people tend to recognize the value of sacrificing today in order to enjoy more income/consumption/wealth in the future. But consider what this research implies for the current political debate about income inequality. Leftists are beating the drums for higher tax rates and more income redistribution, in part because they insist that rich people are either lucky or that their wealth is earned at the expense of the less fortunate (the fixed-pie fallacy). But if income differences are the result of individual choices, these arguments are less persuasive. Rather than seeking to punish success, honest leftists should focus their energies on figuring out how to create a culture of deferred gratification in poor communities.
Sunday, February 18, 2007 ~ 12:14 p.m., Dan Mitchell Wrote: Opponents of Prime Minister Stephen Harper, who heads Canada's minority conservative government, have seized upon remarks he made in
a 2002 fundraising letter to blast his leadership on the issue of climate change. In that letter, Harper described the Kyoto Protocol as "a
socialist scheme to suck money out of wealth-producing nations." He voiced his support for the "campaign to block the job-killing,
economy-destroying Kyoto accord," an agreement he said was "based on tentative and contradictory scientific evidence about climate trends." He
was right on all counts. Agreeing with him are 60 leading scientists who in April wrote Harper an open letter, published in the Canadian Financial Post, asking him to keep his pledge to review Canada's
commitment to the Kyoto Protocol. "Global climate," said the scientists, "changes all the time due to natural causes, and the human impact still
remains impossible to distinguish from this natural 'noise.' ...Kyoto committed Canada to cutting emissions of greenhouse gases by 6% from 1990 levels by 2012. Emissions are about 35% above the target and
continue to rise. It's a nearly impossible job. The European Union, which made similar pledges, has failed to meet its targets. Its CO2 emissions
are rising twice as fast as those of the heretical U.S. since Kyoto. The simple reality is that no nation can continue to grow economically
without its emissions growing. It is also true that Kyoto is a recipe for global poverty. The annual loss for the U.S., according to the U.N.'s own
figures, could be as high as 1.96% of GDP. ...what is driving the global warmers with such passion? Simply a passion for global redistribution of
power and wealth. The operative word here, after all, is "global." Like those in the U.S. who don't think states can handle their own affairs and
do want all power concentrated in Washington, global warmers feel that only international action can overcome national resistance and, yes, national sovereignty. Remember the Law of the Sea Treaty (LOST)? The
Convention on the Law of the Sea would have done to our maritime activities - military and economic - what the International Criminal Court would have done to our criminal justice system - place it under the
thumb of a supranational body like the corrupt and discredited United Nations. LOST would have created an international agency to regulate 70% of the earth's surface, placing seabed mining, fishing rights and
deep-sea oil exploration under the control of a global bureaucracy. President Reagan didn't think the U.S. should be part of that resource grab and global redistribution of wealth.
Sunday, February 18, 2007 ~ 10:50 a.m., Dan Mitchell Wrote: The United States and Britain ranked at the bottom of a U.N. survey of child welfare in 21 wealthy countries that assessed everything from
infant mortality to whether children ate dinner with their parents or were bullied at school. ...One of the study's researchers, Jonathan Bradshaw,
said children fared worse in the U.S. and Britain - despite high overall levels of national wealth - because of greater economic inequality and
poor levels of public support for families. ..."They don't invest as much in children as continental European countries do," he said, citing the lack
of day care services in both countries and poorer health coverage and preventative care for children in the U.S. ...The study also gave the U.S. and Britain low marks for their higher incidences of single-parent
families and risky behaviors among children, such as drinking alcohol and sexual activity. ...The study ranked the countries in six categories,
based on national statistics: material well-being, health and safety, education, peer and family relationships, behaviors and risks, and young
people's own subjective sense of well-being. Both the U.S. and Britain were in the bottom two-thirds of five of the six categories.
Saturday, February 17, 2007 ~ 5:22 p.m., Dan Mitchell Wrote: Internal Market Commissioner, Charlie McCreevy outlined his position on taxation within the European Union, suggesting that 'higher taxes
feed fatter government'. ..."Some see taxation as a means of making society more equal. Of levelling down. Of limiting the upside rewards
that go with taking risk or working hard. I don't. ...I don't see taxation as meritorious in its own right. I believe taxes - of all kinds - should be kept
as low as possible and that the pressure to get them down should be relentless. I believe also, where there is a choice on how to levy taxes, preference should be given to levying them on spending. Taxes on
income are taxes on effort, work and entrepreneurship. Taxes on capital are taxes on investment and risk taking. But it is effort, work, entrepreneurship, investment and risk taking that we need to continue to
grow our economic base. And it is that growth that generates the incremental tax revenues that finance sustainable improvements in welfare. It was when taxes on income were raised and the thresholds at
which they became payable were lowered that Ireland's economy and public finances came close to basket case status. When capital taxes on wealth creation and entrepreneurship proliferated non-compliance
proliferated with it, and wealth and jobs were driven out. In fact the tax revenues that some of those taxes generated were barely adequate to cover the cost of collecting them."
Saturday, February 17, 2007 ~ 3:14 p.m., Dan Mitchell Wrote: ...congestion pricing is conservative economics at its best. For decades, conservatives have championed market-oriented solutions to highway
problems as a means to allocate scarce resources. Congestion pricing gives consumers the opportunity to decide when it is in their economic
interest to ride crowded roads, and whether the price charged for a given trip is worth their travel time savings. In the former Soviet-bloc states,
the standard way to allocate scarce goods was to set the purchase price low enough for everyone to afford, but to make consumers wait in long lines to buy them. The real price depended on what value consumers
placed on their time. This approach is the way we've always allocated access to most roadways in capitalist America - access is "free," just like
for a public park. But our real cost skyrockets when we consider the time we spend crawling along in bumper-to-bumper traffic and with no option
to pay extra for a faster trip. And even without factoring in the cost of time frittered away listening to satellite radio, highways have never
really been "free," but subsidized by taxpayer dollars. Congestion pricing is not a tax increase, but a user fee, which, conservatives agree, is a better way to divide costs. The author is right that congestion pricing is not a tax increase. But roads today currently are financed by taxes. So if congestion pricing is implemented, it should be accompanied by a tax cut of equal magnitude to prevent politicians from inadvertently having a new pile of money to waste on other government programs.
Friday, February 16, 2007 ~ 1:00 p.m., Dan Mitchell Wrote: ...the last two times government seriously tried to control the U.S. economy -- in the 1930s and in the 1970s -- they made a terrible mess of
it. In the 1930s, the Smoot-Hawley Tariff Act caused a collapse in global trade, while the Fed allowed the money supply to shrink by one-third. Government regulation in the 1920s prevented banks from branching,
which caused more than 10,000 to fail in the 1930s, deepening and prolonging the Great Depression. Herbert Hoover's tax hikes were icing on the cake, capping off a perfect storm of D.C. policy mistakes. It took
another 35 years, and a nice run of prosperity, but Washington finally gathered the courage to try this again. Between 1965 and 1981, Great Society welfare and health-care programs, wage and price controls,
inflationary Fed policy, 70% marginal tax rates, 50% capital-gains tax rates, and highly regulated energy, airline, banking and trucking industries created severe problems. The Misery Index (calculated by
adding inflation and unemployment) rose to 21.9% in 1980 (today it is 7.2%). ...The cost of government intervention is always underestimated in the midst of political battles, while the benefits are always
overestimated. Impeding the free market alters the course of economic activity in ways that cannot fully be understood in advance. For example, tax subsidies for using existing solar technology diminish
incentives for research and development, just like welfare payments undermine the willingness of many recipients to work or go to school. Why give up a sure thing for a future that is uncertain? The U.S. is
subsidizing ethanol, which pulls billions of dollars of investment capital away from other areas of the economy. When government picks what it thinks should be the winner, it saps resources from other ideas and
potential advancements.
Friday, February 16, 2007 ~ 12:16 p.m., Dan Mitchell Wrote: In his Budget Statement for the Financial Year (FY) 2007, Second Minister for Finance, Tharman Shanmugaratnam announced a two
percentage point reduction in the corporate income tax rate to 18% to sharpen Singapore's competitive edge. However, the corporate tax cut will be balanced against a number of revenue raising provisions, such
as...an increase in the GST rate from 5% to 7%... The Budget also contained several measures to promote the growth of legal services, financial services, logistics, maritime and aviation services.
Friday, February 16, 2007 ~ 11:43 a.m., Dan Mitchell Wrote: In an official response to the EC's complaint, the Swiss government reiterated its belief that no contractual regulations exist between
Switzerland and the European Union on the harmonisation of company taxation and that consequently, it is not possible for there to be an infringement of any agreement. ...Moreover, the Swiss government
emphasised the fact that it is not part of the Single European Market, so neither the rules on competition in the EC Treaty - amongst others the
rules on state aid - nor the code of conduct on company taxation agreed amongst EU member states are applicable to Switzerland. Switzerland also argued that the cantonal measures on company taxation under
criticism do not discriminate against domestic companies and do not constitute special treatment of foreign companies, because they are not selective but are open to all commercial players - regardless of
nationality or manufacturing or economic sector. ..."Locational competition is a fact. Tax burdens vary considerably even in the EU and company locational moves occur between the EU states. Like all states,
Switzerland endeavours to be an attractive business location with advantageous conditions. Company taxation is an important factor in this regard, but is not the only reason by a long chalk for Switzerland
being attractive," it added.
