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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 Cato Institute, 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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Monday, April 30, 2007 ~ 10:32 p.m., Andrew Quinlan Wrote: A serious public health threat had to be manufactured, and in 1993 the Environmental Protection Agency (EPA) stepped in to the rescue with their bogus environmental tobacco
smoke (ETS) study that says secondhand tobacco smoke is a class A carcinogenic.
...Why is it bogus? The EPA claimed that 3,000 Americans die annually from secondhand smoke, but there was a problem. They couldn't come up with that conclusion using the standard statistical 95 percent confidence interval. They lowered their study's confidence interval to 90 percent. That has the effect of doubling the margin of error and doubling the probability that mere chance explains those 3,000 deaths... During the late '90s, at a Washington affair, I had the occasion to be in the presence of an FDA official. I asked him whether he would approve of pharmaceutical companies employing EPA's statistical techniques in their testing of drug effectiveness and safety. He answered no. I ask my fellow Americans who are nonsmokers: Do you support the use of fraudulent science in your efforts to eliminate tobacco smoke nuisance in bars, restaurants, workplaces and hotels? ...You say, "Okay, Williams, the science is bogus, but how do we nonsmokers cope with the nuisance of tobacco smoke?" My answer is that it all depends on whether you prefer liberty-oriented solutions to problems or those that are more tyranny-oriented. ...The liberty-oriented solution has to do with private property rights, whereby the owner of property makes the decision whether he will allow smoking or not. If one is a nonsmoker, he just doesn't do business with a bar or restaurant where smoking is permitted. A smoker could exercise the same right if a bar or restaurant didn't permit smoking. Publicly owned places such as libraries, airports and municipal buildings, where ownership is ill defined, presents more of a challenge. ...The tyranny-oriented solution is where one group uses the political system to forcibly impose its preferences on others. You might be tempted to object to the term "tyranny," but suppose you owned a restaurant where you did not permit smoking and smokers used the political system to create a law forcing you to permit smoking. I'm sure you'd deem it tyranny.
Sunday, April 29, 2007 ~ 4:16 p.m., Dan Mitchell Wrote: The European Union has once again taken Switzerland to task for its policy on corporate taxes, which it claims violates a free trade accord
with Bern. …Earlier this week senior EU diplomats approved a mandate for talks between the Commission and Switzerland. Brussels argues that the practice of some cantons of partially exempting profits generated
abroad from local company taxes is in breach of the 1972 agreement between Bern and Brussels. However, Switzerland which is not a member of the EU, has consistently said that corporate tax and the tax
policies of the cantons were never parts of the free trade agreement. …The two main political groups in Strasbourg: the Conservatives and Social Democrats, supported the European Commission in its position
against Bern.
Saturday, April 28, 2007 ~ 6:57 p.m., Dan Mitchell Wrote: European Union Taxation Commissioner Laszlo Kovacs has reportedly told Irish business leaders that formal plans for a common EU corporate
tax base will be unveiled by the European Commission next week. …despite Kovacs's assurances that the system would be optional for businesses, many member states, including Ireland, are strongly opposed
to the CCCTB plans, wary that it would be the first step towards the harmonisation of corporate tax rates across the EU, an idea favoured by France and Germany. If this was the case, Ireland would certainly
have a lot to lose, as its 12.5% corporate tax rate has been cited as a major ingredient in Ireland's economic revival in recent years, and investors certainly would not welcome European interference with
Ireland's corporate tax regime. Consequently, organisations such as IBEC, and Irish politicians, have been lobbying in opposition of CCCTB. …Irish MEP Eoin Ryan…told MEPs that he "cannot and will not
accept" moves towards a common corporate tax base. "Tax competition is healthy for the economic development of the European Union. It provides a clear incentive to European Governments to manage their
public finances carefully and to build a corporate tax regime that encourages enterprise," he stated. "The bottom line here is that no one
size fits all policy covering corporate taxation matters in Europe is going to succeed. It is neither sensible nor realistic to seek convergence of
corporate tax rates across Europe. EU member states have different demographic and social priorities. EU member states need to use their corporate taxation policies in different ways so as to entice foreign
direct investment into their countries and generate employment."