Friday, February 16, 2007 ~ 11:30 a.m., Dan Mitchell Wrote: Gov. Arnold Schwarzenegger wants all Californians to have medical insurance. So he's going to force them to have it. ...Of course, his
"solution" won't solve the problem. By making medical care look cheap to people, expanded insurance will push prices up even faster. Everyone
will end up paying more. But politicians benefit because the costs will be hidden. ...This is not to say we don't have a medical mess on our hands.
We do, but the problems have their roots in existing government activity. More such activity is unlikely to make things better. The root of the
problem is that few people face the true cost of medical care. Medicare and Medicaid beneficiaries don't because taxpayers pay their bills. People with employer-based medical insurance don't because insurance
policies shield them from it. Since they pay only small co-pays when they see a doctor, they don't ask, "Do I really need that test?" but rather,
"Does my insurance cover it?" ...With a rational government policy, people would save money for routine medical care and buy insurance for
solvency-threatening illness. After all, we don't buy auto insurance to pay for oil changes and worn-out windshield-wiper blades. But today, people
expect medical insurance to cover routine physical exams because someone else seems to pay the premiums. ...Government further harms us by not permitting cross-state competition. As a New Yorker, I can't
buy a cheap policy sold in Iowa, a state with fewer mandates, because I may only buy from companies that are subject to New York's costly regulations. That's nuts. The upshot is that, however well intentioned,
government regulation of medicine and insurance brings us mostly headaches, and Gov. Schwarzenegger's plan will bring Californians even more. ...Let the states experiment! Universal coverage is a feel-good idea
that many people want Washington to impose. Better to have models of failure in individual states so we all don't have to suffer! We need living
reminders of collectivism's faults. Without the Soviet Union, I fear that Americans will forget its horrors. London's Observer (3/3/02) carried a story saying that an "unpublished report shows some patients are now having to wait more than eight
months for treatment, during which time many of their cancers become incurable." Another story said, "According to a World Health
Organisation report to be published later this year, around 10,000 British people die unnecessarily from cancer each year -- three times as many as
are killed on our roads." ...The story is no better in Canada's national health care system. ...Despite the long waiting times Canadians suffer,
sometimes resulting in death, under federal law, private clinics are not legally allowed to provide services covered by the Canada Health Act.
Regardless of this prohibition, a few black-market clinics service patients who are willing to break the law to get treatment. ...Some of our politicians hold up the Canadian and British nationalized health care
systems as models for us. You can bet that should we ever have such a system, they would exempt themselves from what the rest of us would have to endure. There's a cure for our health care problems. That cure is
not to demand more government but less government. I challenge anyone to identify a problem with health care in America that is not caused or aggravated by federal, state and local governments.
Friday, February 16, 2007 ~ 10:11 a.m., Dan Mitchell Wrote: France, Italy, Spain, Cyprus, Bulgaria, Luxembourg, Hungary, Belgium and Greece have all signed up to a two-page long declaration in which
they argue that the 27-country bloc should be more than just an internal market. Calling their statement, which has been sent to all member
states, "enhancing social Europe" the currently nine-strong group want to use the ongoing negotiations on the EU constitution as a springboard
for their ideas. ...It continues by saying that a Europe of 27 member states "cannot just be a free trade zone but shall guarantee the necessary
balance between economic freedom and social rights." Social Europe is defined as a set of "common values" such as social justice, equality and
solidarity. ...The call for more social Europe goes to the heart of a debate in Europe about the extent to which the bloc should adapt to the force of
globalisation and the extent to which it should set certain social, environmental and work standards, which detractors say could hamper growth and competitiveness.
Friday, February 16, 2007 ~ 9:51 a.m., Dan Mitchell Wrote: Bands like the Rolling Stones and U2 were publicly outed last summer for using tax shelters in the Netherlands to protect the millions they earn on
royalties from getting taxed in their respective home countries. …And the Dutch have beckoned by overhauling their tax structure this past year to make it easier and more lucrative for individuals and
corporations to set up shell companies that allow income from royalties, interest and dividends to flow in and out of the country tax-free. …Mailbox companies, or corporate shells, allow companies to channel
royalties, dividends and interest payments through the Netherlands. More than 20,000 exist right now, according to a report by the Netherlands-based SOMO, the Center for Research on Multinationals.
The Dutch Federal Bank estimates that in 2002, 3.6 billion euros flowed through such companies. The Rolling Stones has taken advantage of the
Netherlands tax structures for the past 20 years, with the help of Dutch accountant Johannes Favie, who runs Promogroup, a financial consulting firm. Promogroup has helped the Rolling Stones pay just over
$7 million in taxes on earnings of $450 million over the past two decades. In 2005, the rockers paid a tax rate of 1.6 percent on earnings
of $172 million. …"What's going on, in a nutshell, is that the Netherlands is a respectable tax haven," says Mark Nestmann, whose firm, Nestmann
Group Ltd., is based in Phoenix, Ariz., and focuses on wealth preservation. …More than 7,000 corporations are head-quartered in the Netherlands, according to John Orr, a spokesperson for the Netherlands
Foreign Investment Agency, including Coke, Starbucks, Exxon, Nike and Subway. And a new tax boon by the Dutch government will keep the
money flowing in. The "working profit initiative," which took effect Jan. 1, 2007, has reformed the country's corporate tax structure, lowering
taxes even further. Michael Ooms, the North American director for the Netherlands Foreign Investment Agency, tells ABC News that the initiative will further enhance the Netherlands' position as a premier
European Union business location. Currently, the Netherlands competes with several other low-tax states in the EU — including Ireland, Luxembourg and Switzerland — for foreign investment. …U2's lead
guitarist, David Evans reportedly told a Dublin radio station in October, "Of course we're trying to be tax efficient. Who doesn't want to be tax efficient?"
Thursday, February 15, 2007 ~ 4:39 p.m., Dan Mitchell Wrote: Switzerland has rejected criticism from the European Commission of corporate tax rates in some cantons, saying it will not yield its
sovereignty over this issue. ...Finance Minister Hans-Rudolf Merz shot down the EU proposal, saying in Bern that there was nothing to negotiate. ...The commission wants the Swiss to change tax rules that it
claims offer unfair advantages to firms operating out of Switzerland. It said low corporate taxes offered by cantons such as Obwalden and Zug
violated a 1972 trade agreement, calling it a disguised state subsidy. ...Merz said he does not fear a backlash from Brussels since so far all the
talk is about negotiations. He reckons that sanctions are also unlikely, as some EU member states would probably not back them. The finance minister admitted though that the European initiative was aimed at
stopping firms - and their tax money - leaving the union for Switzerland's greener pastures.
Thursday, February 15, 2007 ~ 3:12 p.m., Dan Mitchell Wrote: ...the new government has renewed the commitment for sound macroeconomic framework conditions and will stick to the target for
general government net lending of 2% of GDP over the cycle which is necessary to keep public finances on a sustainable path. Underlying this target is the assumption that taxes can be sustained at current levels
which could be difficult in the future, not least due to mobile tax bases and international tax competition. ...the share of 20 64 year olds who
depend on public income transfers has declined to 20% in 2006, but it remains well above the 15-16% of 1990-91. ...Sickness absence among those employed and the number entering disability pension increased
rapidly from the late 1990s. The numbers are now falling, although the stock of disability pensioners remains among the highest in the OECD. ...Letting people keep a bit more of the value they create is vital to
encourage both labour supply and entrepreneurship. The plans to abolish the wealth tax should therefore be endorsed, as it sets in at a rate of 1˝
per cent already from wealth slightly above the average price of a metropolitan-area one-family house. Abolition of the wealth tax might lead to repatriation of capital, possibly making more investment capital
available for new small firms. Marginal income taxes are also important, though, because high rates kick in already from slightly above average
full-time earnings. The combination of social contributions, income and consumption taxes drives the effective marginal tax rate above 70% for
over a third of the full-time employed, helping to explain why working hours for those employed are below the OECD average. ...Moving up the threshold by SEK 100 000 from 105% to 135% of average full-time
earnings, for example, would halve the number of persons exposed to the above-70% combined marginal tax rate, which results when the state income tax sets in on top of social contributions, municipal income tax
and consumption taxes. ...In fact, completely abolishing the state income tax would cost just 1˝ per cent of GDP. For more information visit CF&P's Foundation's study on "The Swedish Tax System: Key Features and Lessons for Policy Makers"
Geography plays a significant part in the amount we pay. Each state, county and municipality conjures up its own formula for taxing its
residents, and thus it costs more -- sometimes a lot more -- to live in one state instead of another. ...All but five states -- Alaska, Delaware,
Montana, New Hampshire and Oregon -- charge a sales tax that varies from a low of 2.9% (Colorado) to a high of 7.25% (California). ...Only seven states -- Alaska, Florida, Nevada, South Dakota, Texas,
Washington and Wyoming -- don't assess income taxes, and New Hampshire and Tennessee have income taxes on just dividends and interest. These states balance the lack of income taxes with other taxes,
notably sales taxes. ...What about the notion of relocating to take advantage of lower taxes in other states? Although it's not for everyone,
it appears that a growing number of people, particularly the wealthy, are doing just that. According to a 2006 article in Barron's, large numbers of
taxpayers are moving from high-tax states to those with lower taxes. One of the big motivators is that 18 states and the District of Columbia
have recently implemented significant estate taxes. Angered by high state and local taxes, residents of the Northeast are fleeing to Florida -- and
not just for the sunnier weather. Florida has no income tax and no estate tax. Highly taxed Californians are making tracks to places such as Arizona and Nevada in record numbers...