Friday, April 27, 2007 ~ 4:03 p.m., Dan Mitchell Wrote: ...the German manufacturer of an automobile exported to the United States gets a rebate from the German government equal to the indirect
taxes paid in Germany, a type of tax called the value-added tax. Since the VAT rate in Germany is 19 percent, the German carmaker gets a 19
percent tax rebate on every vehicle exported to the United States. That's a significant subsidy to German auto manufacturers which enables them
to sell cars in America for much less than they sell for in Germany. But what about U.S. automobiles exported to Germany? A U.S. manufacturer exporting an auto to Germany must pay the German
government a VAT equivalent tax of 19 percent of the price of the car plus 19 percent of all the costs of transportation, insurance, docking and
duties involved in getting the car to Germany. The U.S. company gets no credit for corporate taxes it pays in the United States. ...The VAT advantage also creates a perverse incentive for U.S. companies to move
their plants and jobs to other countries so they, too, can take advantage of the VAT subsidy. ...Some members of Congress are now considering legislation to allow our government to impose a fee on imports from
other nations that is exactly equal to the VAT subsidy given them by their home government, and also to give U.S. producers a rebate on their exports exactly equal to the VAT charge imposed on them by a
foreign country. The former would more than pay for the latter, so this plan should be cost-free to U.S. taxpayers. Not only does she mis-identify the problem (the notion that VATs subsidize exports), Mrs. Schafly's proposed solution is very problematical. Higher import taxes are self-destructive and almost certainly would trigger retaliatory actions by other nations - thus harming US exporters. Having pointed out the problems in her article, it is worth noting that she is right in one important regard, though for the wrong reason. European nations (and other countries with VATs) should not have rebates, but the reason has nothing to do with trade. Instead, the issue is tax competition. As currently designed, VATs are "destination-based" regimes, which have the effect of making it very difficult for a consumer to benefit from lower taxes in another jurisdiction (because consumers pay the VAT rate of their home nation, not the VAT rate of the nation where the good or service is purchased). If VAT rebates were eliminated and nations instead used an "origin-based" approach, governments would feel more compelled to keep tax rates under control since an excessive VAT would lead to more cross-border shopping.
Friday, April 27, 2007 ~ 2:45 p.m., Dan Mitchell Wrote: The double seat arrangement of the European Parliament generates at least 20,000 extra tonnes of CO2 emissions – equalling 13,000 return
flights from London to New York - according to a new study. The report…looks into the environmental costs of having two seats for the EU's assembly - in Brussels and Strasbourg. … When a plenary session is
held in Strasbourg once a month – it is empty for the remaining 307 days of the year - 1,220 officials and other servants of the parliament and
political groups travel from Brussels to Strasbourg while another 525 travel from Luxembourg to Strasbourg. But it is not just people who have to get to the Alsatian capital but also all of their work
paraphernalia. This means "fifteen lorries which ferry cupboards and tin trunks full of documents each month from Brussels or Luxembourg to
Strasbourg and back again," according to the report. As a whole, the costs of the "travelling circus" - as it is known by critics of the
arrangement - amounts to around €200,000 per year, with the total cost of travelling plus the allowances people get for going to Strasbourg amounting to €18 million.
Thursday, April 26, 2007 ~ 4:22 p.m., Dan Mitchell Wrote: Only 1% of small business loans given out in a year are SBA-backed, making the agency largely irrelevant in the capital market. Moreover,
special government programs by their very nature pit those who get support against those who don't. This is not to say that there is no role
for government. Here's one: Free capital from taxes. The U.S. imposes a high tax rate on capital, reducing investment, giving firms an incentive
to move profits abroad and encouraging costly tax avoidance schemes. Economists instead conclude that an optimal tax system in most cases should not include a tax on capital. Reducing the capital tax would be a
significant policy to help all small firms, not simply those favored by a special program. ...cutting tax rates increases the proportion of entrepreneurs who make new capital investments, and increases the size
of the investment they make. Furthermore, cutting taxes leads to small business owners hiring more new workers and increasing pay to existing workers. Then, too, reducing the current complexity in the tax code
would free up time and resources for small firms to focus more on business and less on accountants, lawyers and paperwork. ...governments at all levels should reduce the large regulatory burdens
that afflict small business. Reams of mind-numbing regulations add a hefty cost of $5,600 per employee to enterprises of all sizes. It's worse
for small businesses. In a SBA study on the impact of regulatory costs on the smallest firms, economist Mark Crain of Lafayette College notes
that complying with federal regulations costs companies with fewer than 20 workers an average of $7,647 per employee. ...the 17th-century French minister Jean-Baptiste Colbert (head of Louis XIV's finances)
once asked a group of businessmen what he -- that is, what the government -- could do to help them. Replied one: "Laissez-nous faire." Leave us alone.
Thursday, April 26, 2007 ~ 3:56 p.m., Dan Mitchell Wrote: The Reno Justice Department, whatever else you may think about it, cared passionately about signal "progressive" causes and backed them
to the hilt, regardless of criticism. To the contrary, the Gonzales Justice Department and, indeed, the president, often turn spaghetti-spined when
the priorities of their base are at stake. How surprising, then, that when friends are most sorely needed there are none to be found. The contrast
emerges in high relief on Wednesday. That is when the Supreme Court once again tackles the McCain-Feingold law — the Bipartisan Campaign Reform Act of 2002 which repealed core First Amendment
liberties under the guise of "reforming" campaign-finance regulations. Campaign-finance reform is a hot-button for the Republican base. It is that rare perfect storm of revulsion shared by social conservatives,
business, libertarians and originalist legal scholars. Collectively, they see political speech, political association, and the citizen's right to petition
government squelched by an incumbent-coddling, big-government scheme that betrays freedoms basic to a functioning democracy. Yet, in the most craven act of his administration, President Bush signed BCRA
into law… The Justice Department, to the consternation of Bush supporters, has vigorously defended McCain-Feingold. That includes the case before the Supreme Court on Wednesday, in which Justice defends
the law's most noxious component — the very "issue advertising" ban President Bush purported to have "reservations" about. Under Attorney General Gonzales, the department remarkably argues that the First
Amendment tolerates a scheme that prevents a charitable corporation from mentioning the name of an incumbent — not, mind you, electioneering against him, just mentioning his name — in the course of
an issue ad on a matter of public policy in the weeks before an election.
Thursday, April 26, 2007 ~ 3:20 p.m., Dan Mitchell Wrote: "Kolding prepares for German invasion," screamed the headline in Denmark's Jyllands-Posten. This time around, the "invasion" is nothing
more threatening than an army of job seekers from south of the border attending a job fair. Some drove all night; others were so desperate to
find work that they sneaked in an hour before the fair started only to be expelled. When the gates finally opened, it was very hectic. About 1,500
Germans had signed up for the event but 2,000 showed up, besieging employers. The job fair in late January was the first in the region dedicated to attracting German workers, giving new meaning to the
word Gastarbeiter, usually reserved for foreign workers coming to -- not from -- Germany. …the Continent can…change. Denmark did through innovative reforms, going from chronically high unemployment to a
labor shortage. … How did Denmark become a job Mecca? Much of the credit goes to former Prime Minister Poul Nyrup Rasmussen. No relation to the current prime minister of the same last name, Mr. Rasmussen led
the government in Copenhagen between 1993-2001. He now heads the Socialist group in the European Parliament. When Mr. Rasmussen came to power, unemployment stood at 12.4%, the economy wasn't growing,
and the budget deficit was spiraling out of control. "There was a terrible mood in the country, that nothing could be done," he told me at his
office in Brussels. So the left-wing prime minister fast privatized state companies and advanced Denmark's "flexicurity" system. This neologism describes the combination between the security of
Scandinavian welfare with the flexibility of a modern market economy. "The Danish tradition was never focused on long dismissal notices," Mr.
Rasmussen said, but under his tenure dismissal rules were further loosened. About 30% of the Danish work force now changes jobs each year. … Unemployment fell to 5% and the economy averaged annual
growth rates of about 3% between 1994-2001. His successor has largely continued his polices, with similar success.
Wednesday, April 25, 2007 ~ 5:39 p.m., Dan Mitchell Wrote: Federal agencies have two choices when presented with a merger. They can find a "problem" -- in which case their budgets are justified and
their walls fill up with scalps. Or they can find no problem. Guess which they do? Take the Federal Trade Commission lawsuit to block a proposed merger of Office Depot and Staples, a close parallel to
Sirius-XM. The two would have accounted for just 4% of the office-supply market, but 100% of the market for office supplies purchased from . . . Office Depot or Staples! Take FTC's failed attempt
to block a deal bringing Häagen-Dazs and Dreyer's under the same roof, which in a better world would forever have deprived its promoters of the
respect of their peers. The agency's case was built on the premise that "superpremium" ice cream doesn't compete with, er, ice cream. …
Antitrust battles may depend on the illusion of fierce debate about economics, but there's only one antitrust establishment in Washington whose pre-emptive interest is keeping the charade going. … Even the
alarm over Sarbanes-Oxley and its effect in driving listed companies offshore or into the hands of private equity is akin to fretting about tennis elbow when the arm may be amputated. Not when you have
Congress eagerly promoting bills to put Congress in charge of deciding foreign investment inflows, to punish energy consumption, to prop up a dying private-sector labor movement and regulate CEO pay.
Tuesday, April 24, 2007 ~ 10:15 a.m., Dan Mitchell Wrote: Singer Sheryl Crow has said a ban on using too much toilet paper should be introduced to help the environment. … The 45-year-old…has just
toured the US on a biodiesel-powered bus to raise awareness about climate change. …The pair targeted 11 university campuses to persuade students to help combat the world's environmental problems. … "I have
spent the better part of this tour trying to come up with easy ways for us all to become a part of the solution to global warming," Crow wrote.
…"I propose a limitation be put on how many squares of toilet paper can be used in any one sitting." Crow's publicists managed to get the BBC to reference her biodiesel bus, but her environmental bona fides do not stand up under closer scrutiny. Thesmokinggun.com exposes the demands she makes when going on tour: The rock star's performance contract includes specific day-to-day instructions on what kind of booze Sheryl needs in her dressing room
(TSG has never seen such attention to detail in any other concert rider we've posted). … promoters are directed to purchase specific booze depending on what day of the week the concert falls, as the below rider
excerpt reveals. Additionally, when the global warming warrior hits the road, her touring entourage (and equipment) travels in three tractor trailers, four buses, and six cars. Now that's a carbon footprint!