Thursday, February 15, 2007 ~ 11:14 a.m., Dan Mitchell Wrote: There have been periods of global warming that lasted for centuries -- and periods of global cooling that also lasted for centuries. So the issue is
not whether the world is warmer now than at some time in the past but how much of that warming is due to human beings and how much can we reduce future warming, even if we drastically reduce our standard of
living in the attempt. ...The very attempt to silence all who disagree about global warming ought to raise red flags. Anyone who remembers the 1970s should remember the Club of Rome report that was supposed
to be the last word on economic growth grinding to a halt, "overpopulation" and a rapidly approaching era of mass starvation in the 1980s. In reality, the 1980s saw increased economic growth around
the world and, far from mass starvation, an increase in obesity and agricultural surpluses in many countries. But much of the media went for the Club of Rome report and hyped the hysteria.
Thursday, February 15, 2007 ~ 9:45 a.m., Dan Mitchell Wrote: The sweetest Valentine Republicans in the U.S. Senate could give to American women would be to announce that they will filibuster until
Christmas if Senate Democrats try to ratify the offensive United Nations Convention on the Elimination of All Forms of Discrimination Against Women. Signed by President Jimmy Carter in 1980, and repeatedly
promoted by President Bill Clinton and U.S. Sen. Hillary Rodham Clinton, D-N.Y., it has wisely never been ratified. ...Article 2 reiterates
that the treaty would "eliminate discrimination against women by any person, organization or enterprise," including "laws, regulations,
customs and practices." Our "customs" should be none of our government's business, much less the business of the United Nations.
...Article 11 would chain us to the feminist goal that wages should be paid on subjective notions of "equal value" (i.e., the discredited notion of
"comparable worth") rather than on the free market or on U.S. legal standards of equal pay for equal work. It would also require the United
States to "establish" another longtime feminist goal, a federal "network of child care facilities." ...The monitoring committee in charge of
"progress," which is created by Article 17, consists of "23 experts," on which the United States might some day have one vote out of 23. The
current committee includes representatives from Algeria, Cuba and Bangladesh and a vice chairman from Zimbabwe. ...The committee criticized Ireland for "promoting a stereotypical view of the role of
women in the home and as mothers," Belarus for "such symbols as a Mother's Day" because it promotes "a negative cultural stereotype," and
Slovenia because fewer "than 30 percent of children under 3 years of age were in formal day care." ...United Nations Convention on the
Elimination of All Forms of Discrimination Against Women would give busybody global bureaucrats and activist judges extraordinary powers to
revise U.S. laws, education and customs to comport with radical feminist ideology.
Wednesday, February 14, 2007 ~ 11:55 p.m., Dan Mitchell Wrote: Arkansas Governor Mike Beebe may not be a man from Hope, but the newly elected Democrat is becoming a voice for tax relief within his
party. Last year he campaigned on cutting in half his state's 6% sales tax on groceries. Last week he made good on the promise by striking a deal
with a reluctant Democratic legislature. His compromise also repeals income taxes on the poor and cuts sales taxes that manufacturers pay on
their utility bills. All told, taxpayers will save $319 million over two years, or what the Governor calls "the largest tax decrease in the history
of the state." ...The Tax Foundation reports that Arkansas is the 27th most taxed state in the nation with a heavier tax burden than neighboring Texas and Tennessee, neither of which has an income tax
and rank 44th and 47th. The state is expected to have an $840 million surplus this year and could therefore afford additional cuts in its 6% general sales tax and 7% tax on income over $30,100.
Wednesday, February 14, 2007 ~ 9:25 p.m., Dan Mitchell Wrote: Connecticut Governor M. Jodi Rell wants to thank constituents for electing her with 63% of the vote by socking them with a 10% hike in the
personal income tax rate. Fellow Republicans in the state legislature are understandably scratching their heads. But the proposal has no doubt also left many taxpayers wondering why they even bother to pull the
lever for Republicans. Ms. Rell dropped this bombshell last week when she presented her biennial budget. In addition to the income tax increase, which would push the top marginal rate to 5.5% from the current 5%
over two years, the Governor also proposes increasing cigarette taxes, hiking bus fares and phasing out a $500 property tax credit. Democrats,
who control both houses of the legislature, welcome the plan. So does much of the state's liberal media, who are hailing Ms. Rell as "brave"
and "courageous." But as Susan Kniep of the Federation of Connecticut Taxpayer Organizations put it to the Associated Press, "Gee, why didn't
we kind of hear about this before we went into the polls?" Governor Rell says a tax increase is necessary to fund more education spending. But
Connecticut already spends more money per student on public schools than all but three states. According to the latest Census data, which is
from the 2004 school year, Connecticut's per-pupil spending is $10,788, or more than 30% above the national average of $8,287. …Connecticut
adopted its income tax in 1991, and it has since ranked last nationally in employment growth while losing tens of thousands of people to other
states. Increasing the income tax rate seems an odd way to reverse these trends. "When looking at states that have growing economies and are
thriving," said Republican state senator David Cappiello in an interview, "they're the states that either have no income tax or are looking to phase
down their income tax. Connecticut is moving in the opposite direction." …By the way, it's not as if Connecticut taxpayers haven't been doing
their part; the state will end the current fiscal year with a $600 million revenue surplus. The problem is that the politicians want to spend the money faster than it comes in. Governor Rell's budget would grow
government by nearly 13% over two years and bust constitutional spending caps approved by 81% of voters back in 1992. No wonder she kept her plans secret until after the election.
Wednesday, February 14, 2007 ~ 7:12 p.m., Dan Mitchell Wrote: Some Valley employers, especially those in the food industry, say payroll budgets have risen so much that they're cutting hours, instituting hiring
freezes and laying off employees. ...Mark Messner, owner of Pepi's Pizza in south Phoenix, estimates he has employed more than 2,000 high school students since 1990. But he plans to lay off three teenage workers
and decrease hours worked by others. Of his 25-person workforce, roughly 75 percent are in high school. "I've had to go to some of my kids
and say, 'Look, my payroll just increased 13 percent,' " he said. " 'Sorry, I don't have any hours for you.' " ...The Employment Policies Institute in
Washington, which opposed the recent increases, cited 2003 data by Federal Reserve economists showing a 10 percent increase caused a 2 percent to 3 percent decrease in employment. It also cited comments by
noted economist Milton Friedman, who maintained that high teen unemployment rates were largely the result of minimum-wage laws. ...Tom Kelly, owner of Mary Coyle Ol' Fashion Ice Cream Parlor in
Phoenix, voted for the minimum-wage increase. But he said, "The new law has impacted us quite a bit." It added about $2,000 per month in
expenses. The store, which employs mostly teen workers, has cut back on hours and has not replaced a couple of workers who quit. Kelly raised the wages of workers who already made above minimum wage to ensure
pay scales stayed even. As a result, "we have to be a lot more efficient" and must increase menu prices, he said. ...After the minimum-wage law
went into effect, "a couple of my friends got laid off - they worked in fast food," he said. "They're going to wait until they're out of high school to find other jobs."