Tuesday, April 24, 2007 ~ 9:51 a.m., Dan Mitchell Wrote: ...in 2004, [the FDA] released an analysis indicating that young people on antidepressants had about a 2% risk, not of suicide, but of "suicidal
thoughts." Anti-pharmaceutical activists and some politicians immediately called for major restrictions on antidepressants, simply ignoring that since the introduction of modern SSRI-type medications in
the late 1980s, teen suicide rates had steadily fallen. No, the drumbeat from the "no risk allowed" crowd got the attention of the always
risk-averse FDA. The result was a "Black Box" warning -- the strongest possible warning short of an outright ban -- slapped onto the
antidepressants. Remember, this was provoked by an alleged increase in thoughts, not deeds. There were no actual suicides -- zero -- in the FDA
studies, and none in the latest, more extensive analysis. Guess what happened next? Parents, naturally as frightened by this new warning as they would be by a skull-and-crossbones, decided to forego giving these
medicines to their children. Many family doctors, spooked by the prospect of lawsuits, suddenly found other, less effective treatment options more appealing. Primary-care physicians are the ones who
prescribe most treatments for depression, not psychiatrists. Since this warning label was introduced, usage of SSRI medications declined by more than 14% from 2004 to 2006 among patients under 19 years old.
And, no surprise, actual suicides, not hypothetical ones, increased 18% among youngsters during the first year of the Black Box warnings -- the first such increase in many years.
Monday, April 23, 2007 ~ 3:53 p.m., Dan Mitchell Wrote: The International Monetary Fund has effectively branded Britain a tax haven. The world's most important financial organisation last week
published a working paper seeking a definition of offshore financial centres. For the very first time it ranked Britain alongside the likes of
Bermuda and the Cayman Islands - unregulated jurisdictions associated with illicit funds. ...The City of London is the world's largest tax haven...
The UK has become a centre for illicit funds drained from many of the world's poorer countries, and British offshore secrecy prevents those countries from running effective tax regimes.
Monday, April 23, 2007 ~ 2:16 p.m., Dan Mitchell Wrote: It isn't easy to put one of the more well governed states on the path to fiscal ruin in a mere three months, but it seems Florida Governor
Charlie Crist is exceptional. His campaign to socialize Florida's insurance market has placed the Sunshine State one big hurricane away from financial disaster. ...Mr. Crist is a man on a poll-driven mission and
his line has been that greedy insurers are ripping off his constituents. In January he convinced the Republican legislature to pass a "reform"
designed to lower the price of insurance by making the state a larger player in the market and undercutting private insurers. The new law
allows state-run Citizen's Property Insurance -- intended to be an insurer of last resort -- to compete directly with private companies. This exercise
in Cuban economics is already gutting Florida's once-competitive insurance market. Private insurers know the law will artificially depress rates, forcing some to operate at a loss. Many have responded by
cancelling policies, prompting Governor Crist to issue an "emergency" order freezing premiums and barring cancellations. Yet even this hasn't
stopped the bleeding. ...Large numbers of homeowners are now turning to Citizen's, which itself is only able to offer lower premiums because of
its implicit taxpayer guarantee, and because its actuarial assumptions reside in la-la land. Citizen's likes to say it will have $8 billion with
which to pay claims, but it rarely notes that much of this is a line of credit. Between such credit and its bonding authority, what Citizen's
really has is the potential to rack up huge liabilities that will have to be paid by someone when the next storm surge comes ashore. Most likely,
that someone will be all Florida homeowners, who, in the event of a Citizen's collapse, will be on the hook for large assessments. This tax is
likely to be levied on every homeowner, including those who don't live in areas at high risk for storm damage. Another option would be for the
state to provide a bailout, putting all taxpayers on the hook. The risk of a taxpayer bailout is also high for the state's hurricane fund: The new
law doubled its risk-bearing capacity to $32 billion in business, thus allowing insurers to purchase reinsurance at cheaper rates than on the
open market. However, the fund has only $1 billion in cash on hand, and thus no way to cover its new business if disaster strikes -- short of
dunning taxpayers. ...After Katrina, private insurers paid more than $40 billion to 1.7 million policyholders in Florida. But the state government
and its taxpayers may end up paying for the next big one largely by themselves. ...Mr. Crist and his fellow Republicans had better hope that predictions of more frequent hurricanes are wrong. Because when they
hit, and taxpayers discover there's no such thing as free insurance, what could get blown away is their governing majority.
Sunday, April 22, 2007 ~ 1:19 p.m., Dan Mitchell Wrote: The statistics are clear. Communities that recognize and grant Second Amendment rights to responsible adults have a significantly lower
incidence of violent crime than those that do not. More to the point, incarcerated criminals tell criminologists that they consider local gun laws when they decide what sort of crime they will commit, and where
they will do so. ...In recent years, however, armed Americans - not on-duty police officers - have successfully prevented a number of attempted mass murders. Evidence from Israel, where many teachers
have weapons and have stopped serious terror attacks, has been documented. Supporting, though contrary, evidence from Great Britain, where strict gun controls have led to violent crime rates far higher than
ours, is also common knowledge. ...Whenever I've seen one of those "Gun-free Zone" signs, especially outside of a school filled with our
youngest and most vulnerable citizens, I've always wondered exactly who these signs are directed at. Obviously, they don't mean much to the sort of man who murdered 32 people just a few days ago.
Sunday, April 22, 2007 ~ 9:45 a.m., Dan Mitchell Wrote: …a way to lower the incidence of illness, mayhem and death from alcohol abuse by young people is to lower the drinking age. …the
drinking age of 21 has moved drinking to settings away from parental instruction and supervision. Among college students, drinking has gone
"off campus and underground," increasing risks while decreasing institutions' abilities to manage the risks. …Each state has the right to
set a lower age -- more than half had lower age limits in the 1970s -- but doing so will cost it 10 percent of its federal highway funds and cause significant uproar from contractors and construction unions. …on
campuses, a drinking age of 21 infantilizes students, encouraging immature behavior with alcohol and disrespect for law generally. Furthermore, an "enforcement only" policy makes school
administrations adversaries of students and interferes with their attempts to acquaint students with pertinent information, such as the neurological effects of alcohol on young brains. He notes that
18-year-olds have a right to marry, adopt children, serve as legal guardians for minors and purchase firearms from authorized dealers, and are trusted with the vote and military responsibilities. So, he says, it
is not unreasonable to think that they can, with proper preparation, be trusted to drink.
Saturday, April 21, 2007 ~ 3:04 p.m., Dan Mitchell Wrote: The European Union has become better at spending money resulting in EU capitals getting back less of their annual membership fee, the
European Commission has announced. ...Out of the EUR107.4 billion EU spending finally agreed on for 2006 only EUR950 million was left unused - down from EUR1 billion in 2005. "Improved budget
management and better planning help protect taxpayers' interests," said EU budget commissioner Dalia Grybauskaite in a statement. ...the European Union is not allowed to make any profit and any surplus is
therefore channelled back to EU member states' coffers by way of a rebate on the year's EU fee.
Saturday, April 21, 2007 ~ 1:59 p.m., Dan Mitchell Wrote: One day after taxpayers filed their annual returns, the American Red Cross picked the head of the Internal Revenue Service to take over the
disaster-relief agency as it struggles to restore a reputation damaged by its responses to Hurricane Katrina and other recent catastrophes. The Red Cross Board of Governors voted yesterday to name IRS
Commissioner Mark W. Everson, the nation's top tax man since 2003, as the new president and chief executive of the $6 billion organization.
Friday, April 20, 2007 ~ 1:07 p.m., Dan Mitchell Wrote: Treasury Secretary Henry M. Paulson said yesterday that the Internal Revenue Service would have a tough time wringing money out of the
nation's tax cheats without imposing "draconian" new burdens on honest taxpayers. Speaking to a Senate committee led by Democrats eager to raise cash without raising tax rates, Paulson said it was
"unrealistic" for them to expect to collect hundreds of billions of dollars from the federal tax gap, the difference between taxes owed and taxes
paid. …Democrats bristled at Paulson's remarks and accused the administration of failing to take seriously its duty to enforce the nation's tax laws. Finance Committee Chairman Max Baucus (D-Mont.)
demanded that Paulson return in July with a strategy for increasing the voluntary compliance rate to 90 percent by 2017 from 84 percent, a change he said would increase tax collections by $150 billion a year.
…Paulson said other tax-gap ideas floating around Washington "would be unnecessarily painful, expensive and time-consuming for taxpayers."
Politicians haven't endorsed the more extreme notions, but Paulson cited some anyway -- steps such as eliminating most cash transactions or
tripling the number of IRS audits. "In theory, each of these measures could bring in some additional revenue," Paulson said. "But the cost of
compliance for individuals and businesses -- most of whom already pay what they owe -- would far outweigh the gains."
Friday, April 20, 2007 ~ 10:47 a.m., Dan Mitchell Wrote: The academic literature search indicates that because of three factors – high skilled people becoming more internationally mobile, greater
concentration of earnings in the higher income areas of the economy and increased international mobility of international capital – the UK like all other major economies has become more susceptible to negative
impacts from high taxation in recent years …the simulation of the Irish rate of corporation tax shows how a serious attempt to reduce corporation tax could have a transformational impact on the UK
economy. Investment is boosted after 14 years by 60%; GDP is boosted by nearly 9% and the impact of increased incomes and growth means that that the annual public deficit is reduced by just under £30 billions
eventually.
Friday, April 20, 2007 ~ 10:10 a.m., Dan Mitchell Wrote: For centuries, guns have been plentiful in the United States. Young men, and often young women as well, were taught gun safety and how to
shoot before they were old enough to drive cars. Yet your chances of being gunned down by a total stranger at your local school or bank or church in 1644, 1744, 1844 or 1944 were exactly nil. Yes, we had some
spectacular political assassinations, but to suggest that the easy availability of guns accounts for the grim social realities we've created in the 21st century is simplistic to the point of foolishness.
Friday, April 20, 2007 ~ 9:54 a.m., Dan Mitchell Wrote: The latest reform replaces the traditional defined-benefit pension for civil servants, under which the government promises pension payouts
from future tax revenues. All bureaucrats who have joined the ranks of the federal or most state governments since January 2004 are instead enrolled in NPS, a defined-contribution program in which workers save
a portion of their wages in their own retirement accounts. The program is set to be rolled out over the next six to nine months. Within two years,
2.6 million people are expected to be enrolled in the new plan, paying 20% of their wages into a fund that will then have assets of $4 billion.