Tuesday, February 13, 2007 ~ 12:43 p.m., Dan Mitchell Wrote: According to the IRS, only eight percent of the individual income tax gap came from unreported wages, salaries and tips. Just five percent came
from unreported capital gains and another five percent from unreported pensions, annuities and IRA distributions. Less than three percent of the tax gap was accounted for by unreported interest and dividends. By
contrast, 35 percent of the tax gap came from unreported business earnings by non-farm sole proprietors, and another 13 percent resulted from unreported partnership income. This suggests that the best way to
evade taxes, should one choose to go that route, would be to start your own business. It's just too easy to hide income and overstate business
expenses in ways that are almost impossible to detect. And since most small businesses don't make much money even if they accurately report
all their income and expenses, it isn't worth the IRS's time to go after them. ...closing the tax gap in ways that will yield significant revenue to
the government is much harder than generally believed. Most people think the IRS just needs to audit more people. But unless it has good reason in advance to believe that fairly substantial revenues will result
from an audit, it could easily be counterproductive. The increased deterrent effect could be more than offset by taxpayer complaints that
will result in efforts by Congress to tie the IRS's hands and cut its budget. In the end, there is really no pot of money that Congress can use to pay
for more spending. To get more than a small part of the tax gap will require draconian enforcement efforts that will lead to a taxpayer backlash and a quick retreat by Congress and the IRS. It may be that we
simply have to accept a certain amount of tax cheating as part of the price we pay for a free society.
Tuesday, February 13, 2007 ~ 12:03 p.m., Dan Mitchell Wrote: Recent studies of vegetation patterns, based on detailed satellite images and on-the-ground inventories of trees, have found that Niger, a place of
persistent hunger and deprivation, has recently added millions of new trees and is now far greener than it was 30 years ago. These gains, moreover, have come at a time when the population of Niger has
exploded, confounding the conventional wisdom that population growth leads to the loss of trees and accelerates land degradation, scientists studying Niger say. …Another change was the way trees were regarded
by law. From colonial times, all trees in Niger had been regarded as the property of the state, which gave farmers little incentive to protect them.
Trees were chopped for firewood or construction without regard to the environmental costs. Government foresters were supposed to make sure the trees were properly managed, but there were not enough of them to
police a country nearly twice the size of Texas. But over time, farmers began to regard the trees in their fields as their property, and in recent
years the government has recognized the benefits of that outlook by allowing individuals to own trees. Farmers make money from the trees by selling branches, pods, fruit and bark. Because those sales are more
lucrative over time than simply chopping down the tree for firewood, the farmers preserve them.
Tuesday, February 13, 2007 ~ 10:35 a.m., Dan Mitchell Wrote: Prominent EU francophiles are proposing that Europe's "most precise and rigorous language" - French - be "authoritative" in the case of legal
interpretation problems, in a move seen by some observers as a "rearguard battle against the demise of French." ...Some observers present at Wednesday's press conference expressed scepticism about the
initiative, suspecting that it was not so much triggered by legal concerns but rather born out of frustration with the general decline of the French
language in the EU. "They don't want to say it, but they are raising the alarm on English getting more and more predominant in the
institutions," one parliament insider said. "It's a rearguard battle against the demise of French," said another observer working in the parliament.
...A parliament official explained that draft political texts for MEPs are often born in last-minute negotiations between parliament officials and
MEPs' assistants having to communicate rapidly and efficiently. "There you have an Italian, a Pole and a Lithuanian. And they speak in a language they all understand - normally English. That's perfectly
normal," he said. French trades unions have discovered a new enemy to protest against: the English language. ...They argue that the English language has
colonised French screens, large and small, infiltrated French music, and is now conquering the French workplace as well, in e-mails or "les
e-mails", and on "le web" or "l'internet" and even on "les news". ...The French have already legislated against the English language encroaching
too much in songs on the radio by means of a quota limiting English pop, rock and rap, but the language just keeps creeping back in via other
routes. According to a survey brandished by the French trades unions at their press conference in Parliament today, 7% of French firms already
use English as their main language, while multi-nationals routinely send e-mails to their French workers in English regardless of whether they understand them. ...Pierre Kosciusko-Morizet, CEO of the French
internet company priceminister.com, believes that this rearguard action against the infiltration of English comes too late. ..."I wish that French
were the global language of business," he sighs. "Because my French is better than my English. But it isn't. English has become the international
language. And I don't believe that the right way to go about things is by banning a language - that is not how English became a global language."
Tuesday, February 13, 2007 ~ 10:00 a.m., Dan Mitchell Wrote: The only effective way to reduce traffic congestion is to use pricing. This is increasingly accomplished by electronic tolling so drivers don't have to
stop. Driving at peak hours, or along certain congested roads, would cost more, so that less-urgent trips would be rescheduled or rerouted. New York City could impose higher tolls for bridges and tunnels during
rush hours and charge for cars entering lower Manhattan in the morning rush, or for cars traveling within lower Manhattan during the business
day. ...In Florida, a 25-cent discount on a 50-cent rush hour toll induced 71% of drivers to change the time of their trip at least once a week.
Minneapolis allowed drivers to pay a toll to use speedier high-occupancy vehicle lanes, which resulted in a 50% reduction in rush-hour congestion
and a 12% decrease in crashes. ...it's not tolls that are particularly detrimental to the poor, because they can be rebated - it's congested roads. Congestion lowers mobility, making it harder to travel to much
needed jobs. Converting some highway lanes to toll lanes gives low-income drivers a valuable choice of more time. ...Americans rely on prices for a stable supply of food, clothes, water, energy, and
telecommunications. Why should roads be an exception?
Monday, February 12, 2007 ~ 3:13 p.m., Dan Mitchell Wrote: Imagine you are the CEO of a major U.S. manufacturing company. You are looking to locate a new domestic plant. All other factors being equal,
would you locate the plant in the state with the highest taxes? Now, make that question international. Would you locate a plant in a country with high taxes or low? The obvious answer points to a growing
economic problem for the United States. Among the 30 wealthy countries that make up the Organization for Economic Cooperation and Development (OECD), the U.S. ranks second, just below Japan, for the
highest combined tax rate (federal and state) on corporate profits. Our position in the world hierarchy is relatively new. In 1994, the U.S. ranked
18th. But since then, other nations have been cutting rates-from an average of 37 percent to 28 percent-while the U.S., at 39 percent, has maintained its high level. ...most foreign multinationals are
headquartered in countries that charge taxes only on domestic operations. If a French firm locates a plant in Ireland, then all of the profits of the Irish plant are taxable in Ireland, but are free from French
taxation. So French firms have an enormous incentive to locate in the country with the lowest taxes they can find. That rules out the United
States. ...the latest literature suggests that relative tax rates are a big, big deal. Indeed, the dramatic flow of international capital to the lowest
tax environment is one of the strongest and most reliable findings in the history of economic science. If a country lowers its rate below its rivals,
as Ireland, now with a 12.5 percent rate, began doing more than a decade ago, then multinationals flood that nation with capital. It's very much in the data. ...The status quo-one of the most unfriendly tax
policies toward business on earth-is unacceptable to anyone who cares about the future of American industry. No one should be surprised if our
best firms continue to flee overseas and if foreign-based firms prefer locating their plants outside America.
Monday, February 12, 2007 ~ 2:44 p.m., Dan Mitchell Wrote: Financial regulation is most often justified by arguing it is needed to protect all participants from those who would engage in fraud or theft,
and to protect unsophisticated investors from losing money in investments they do not understand. The U.S. Securities and Exchange Commission (SEC) has just proposed that the amount of liquid net worth
an individual must have before investing in hedge funds and other so-called risky investments be raised to as much as $2.5 million. People meeting a net liquid worth requirement are considered "accredited
investors." ...Even though most people would agree it is important to try to protect "widows and orphans" from unscrupulous and/or incompetent
financial promoters, there is a fine line between protecting those who need protection and denying freedom to those who don't. Does it make sense to prohibit a person who has recently obtained a graduate degree
in finance from a leading business school from buying and selling hedge funds, because he or she has not yet accumulated some arbitrary amount
of wealth -- while legally allowing any adult man or woman to take all of his or her wealth and go to Las Vegas and blow it at the gambling tables?
Monday, February 12, 2007 ~ 12:32 p.m., Dan Mitchell Wrote: Almost four out of ten GPs have so little faith in the Health Service that they would rather be treated privately, a survey shows today. Of the 600
family doctors questioned, 28 per cent have actually taken out private medical insurance to avoid being treated on the NHS, and a further 10
per cent said they would opt for private treatment if they or a relative fell ill.
Monday, February 12, 2007 ~ 10:52 a.m., Dan Mitchell Wrote: A Royal administration, she said, would raise the minimum wage and pensions, fine companies that outsource jobs, subsidize people who rent
their homes, and provide women under 25 with free contraception. More would be spent on scientific research and job training. …More glaringly
absent amid the promised largesse of her social policies was any hint of how it would all be paid for. It was all the more bizarre since Ms. Royal
began her speech yesterday by noting the drag of France's public debt on the country's competitiveness. In her discourse on unemployment, she didn't mention the country's rigid labor laws, the chief cause of
joblessness, especially among the young. …Where the Socialist leader actually took concrete policy stands, the familiar anticapitalist line
dominated. "I don't want a Europe that would only be a zone of free trade leaning up against NATO," she said. "I want even less a Europe of
'everyone for himself' where fiscal and social dumping" (i.e., a Europe where member states lower tax rates and loosen labor codes to grow
their economies) "replace solidarity." So, in other words, her France would remain opposed to opening up the single market, reducing farm subsidies and pushing trade liberalization.