NPS will also be open to India's informal-sector workers on a voluntary basis.
Friday, April 20, 2007 ~ 8:19 a.m., Dan Mitchell Wrote: It's been a central plank of George Bush's social policy: to stop teenagers having sex. More than $1bn of federal money has been spent
on promoting abstinence since 1998 - posters printed, television adverts broadcast and entire education programmes devised for hundreds of
thousands of girls and boys. The trouble is, new research suggests that it hasn't worked. At all. A survey of more than 2,000 teenagers carried out
by a research company on behalf of Congress found that the half of the sample given abstinence-only education displayed exactly the same predilection for sex as those who had received conventional sex
education in which contraception was discussed.
Thursday, April 19, 2007 ~ 1:35 p.m., Dan Mitchell Wrote: Gary Shilling, an economist in Springfield, N.J., figures that 52.6% of Americans, which includes dependents of direct recipients, "now receive
significant income from government programs" ...the data from 1950, when a mere 28.3% of Americans relied on Washington, that really shows how needy we've become. ...if the current pace is not abated in 10
years, the percentage could exceed the 55% mark of 1980, the year Reagan was elected on a platform of scaling back the federal behemoth. By 2040, it could be 60%, Shilling reckons. This bodes ill for any
prospects of cutting government back to any reasonable size and reforming our messy and intrusive tax system. ...when more than half of the country has a financial interest in seeing the government grow, that's
the part of America to which they will cater. That's certainly not healthy and it is likely unsustainable. ...How long before the richest and most productive Americans decide that they will no longer prop up the
poorest and least productive? With their political influence waning as that of the untaxed and low-taxed Americans and those who live off the government grows, they can either seek a tax-haven nation where
government isn't a growth industry, or they can choose to be less productive. Neither choice is good for America's future.
Thursday, April 19, 2007 ~ 11:47 a.m., Dan Mitchell Wrote: Eliminate all private donations to candidates or candidates PAC's. Make every donation to any political group (private firms, PACs, interest organizations, and the like) limited and transparent. ...create a very nominal campaign tax (some studies estimate it would cost only $5 per taxpayer per year to cover all congressional elections) so that all candidates have a fund of clean money to use while running for public office. Finally, mandate equal and extensive free advertising on all public television, radio, print, and online media outlets so each candidate can express his platform to the public. Campaign finance reforms like these (and surely a few others), will create positively great changes in American politics. Williams is correct in noting that the current political process is riddled with sleaze and corruption, but he mistakenly focuses on the symptoms rather than the disease. So long as politicians are seizing and redistributing $3 trillion every year, special-interest groups will figure out ways to steer money to themselves: Clean campaigns will eliminate many of the abuses that we currently see in American politics. So much of the paybacks, waste, bribery, buying and selling of votes, and general corruption will immediately be put to sleep. Clean campaigns will reduce the power of elites by ending the new arms race for money, and bring back the soul of democracy by increasing the power of the people. If Williams really wants to reduce the amount of money flowing into politics and if he really wants to reduce graft, bribery, and deal-making, the only effective approach is
to reduce the size of government.
Thursday, April 19, 2007 ~ 11:15 a.m., Dan Mitchell Wrote: Taxes are eating into Canadians' incomes more than ever, costing the average family more than food, clothing and housing combined,
suggests a new survey. ...The average Canadian family earned $63,001 in 2006 and paid taxes equalling $28,311, almost 45 per cent of its income, while spending 35.6 per cent of its income on food, clothing and
housing. According to the institute, 45 years ago that same family earned $5,000 and paid $1,675, or 33.5 per cent of its total income, in taxes. In 1961, the average family spent 56.5 per cent of its income on
the necessities of life.
Thursday, April 19, 2007 ~ 10:54 a.m., Dan Mitchell Wrote: Congress is keeping Andrews Air Force base plenty busy this year ferrying lawmakers all over the globe at taxpayers' expense. Rep. Bennie
Thompson of Mississippi took his wife, nine Democrats and two Republicans - Reps. Dan Lungren of California and Mike Rogers of Alabama - on a whirlwind tour of the Caribbean last week. After stops
in Honduras and Mexico, they stopped in the U.S. Virgin Islands, where the delegation stayed at the five-star Caneel Bay resort. In a separate
trip to the Caribbean last week, Rep. Eliot Engel of New York squired his wife and four Democratic members to Grenada and Trinidad. All told, the military flew at least 13 congressional delegations to various
destinations during the Easter recess -- at an estimated rate of $10,000 or more per flying hour. ...At the Caneel Bay resort, where room rates reach $1,100 per night, the spokeswoman said Thompson and his wife
paid the "government rate." But, according to the reservations department, Caneel Bay doesn't "offer any government rates." ...Rep.
Jim Oberstar, D-Minn., also led a trip to Belgium over the two-week Easter recess. In February, Sen. Bob Bennett, R-Utah, took a delegation there. "We're at war with Iraq and Afghanistan, but apparently our
members see Belgium as our most urgent international destination," scoffed one Republican member of Congress.