Sunday, February 11, 2007 ~ 7:56 p.m., Dan Mitchell Wrote: In the neighborhood President Bush visited right after Hurricane Katrina, the U.S. government gave $84.5 million to more than 10,000
households. But Census figures show fewer than 8,000 homes existed there at the time. ...The pattern was repeated in nearly 100 neighborhoods damaged by the hurricanes. At least 162,750 homes that
didn't exist before the storms may have received a total of more than $1 billion in improper or illegal payments, the AP found. The AP analysis discovered the government made more home grants than the number of
homes in one of every five neighborhoods in the wake of Katrina. ...the AP's findings are similar to those of a February report by the Government Accountability Office, which found hurricane aid was used
for to pay for guns, strippers and tattoos. The GAO concluded that between $600 million and $1.4 billion was improperly spent on Katrina relief alone. In one neighborhood GAO scrutinized, at least one person
gave an address as a cemetery. Records show FEMA gave 27,924 assistance grants worth $293 million in that neighborhood. The AP's analysis shows only 18,590 homes existed, meaning up to $98 million in
aid could have been disbursed improperly or illegally.
Sunday, February 11, 2007 ~ 6:11 p.m., Dan Mitchell Wrote: Ségolčne Royal, the presidential candidate of the Socialist Party, on Sunday unveiled a long-awaited, 100-proposal platform, veering sharply
to the left on economic policy... In a two-hour speech to about 10,000 supporters north of Paris, she pledged to raise pensions, increase the minimum wage to EUR1,500, or about $2,000, a month and guaranteed
a job or further training to every youth within six months of graduating. ...she vowed that she would tackle the social exclusion in the suburbs by
reducing the number of students in classes. She also promised free tutoring for students that have difficulties keeping up, and workshops for
parents to teach them how to discipline their children. ...She called for a European Union that "protects its citizens" and said that, as president,
she would lobby for the European Central Bank to consider not just inflation but also employment and growth when it sets interest rates.
Sunday, February 11, 2007 ~ 3:31 p.m., Dan Mitchell Wrote: South Carolina could be next. Legislation is now being drafted to allow nearly 200,000 poor students to opt out of failing public schools by
giving them up to $4,500 a year to spend on private school tuition. Middle class parents would be eligible for a $1,000 tax credit. Governor
Mark Sanford, a Republican, also wants to create more choice within the public system by consolidating school districts so students who can't
afford to live in a certain zip code aren't forced into the worst public schools -- a system that now consigns thousands of African-American
students to failing schools. In his State of the State Address last month, Mr. Sanford branded the current districts a "throwback to the era of
segregation." The comment drew hardly a flutter in the legislature, he told us, because "everyone knows it's true." Despite a 137% increase in
education spending over the past two decades and annual per pupil spending that exceeds $10,000, South Carolina schools trail the nation in
performance. The state ranks 50th in SAT scores, only half of its students graduate from high school in four years and only 25% of eighth graders
read at grade level. The Governor's budget puts it this way: "The more we expose students to public education, the worse they do." In last year's
elections three legislators paid for their opposition to school choice with their seats. One freshman reformer is Representative Curtis Brantley, an
African-American Democrat from rural Jasper County who defeated a white incumbent in a June primary. He told us he supports school choice because something must be done to shake up the status quo.
Saturday, February 10, 2007 ~ 9:15 p.m., Dan Mitchell Wrote: In his 2004 book, The Deacons for Defense: Armed Resistance and the Civil Rights Movement, Tulane University history professor Lance Hill
tells their story. Hill writes of how a group of southern working class black men advanced civil rights through direct action to protect members of local communities against harassment at schools and polling
places, and to thwart the terror inflicted by the Ku Klux Klan. He argues that without the Deacon's activities the civil rights movement may have
come to a crashing halt. ...Following a KKK night ride in Jonesboro, the Deacons approached the police chief who had led the parade and informed him that they were armed and unafraid of self-defense. The
Klan never rode through Jonesboro again. Local cross burnings ceased when warning shots were fired as a Klansmen's torch met a cross planted in front of a black minister's home. The initial desegregation of
Jonesboro High School was threatened by firemen who aimed hoses at black students attempting to enter the building. When four Deacons arrived and loaded their shotguns, the firemen left and the students
entered unscathed. It was this series of efforts by the Deacons that caused the Klan to leave Jonesboro for good. Similar work in Bogalusa, Louisiana drove the KKK out of that town as well, and led to a turning
point in the civil rights movement. Acting as private citizens in lawful employment of their constitutional rights, the Deacons demonstrated the
real social impact of the freedoms our nation's founders held dear. ...Gun control measures, from the slave gun bans of the 1700s South to the Brady Bill regulations of the 1990s have unfairly targeted black
Americans and have worked to curtail a disproportionate number of their constitutional rights.
Friday, February 9, 2007 ~ 1:33 ap.m., Dan Mitchell Wrote: Romania increased spending on roads, railways, pensions and other areas last year, mainly in December, to bring standards closer to those in
the EU, which it joined on January 1. ...The Finance Ministry said today the government boosted revenue to 31.8% of GDP last year from 30.3% the previous year, helping meet a key EU recommendation. EU
Monetary Affairs Commissioner Joaquin Almunia said last year that budget revenue as a proportion of GDP was lower than in any EU nation and recommended the country increase it. Economic growth,
which the government has estimated at about 8% last year from 4.1% in 2005, also stimulated revenue collection, the finance ministry said. ...Romanian government spending increased 25% last year in nominal
terms and accounted for 33.5% of GDP, from 31.2% in 2005, the ministry said. Income tax collection rose 44.7% to 9.8 billion lei ($3.8 billion). Romania has said income tax revenue has consistently increased
since January 1, 2005, when it introduced a flat tax of 16% on corporate and personal income, the lowest in eastern Europe. It replaced a corporate tax rate of 25% and a personal income tax rate of as high as
40%.
Friday, February 9, 2007 ~ 11:52 a.m., Dan Mitchell Wrote: The tax code is the original hectoring mommy behind our health-care neuroses. It gives the biggest subsidy to those who need it least. It pays
the affluent to buy more medical care than they would if they were spending their own money. It prompts them to launder our health spending through an insurance bureaucracy, creating endless paperwork.
It prices millions of less-favored taxpayers out of the market for health insurance. It fosters a misconception that health care is free even as
workers are perplexed over the failure of their wages to rise. Clark Havighurst, a Duke University sage, points to one of the many destructive consequences: "With insured consumer-voters generally
believing that someone other than themselves is paying for their health care, they see no reason not to approve regulatory and other public
policies that raise the cost of that care and foreclose opportunities to economize." ...Others point to a destructive consequence for the practice
of medicine itself. Patients, because their only skin in the game is their skin, end up listening to doctors and hospitals who are massively incentivized to expose them to more procedures, more tests and more
drugs than patients, quite apart from any consideration of costs, would choose for themselves. ...Much better, in our view, would be simply to do
away with the tax break and let businesses and consumers adjust. The insurance industry wouldn't stand around and watch its livelihood vanish. And tax rates could be adjusted to make sure the overall tax
burden remains unchanged. You'd be shocked at how quickly the system would right itself. Alas, there is panic on K Street when anyone suggests doing away with the tax break directly. The health industry goes ape.
Thursday, February 8, 2007 ~ 2:59 p.m., Dan Mitchell Wrote: Donald Tsang has pledged to cut Hong Kong's individual and corporate income taxes if re-elected as the Special Administrative Region's Chief
Executive next month. Tsang officially announced that he would seek election to a second term of office last week and said that one of his key
policies would be to return some of Hong Kong's fiscal surplus back to the population through a "gradual" reduction in salary and profit taxes to 15%.
Thursday, February 8, 2007 ~ 12:20 p.m., Dan Mitchell Wrote: The choice bill would have gone down to defeat had Rep. Brad Last not changed his vote. Just last month, Mr. Last, himself a former
public-school official, voted against the bill as a member of the Education Committee. Last Thursday, he voted "yes," prompting gasps
from the visitor's gallery. "I believe history will demonstrate to supporters and detractors that this is a good choice," he told a hushed
chamber. "To those of you in public education who want to kill me right now, I'm really sorry. I understand your pain. I would ask you, go read
this bill, and don't say a word to me until you read this bill." Another surprise supporter of the bill was freshman Rep. Keith Grover, a vice
principal at a junior high school, who said during the floor debate that "everyone knows how I make a living" and that he had wrestled with his
conscience on how to vote. He said he believed public education needed the innovation that choice could bring.
Thursday, February 8, 2007 ~ 10:16 a.m., Dan Mitchell Wrote: Benedikt Thoma recalls the moment he began to think seriously about leaving Germany. It was in 2004, at a New Year's Day reception in
nearby Frankfurt, and the guest speaker, a prominent politician, was lamenting the fact that every year thousands of educated Germans turn their backs on their homeland. ...There has been a steady exodus over
the years, but it has recently become Topic A in a land already saddled with one of the most rapidly aging and shrinking populations of any Western nation. With evidence that more professionals are leaving now
than in past years, politicians and business executives warn about the loss of their country's best and brightest. ...The trigger for this latest bout
of angst was the release last fall of new government statistics showing that 144,800 Germans emigrated in 2005, up from 109,500 in 2001. At the same time, only 128,100 Germans returned, a decline of nearly
50,000 from the year before. That made it the first year in nearly four decades that more people left than came home. Demographic experts also say the nature of the emigrants is changing. These are not just
young unskilled workers like those who fled the economically blighted eastern part of Germany after the country was reunified in 1990 to work
in restaurants in Austria or Switzerland. They are doctors, engineers, architects and scientists - just the sort of highly educated professionals that Germany needs to compete with economic up-and-comers like
China and India. "It's not a problem of numbers as much as brain drain," said Reiner Klingholz, the director of the Berlin Institute for
Population and Development. "What we desperately need in the near future are talented and qualified people to replace those who will retire
in 15 to 20 years." ...Germany is not the only European country losing people. Nicolas Sarkozy, the conservative presidential candidate in
France, recently held a rally in London, home to 300,000 French citizens living in Britain, urging them to return and "make France a great
nation." The number of French citizens living in Britain jumped 8.4 percent in 2005, according to government statistics. But the total number
of French people living outside the country grew only 1.2 percent, or 15,300 people, roughly equivalent to Germany's net loss of about 16,700 citizens. Caveats aside, there is plenty of anecdotal evidence that
Germany has become less attractive for people in fields like medicine, academic research and engineering. Those who leave cite chronic unemployment, a rigid labor market, stifling bureaucracy, high taxes and
the plodding economy - which, though better recently, still lags behind that of the United States. ...While the European Union's expansion has
given Germans more options, their two favorite destinations are outside it: Switzerland and the United States.
Wednesday, February 7, 2007 ~ 4:20 p.m., Dan Mitchell Wrote: The Congressional Budget Office -- not the White House -- is estimating that the current year's deficit (for fiscal 2007) will fall to $172 billion.
That's not bad given continuing Katrina relief spending, $30 billion for homeland security, and a couple hundred billion or so to fight the war on
terror. The White House is projecting that its new budget will eliminate the deficit by 2012 assuming Mr. Bush's tax cuts are extended after 2010.
We don't put much stock in future budget forecasts because they depend on so many variables. But even CBO predicts the deficit should remain
near or below 1% of GDP for the rest of the Bush Presidency. That's well below the 40-year average of 2.4% of GDP. This also means that the federal debt burden will continue to fall. Alarmists point to the $1.4
trillion rise in total federal debt from 2003-2006, but that amount is dwarfed by the $14 trillion in new household wealth created over the same period. And for all the international scolding of an allegedly
profligate America, U.S. federal debt as a share of GDP is falling again (see the top chart nearby). At 37% in 2006 and heading south, the U.S. figure compares to 52% in Germany, 43% in France, and 79% in Japan.
Once again rising total "debt" is a scare word used to justify higher taxes. The real game to watch isn't debt or deficits but spending. Here,
too, Mr. Bush has an improved track record in his second term. From 2001-2005, outlays ballooned by $609 billion, or 33%, and Mr. Bush never did veto a spending bill. By contrast, on current pace his second
term outlays will grow by 21% -- hardly tightfisted, but a third slower. The other news you won't often hear concerns the soaring tax revenues
in the wake of the 2003 supply-side tax cuts. Tax collections have risen by $757 billion, among the largest revenue gushers in history. Receipts,
especially from high-income individuals and corporations, have been growing for some two years at nearly twice the rate of spending, which explains the falling deficit. Economic growth is always the key to
eliminating red ink, which is why keeping this 63-month expansion rolling needs to be the main domestic priority. This requires making those lower 2003 tax rates permanent, rather than letting them expire in
2010 and socking the economy with the biggest tax increase in history.
Wednesday, February 7, 2007 ~ 4:02 p.m., Dan Mitchell Wrote: ...the American share of global initial public offerings declined to 5% from 50% in the last five years. Foreign companies are being scared
away in part, both reports conclude, by soaring costs of American law. The highwater mark for securities lawsuits was reached in 2005, with over $9 billion in class action settlements. The zeal of American
prosecutors in corporate scandals is also of a different order of magnitude. In 2004, government fines in America totalled $4.74 billion, over 100 times more than in Britain, which had a total of $40.48 million.
Sarbanes-Oxley, the federal law that imposes higher accountability standards on corporate boards, has almost tripled auditing costs for small public companies. ...Perhaps the most chilling parts of the
Bloomberg-Schumer report are the surveys of foreign business leaders who suggest, overwhelmingly, that they no longer trust American law. For most of the last century, trust in American commercial and securities
law was one of our greatest competitive advantages. Investors flocked to our markets because securities laws guaranteed transparency and honesty. American contract law was the gold standard for world
business, in part because of a long tradition of judges rigidly applying guidelines of liability and damages. Economist Douglass North received
a Nobel prize in part for his work on the vital role of legal stability in economic prosperity. An "essential element of the concept of justice,"
legal philosopher H.L.A. Hart observed, "is the principle of treating like cases alike." That's why law is the foundation of freedom - people know
where they stand. They can act freely instead of looking over their shoulders all day long. But that trust has now capsized. Companies are afraid that if a few employees out of thousands do something wrong -
even if not material to the bottom line - the company faces the prospect of ruin. An indictment, not a conviction, could put a company out of
business. Why roll the legal dice in America when legal systems in Britain and elsewhere focus on punishing the individual wrongdoer, not shooting
everyone in sight? ...It's impossible to measure how much distrust of law has contributed to declining competitiveness. But the evidence is all
around us. Just talk with foreign business leaders. The main victims of this trend, however, are employees and their pension plans. Drying up of
markets means that countless people lose job opportunities and that innovation moves offshore. Trust, once lost, is hard to regain. Tort reforms limiting damages don't get close to the heart of the problem.
American justice has a deeper flaw - it no longer reliably distinguishes right from wrong. Instead, decisions are made on an ad hoc basis, jury by jury, without predictable boundaries.
Wednesday, February 7, 2007 ~ 3:34 p.m., Dan Mitchell Wrote: Deficits are often used as reason for higher taxes, such as in 1993 and 1982. But to believe in higher taxes as sound economic policy in coming
years, you also have to believe in the CBO's cheery forecast that hundreds of billion of dollars in new taxes will have little or no effect on economic growth. Now you don't have to be an acolyte of supply-side
guru Arthur Laffer to find that sort of "static analysis" a little weird. Most Americans probably would. So, apparently, did the economic team
at Goldman Sachs, the old employer of Robert Rubin, President Bill Clinton's second treasury secretary. Thus the firm's econ wonks decided to try and simulate the real-world effect of letting the Bush tax cuts
expire at the end of 2010. Using the respected Washington University Macro Model, Goldman reset the tax code to its pre-Bush status, assumed all tax cuts expired, and watched how the economy reacted as
2011 began. What did the firm see? Well, in the first quarter of 2011 the economy dropped 3 percentage points below what it would have been
otherwise. "Absent a tailwind to growth from some other source," the analysis concludes, "this would almost surely mark the onset of a recession."
Wednesday, February 7, 2007 ~ 11:56 a.m., Dan Mitchell Wrote: Contrary to the popular perception, Bush has been one of the most pro-regulation presidents-far more so than Democrat Bill Clinton, who,
in many ways, was a better friend to the free market than Bush has been. ...By 2002, just one year into the Bush Administration, there were clear
signs of backsliding. A government report endorsed the view that human activity was a principal cause of global warming and the administration
signaled that it was going to become more aggressive about issuing new regulations. Said OMB's Graham, "There's no allergy to regulation" at
the White House....Bush threw all of his free market principles to the wind and endorsed the biggest expansion of government regulation in decades by signing the Sarbanes-Oxley bill. ...According to a report by
the Small Business Administration, by 2004, the burden of government regulation on the economy reached $1.1 trillion-$10,172 per American household. A recent report from the Competitive Enterprise Institute
found the regulatory onslaught continuing through 2006, with many new regulations still in the pipeline.