Wednesday, April 18, 2007 ~ 1:44 p.m., Dan Mitchell Wrote: The Swiss government is reportedly mulling a plan to improve the tax regime for hedge funds in a bid to lure more fund managers away from
London, which currently dominates the European hedge fund industry. ...One of the key proposals that has been floated includes a special 10%
rate for the fund industry, amounting to an effective cut in the marginal tax rate of 35%. "The financial marketplace is of enormous importance
to our country," Merz was quoted as observing in the report. "I know that we have a disadvantage in taxes. We understand the problem, and
we have to solve it." ...Switzerland had been overtaken by competitors which offered more flexible regulatory structures, lower taxes, and
access to the lucrative EU market on preferential terms. However, Merz told Bloomberg that the new policy was not designed as a "frontal attack" on London's hedge fund dominance, but was aimed at
stimulating greater jurisdictional competition for fund business in Europe.
Wednesday, April 18, 2007 ~ 1:20 p.m., Dan Mitchell Wrote: Sallie Mae is just another company in a highly regulated industry that's going private. The last one to announce was Texas gas giant TXU
Corp., in February. Maybe it's a sign that the recent surge in regulation of public companies has gone too far. Companies would rather go private, and scratch up money outside of public markets, than subject
themselves to the intense, ongoing and highly intrusive scrutiny of federal financial regulators. ...The tidal shift in new stock offerings from
the U.S. to Europe's money centers in recent years poses a major threat to American financial capitalism - possibly the most serious threat since
the '29 market crash. Since its enactment in 2002 following the Enron scandal, the Sarbanes-Oxley Act has become a costly albatross around the necks of American corporations. ...In 2000, U.S. markets accounted
for 50% of all initial public offerings, by dollar value. By 2005, in the wake of 2002's Sarbanes-Oxley Act and a new era of oversight of public
firms, that had shrunk to a pitiful 5% of the total. That doesn't mean U.S. markets are dead. Quite the contrary. Private-equity firms are booming, since they offer a way to take part in U.S. markets and the
U.S. economy without having to live under our onerous regulations. Indeed, as the CCMR report noted, in 2005 foreign companies raised $53.2 billion in U.S. private equity placements, more than 10 times the
amount they raised in U.S. public markets.
Wednesday, April 18, 2007 ~ 12:45 p.m., Dan Mitchell Wrote: A shrinking population in itself is not necessarily a problem. But the rise in the "old age dependency" most definitely is. Fewer and fewer younger workers will have to finance the retirement of more and more elderly people in need of a range of support services from pensions to health care. European Commission forecasts suggest that the number of people aged 65 and older as a percentage of the working population (aged 15-64) will more than double between now and 2050 to 53% from 25%. ...A continuation of the current pay-as-you-go pension systems, where employee contributions are used to pay for the pensions of those already retired, seems unsustainable. It would require an almost superhuman willingness among the shrinking pool of workers to pay ever rising payroll taxes for the increasing ranks of the older generation. It would overstretch the solidarity between generations and would only accelerate an already observable brain drain. Many of the most talented Europeans are already looking for higher salaries and lower taxes abroad. But Americans should not gloat. Entitlement programs are pushing the United States in the same direction.
Wednesday, April 18, 2007 ~ 11:37 a.m., Dan Mitchell Wrote: ...a recent study by Gregory Mankiw, an economist at Harvard...concluded that a $1 tax cut on dividends would reduce
government revenue collections by about 50 cents, after taking into account taxes on $2 of additional economic growth induced by the tax cut. A $1 tax cut from an across-the-board rate reduction would cost the
IRS about 77 cents, after taking into account taxes on the 95 cents of additional economic growth induced by the tax cut. ...If Congress is willing to forego 50 cents of revenue, the economy would grow and
people would have $2 more income. If given the choice, most people would take the $2. Now apply the conclusions of the Mankiw study in reverse -- to tax increases. The results illuminate the high costs of
providing the government with an additional $1 to spend. A purported $1 tax increase on dividends only nets the Treasury 50 cents -- but costs
Americans $2 in lost income, plus 50 cents in tax. When a higher rate is levied on all forms of income, an attempted $1 tax increase yields only
77 cents -- but costs Americans 95 cents in lost income plus 77 cents in tax. If the government were to kick up the tax increases enough to collect a full additional $1, the cost to the public would be between
$2.25 and $5, counting both tax paid and income lost. A May 2006 study by Harvard's Martin Feldstein, "The Effect of Taxes on Efficiency and
Growth," confirms the disproportionately large economic losses associated with tax increases.
Wednesday, April 18, 2007 ~ 11:30 a.m., Dan Mitchell Wrote: Typically, meat production in the United States rises by about 2 per cent a year, but the pressure from American ethanol producers
manufacturing road fuel from corn has sent the price of maize soaring to $4 a bushel. The USDA is predicting that the 2006 corn crop will sell for
an average of $3.10 a bushel at the farm gate, the highest for a decade. Faced with extortionate feed costs, cattle and poultry farmers are rearing fewer animals and slaughtering them early. That means a
sudden reversal in the annual meat production gain, representing a fall of 1.7lb per person. "There is a new demand component," Shayle
Shagam, a livestock analyst at USDA, said. "Livestock producers have to bid against the ethanol industry to get supplies of corn." The biofuel
revolution's unpleasant negative consequence was first felt south of Rio Grande, when the escalating price of corn affected a food staple.