Tuesday, February 6, 2007 ~ 5:04 p.m., Dan Mitchell Wrote: ...last August, according to details disclosed in documents maintained by the Handelsregister, the trade registry of the Netherlands, Promogroup
helped the three [Rolling Stones] performers set up a pair of private Dutch foundations that will allow them to transfer assets tax-free to heirs when they die. Other Dutch shelters that Promogroup has arranged
for the three have already paid off handsomely; over the last 20 years, according to Dutch documents, the three musicians have paid just $7.2 million in taxes on earnings of $450 million that they have channeled
through Amsterdam - a tax rate of about 1.5 percent, well below the British rate of 40 percent. ...The rock powerhouse U2 has transferred lucrative assets to Amsterdam, as have other pop singers and
well-known athletes... While old-school, offshore tax havens - the warm ones with tropical fish, off-the-shelf holding companies sporting post-office-box addresses, and scant regulation or transparency - still
attract money, they are largely patronized, tax lawyers and entertainment bankers say, by hedge funds and private equity firms looking to protect lush trading profits from taxes. But for earnings
derived from intellectual property such as royalties, the Netherlands has become a tax shelter of choice. ...Many of the world's multinational
corporations, like Coca-Cola, Nike, Ikea, and Gucci, have set up holding companies here in recent years to take advantage of tax shelters nearly identical to the ones that the Rolling Stones and U2 use. ...The
Netherlands is home to almost 20,000 "mailbox companies," Dutch shorthand for corporate shells set up by foreign companies and wealthy
foreigners who use them to relieve taxes on royalties, dividends and interest payments... Globally, some 1,165 companies use Dutch tax shelters to reduce or eliminate taxes on royalties and patents. This is good news for all taxpayers. The rich directly benefit since greedy politicians are unable to seize as much of their money, and the rest of us benefit since this puts downward pressure on tax rates as governments try to keep the geese that lay the golden eggs from flying away. Not surprisingly, international bureaucracies and left wing groups despise tax havens - precisely because tax competition makes it more difficult to increase the size of government. The story in the Times elaborates, including completely unsubstantiated accusations that low taxes somehow facilitate dirty money: Some experts see a darker side to the emergence of the Netherlands as a sought-after tax shelter. In 2000, the Organization for Economic
Cooperation and Development, based in Paris, black-marked the country as one of the world's top five industrialized tax havens for promoting
"treaty shopping" for low-tax jurisdictions. ...In its report last fall, SOMO, the research group, said...that "tax haven features of the
Netherlands also facilitate money laundering and attract companies with a dubious reputation."
Tuesday, February 6, 2007 ~ 3:16 p.m., Dan Mitchell Wrote: ...the current expansion was derided right through 2004 as a "jobless recovery." We now know the economy has created 7.4 million new jobs
since mid-2003, as revisions by the Bureau of Labor Statistics have added hundreds of thousands to its original monthly estimates. Thus the hand-wringers have had no choice but to move on, turning their laments
to allegedly "stagnant wages." Well, that's now vanishing too. ...As for real (inflation-adjusted) wage growth, it averaged 0.6% annually for
non-farm workers in the first half of the 1990s compared with 1.5% a year so far in this decade. "This cycle as a whole has witnessed twice the
average real wage growth than the first 64 months of the previous expansion," Mr. Darda writes. For the last 12 months, real wages have
risen even faster, at a 1.7% clip. ...So moving right along, this week's bad news is said to be the U.S. "savings rate," which according to the official
measure was "negative" for a whole calendar year for the first time "since the Great Depression," as Martin Crutsinger of the Associated
Press helpfully put it. ...As a statistic, however, the official "savings rate" is nearly as useless a guide to prosperity as the trade deficit. In the
government accounts, what is called the savings rate is literally income less consumption. But the government defines income too narrowly and
consumption broadly. For example, "income" doesn't measure capital gains (whether realized or not), the rising value of your home, or even
increases in your retirement accounts. ...these columns long ago began to watch a far more instructive figure known as "household net worth."
That number, released by the Federal Reserve, includes all assets (tangible and financial) held by individuals less their liabilities (mortgage
and other debt). At the end of last year's third quarter, U.S. household net worth had climbed to $54.1 trillion. That was an increase of more than $3 trillion over the previous four quarters.
Monday, February 5, 2007 ~ 11:39 a.m., Dan Mitchell Wrote: Within each country, the increase in inequality that we have seen in the past generation is predominantly a result of failures of social investment
and changes in regulations and expectations. It has not been accompanied by any acceleration in the overall rate of economic growth. For the most part, it looks like these changes in economy and society
have not resulted in more wealth, but only in an upward redistribution of wealth -- a successful right-wing class war. This kind of inequality should
be a source of concern. Bill Gates, Paul Allen, Steve Ballmer and the other millionaires and billionaires of Microsoft are brilliant, hardworking, entrepreneurial and justly wealthy. But only the first 5
percent of their wealth can be justified as an economic incentive to encourage entrepreneurship and enterprise. The next 95 percent would create much more happiness and opportunity if it were divided evenly
among U.S. citizens or others than if they were to consume any portion of it. An unequal society cannot help but be an unjust society. The most
important item that parents in any society try to buy is a head start for their children. And the wealthier they are, the bigger the head start.
Societies that promise equality of opportunity thus cannot afford to allow inequality of outcomes to become too great.
Monday, February 5, 2007 ~ 10:50 a.m., Dan Mitchell Wrote: EU commissioners are finding themselves under scrutiny to see if they are putting into practice the green values that Brussels is increasingly
preaching, with most of the 120-strong fleet of officials cars comprising gas-guzzling, C02-emitting giants. …the vast majority of the 27 commissioners use the standard-issue vehicles such as Audis or Mercedes
– high on security features but rather lower on environment friendliness - to be ferried here and there across Brussels; sometimes even the few hundred metres between commission buildings. …A commission
spokesperson said "It's an individual decision for commissioners what their service car should be but as a general rule, the commissioners
choose cars that are functional and safe for what they are doing."
Sunday, February 4, 2007 ~ 5:27 p.m., Dan Mitchell Wrote: According to the Bureau of Labor Statistics, public school teachers earned $34.06 per hour in 2005, 36% more than the hourly wage of the
average white-collar worker and 11% more than the average professional specialty or technical worker. In the popular imagination, however, public school teachers are underpaid. "Salaries are too low. We
all know that," noted First Lady Laura Bush, expressing the consensus view. "We need to figure out a way to pay teachers more." Indeed, our
efforts to hire more teachers and raise their salaries account for the bulk of public school spending increases over the last four decades. During
that time per-pupil spending, adjusted for inflation, has more than doubled; overall we now annually spend more than $500 billion on public education. …higher teacher pay seems to have no effect on raising
student achievement. Metropolitan areas with higher teacher pay do not graduate a higher percentage of their students than areas with lower teacher pay. In fact, the urban areas with the highest teacher pay are
famous for their abysmal outcomes. Metro Detroit leads the nation, paying its public school teachers, on average, $47.28 per hour. That's 61% more than the average white-collar worker in the Detroit area and
36% more than the average professional worker. In metro New York, public school teachers make $45.79 per hour, 20% more than the average professional worker in that area. And in Los Angeles teachers
earn $44.03 per hour, 23% higher than other professionals in the area. Evidence suggests that the way we pay teachers is more important than simply what they take home. Currently salaries are determined almost
entirely by seniority--the number of years in the classroom--and the number of advanced degrees accumulated. Neither has much to do with student improvement. …Of course, public school teacher earnings look
less impressive when viewed on an annual basis than on an hourly basis. This is because teachers tend to work fewer hours per year, with breaks during the summer, winter and spring. But comparing earnings on an
annual basis would be inappropriate when teachers work significantly fewer hours than do other workers.
Sunday, February 4, 2007 ~ 4:12 p.m., Dan Mitchell Wrote: In Mississippi, Attorney General Jim Hood has bludgeoned insurer State Farm into a gigantic settlement over hundreds of dubious claims. His
populist opportunism is matched by Florida, where legislators have passed a "reform" that forces insurers to lower their premiums and
allows the state-run insurer to co-opt the local market. Mr. Hood has been on a campaign to loot insurers from the first days after Katrina. His
complaint is that it is "unconscionable" that insurers have refused to pay for flood damage. Never mind that their contracts specifically contain
flood exclusions even as they pay tens of millions for wind damage. This water exclusion has been well known among homeowners and state regulators for years, which is why the federal government offers flood
insurance. Mr. Hood nonetheless filed a civil suit and began a criminal probe. …As for Florida, insurers are understandably trying to build up
their reserves against the likelihood of larger future payouts. Forecasters are predicting more frequent hurricanes for the state, which could mean
hundreds of billions of dollars in claims. So premiums have been rising. Florida legislators and new GOP Governor Charlie Crist have responded with one of the more un-Republican reforms on Florida's
books. The measure mandates a reduction in homeowner premiums from private insurers by 5% to 25%, which means that companies are likely to be even less prepared to cover future damages. The legislation will also
force insurers that write home and auto policies in other states to offer home insurance in Florida -- or be banned from the Sunshine State. Another charming twist is that the new Florida law will allow the
state-run Citizen's Property Insurance to begin competing with private insurers. This was done in the name of "competition," but it will have
precisely the opposite effect. Citizens was designed as an insurer of last resort, but as a government company it will not have to worry about
profits and other capitalist details. It will be able to offer lower prices because it has an implicit taxpayer guarantee, a la Fannie Mae. These
arrangements typically end badly for the taxpayer, who in this case will be absorbing future hurricane risk without even realizing it. Some insurers have already responded to all this by cancelling policies. And
Governor Crist this week issued an "emergency" order freezing premiums and barring cancellations. So not only is the state imposing price controls, it is forcing companies to do business. Where'd the
Governor learn economics -- Caracas?
Saturday, February 3, 2007 ~ 2:34 p.m., Dan Mitchell Wrote: The voucher bill passed out of committee earlier this week and is backed by Governor Jon Huntsman. It would offer students who attend private
K-12 schools from $500 to $3,000 in tuition reimbursement based on family income. While Utah is known for its Mormon population, the biggest winners under the plan would be the state's growing Hispanic
population, who haven't done well in general in Utah public schools. As usual, local school boards and the state teachers union (the Utah
Education Association) are fighting the idea, claiming that it will "drain" money from public schools. This hardly seems likely because the $9
million cost of the program is about 0.5% of total school spending. And the voucher maximum of $3,000 is less than half the state per child public-school spending average of $6,325. The voucher bill also allows
Utah public schools to keep the difference between the voucher amount paid out to students who leave and the $6,325 per pupil average. Vouchers are working in a handful of cities, such as Cleveland,
Milwaukee, and Washington, D.C. Former Florida Governor Jeb Bush also promoted a statewide plan, until a liberal state court invented constitutional objections. The evidence on student performance has
mostly been favorable in these schools, and research by Harvard economist Carolyn Hoxby has found that the presence of vouchers has caused the public schools to improve their performance as well.
Friday, February 2, 2007 ~ 12:39 p.m., Dan Mitchell Wrote: President Jacques Chirac has demanded that the United States sign both the Kyoto climate protocol and a future agreement that will take effect
when the Kyoto accord runs out in 2012. …he warned that if the United States did not sign the agreements, a carbon tax across Europe on imports from nations that have not signed the Kyoto treaty could be
imposed to try to force compliance. …Trade lawyers have been divided over the legality of a carbon tax, with some saying it would run counter to international trade rules. But Mr. Chirac said other European
countries would back it. "I believe we will have all of the European Union," he said.
Friday, February 2, 2007 ~ 12:16 p.m., Dan Mitchell Wrote: EU justice commissioner Franco Frattini has said he will push for a reduction in the amount of air passengers' data provided to the US, amid
efforts to update a controversial EU-US data sharing agreement which will expire by the end of July. The reduction of 34 pieces of passenger records - which Washington considers key to its security programme -
"would not harm counter-terrorism efforts", Mr Frattini told the European Parliament in a debate which saw the commissioner grilled by MEPs on Wednesday (31 January). Mr Frattini underlined the need to
strike a balance between the requirements of fighting terrorism and concerns about data protection, saying that "privacy rights are non-negotiable."
Friday, February 2, 2007 ~ 11:04 a.m., Dan Mitchell Wrote: Two weeks ago, U.S. drug agents launched raids on 11 medical-marijuana centers in Los Angeles County. The U.S. attorney's
office says they violated the laws against cultivation and distribution of marijuana. Whatever happened to America's federal system, which recognized the states as "laboratories of democracy"? ...The
constitutional plan presented in the Federalist Papers delegated only a few powers to the federal government, with the rest reserved to the
states. The system was hailed for its genius. Instead of having decisions made in the center -- where errors would harm the entire country -- most
policies would be determined in a decentralized environment. ...It made a lot of sense. It still does. Too bad the idea is being tossed on the trash heap by big-government Republicans and their DEA goons. Drug
prohibition -- like alcohol prohibition -- is a silly idea, as the late free-market economist Milton Friedman often pointed out. Something
doesn't go away just because the government decrees it illegal. It simply goes underground. Then a black market creates worse problems. Since sellers cannot rely on police to protect their property, they arm
themselves, form gangs, charge monopoly prices, and kill their competitors. Buyers steal to pay the high prices. Alcohol prohibition in the 1920s gave America Al Capone and organized crime. Drug
prohibition has given us South American and Asian cartels that finance terrorism. ...Drug prohibition does more harm than drugs. ...This is supposed to be a free country, and in a free country adults should have
the right to ingest whatever they want. A drug user who harms someone else should be punished, but a peaceful user should be left alone. Despite
my reservations about medical marijuana, the states' experimentation is still better than a brutal federal one-size-fits-all crackdown. There is no
role here for the federal government. If the people of a state want to experiment by loosening drug prohibition, that should be their right. Washington should mind its own business.
Thursday, February 1, 2007 ~ 9:51 a.m., Dan Mitchell Wrote: Switzerland's decentralised taxation system is causing irritation among its European Union neighbours. The row was triggered by the decision,
late last year, of the French rock star Johnny Hallyday to leave France and take up residence in the Swiss Alpine resort of Gstaad. ...In France,
where Hallyday is a national icon, there is anger. Advisers to the French presidential candidate Segolene Royal have accused Switzerland of
"looting" its neighbours. ...Swiss cantons are allowed to set their own taxes and many are now engaging in an internal corporate tax-cutting
competition. Canton Obwalden, in central Switzerland, slashed its corporate tax rate to just 6.6% at the start of 2006; it attracted 376 new companies in just 11 months. The European Commission has warned
that this may constitute an unfair subsidy under the European Free Trade Agreement. "Talk to any tax expert," said Michael Reiterer, the
commission's new ambassador to Switzerland. "This is recognised as a subsidy. And there we think Switzerland should think a bit whether
behaviour which is clearly outlawed in the EU is the best policy to follow in such a close relationship between two partners." ...Stefan Kux, head
of economic development for Zurich, is not the least bit worried by the complaints from Brussels, in fact he sees them as quite positive. "We are
profiting from the mistakes of our neighbours," he explained. "They are making economic promotion for us for free, everyone now knows that
Switzerland has an excellent tax system, so I'm very grateful." ...within the Swiss government there is little patience with Europe's objections
over tax. "The Swiss position is on very safe ground," insisted Adrian Sollberger, spokesman for Switzerland's office of European policy. "We
do not have an agreement to harmonise taxes, none whatsoever, so by definition there cannot be any infringement of any agreement between Switzerland and the EU." ...the Swiss government will not budge;
ministers say they view an attack on the tax system as an attack on Swiss sovereignty. The row is sure to simmer on. Meanwhile the businesses and the celebrities just keep on coming.
Thursday, February 1, 2007 ~ 8:30 a.m., Dan Mitchell Wrote: Democrats want to flog the global warming theme through 2008 and they'll take what help they can get, even if it means cozying up to
executives whose goal is to enrich their firms. Right now, the corporate giants calling for a mandatory carbon cap serve too useful a political
purpose for anyone to delve into their baser motives. The Climate Action Partnership, a group of 10 major companies that made headlines this
week with its call for a national limit on carbon dioxide emissions, would surely feign shock at such an accusation. After all, their plea was carefully timed to coincide with President Bush's State of the Union
capitulation on global warming, and it had the desired PR effect. The media dutifully declared that "even" business now recognized the climate
threat. ...Four of the affiliates--Duke, PG&E, FPL and PNM Resources--are utilities that have made big bets on wind, hydroelectric and nuclear power. So a Kyoto program would reward them for simply
enacting their business plan, and simultaneously sock it to their competitors. Duke also owns Cinergy, which relies heavily on dirty, CO2-emitting coal plants. But Cinergy will soon have to replace those
plants with cleaner equipment. Under a Kyoto, it'll get paid for its trouble. DuPont has been plunging into biofuels, the use of which would soar under a cap. Somebody has to cobble together all these complex
trading deals, so say hello to Lehman Brothers. Caterpillar has invested heavily in new engines that generate "clean energy." British Petroleum is
mostly doing public penance for its dirty oil habit, but also gets a plug for its own biofuels venture. Finally, there's General Electric, whose CEO Jeffrey Immelt these days spends as much time in Washington as
Connecticut. GE makes all the solar equipment and wind turbines (at $2 million a pop) that utilities would have to buy under a climate regime. GE's revenue from environmental products long ago passed the $10
billion mark, and it doesn't take much "ecomagination" to see why Mr. Immelt is leading the pack of climate profiteers. ...What makes this lobby
worse than the usual K-Street crowd is that it offers no upside. At least when Big Pharma self-interestedly asks for fewer regulations, the economy benefits. There's nothing capitalist about lobbying for a
program that foists its debilitating costs on taxpayers and consumers while redistributing the wealth to a few corporate players. This is what comes from Washington steadily backstepping energy policy into the
interventionist 1970s, picking winners and losers. In ethanol, in biodiesel, in wind farms, success isn't a function of supply or demand. The champs
are the ones that coax out of Washington the best subsidies and regulations. Global warming is simply the biggest trough yet.
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