Mexico's tortilla inflation crisis is spreading north to the heartland of rib-eye steak and chicken wings. The USDA predicts that food prices will
rise by up to 3.5 per cent this year as farmers rein in output in response to feedstock costs.
Tuesday, April 17, 2007 ~ 2:11 p.m., Dan Mitchell Wrote: This year there are a record 66,000 pages of mostly incomprehensible tax laws to comply with, and for those with really complicated returns,
526 separate forms that may need to be filled out. In 2005 an astonishing six out of every 10 taxpayers needed the help of a trained professional to complete their returns. Tax preparation is now one of
America's fastest growth industries. A Cato Institute study finds that 1.2 million workers are employed as tax accountants, lawyers, and H&R Block employees. Even so, to make sense of their taxes American
workers and businesses devote 6.4 billion hours a year, about 45 hours per return. There are now 16 separate tax breaks for college education
and several dozen for energy conservation, including write-offs for such things as purchasing electricity-saving refrigerators. About two-thirds of
Americans say they can't figure out basic IRS regulations or the tax laws on the sale of a home. Yet Congress says that it has passed 22 laws to
"simplify the tax code" over the past 40 years. ...the IRS has 100,000 tax agents, more employees than the Environmental Protection Agency, the
Occupational Safety and Health Administration and the Food and Drug Administration combined. Yet Congressional Democrats want to hire thousands more tax agents to audit more Americans and close the $300
billion "tax gap." ...there's a case to be made that the 16th amendment was an even greater failure than that other Progressive era experiment,
prohibition. We should have listened to the advice rendered by the New York Times, which while editorializing against the income tax in 1909 warned: "When men get in the habit of helping themselves to the
property of others, they cannot be easily cured of it."
Tuesday, April 17, 2007 ~ 1:44 p.m., Dan Mitchell Wrote: The Democrats say they don't want this soak-the-rich tax to hit the middle class. But the AMT's relentless growth is largely of their making.
Liberals created the AMT to punish those 21 millionaires but failed to index it for inflation. And Democrats raised the AMT tax rate in 1993--to 26% and 28% from a single rate of 24% as part of Bill
Clinton's tax increase of 1993. According to the Joint Committee on Taxation, the AMT would have hit "only" 2.6 million Americans next
year if not for that tax hike. So nearly 90% of this problem was created the last time Democrats ran the government. ...The easiest exit from this
box canyon would be for Democrats to cut the AMT rate back to its pre-Clinton levels, and then cut some spending if they want to stick with
their crazy "pay-go" rules. Better yet, they could start thinking about larger tax reform that would eliminate the AMT, lower rates for
everyone, and close loopholes and needless deductions. We can dream, can't we?
Tuesday, April 17, 2007 ~ 11:56 a.m., Dan Mitchell Wrote: The Czechs are the latest converts with Prime Minister Mirek Topolánek's announcement last week that the personal income-tax rate
will fall to a flat 15% next year, replacing progressive rates of 12% to 32%. The corporate tax rate gradually drops to 19% in 2010 from the current 24%. If the Prime Minister manages to push his plans through a
divided parliament in June, it would bring to 14 the number of single-rate tax systems in the world, all but four of them in Eastern Europe. (Hong Kong, Iceland, Mongolia and Kyrgyzstan are the
exceptions.) ...the Czechs are following in the footsteps of former Communist countries, from Russia to Romania, that have shown how flat taxes help produce rapid growth in output and revenues. In deciding
on a flat tax, it's a good bet that Prague had Bratislava on its mind. The Czechs' traditionally poorer Slovak cousins have outshined their former
countrymen with the help of a flat 19% tax on corporate and personal income. The peaceful break-up of Czechoslovakia has led to some mutually beneficial competition between the two countries. It's past time
that this competitive flat-tax spirit extends to the economies west of the old Iron Curtain.
Tuesday, April 17, 2007 ~ 10:17 a.m., Dan Mitchell Wrote: The reforms include cuts in corporate taxes and a flat income tax, and also promise to significantly cut the social subsidies paid by the
government. By 2010, corporate income tax would be slashed from the current 24 percent to 19 percent, while starting next year individual income tax would be set at a flat 15 percent, in contrast to the current
graduated income tax, which varies from 12 percent to 32 percent. ...The idea behind the reforms is that they will encourage people to work
rather than rely on subsidies from the state, Topolánek said. HVB Bank's chief economist, Pavel Sobísek, supported this position, saying the
reforms should help halt the deficit and would motivate people to prefer earnings from work to social subsidies.
Monday, April 16, 2007 ~ 5:37 p.m., Dan Mitchell Wrote: ...the Sarbanes-Oxley Act , although well intentioned, has also created unexpected and unprecedented costs for the business community - and
those costs are spawning a rapid relocation of capital (the lifeblood of prosperity) from the U.S. to other countries. Since the early 1900s,
America has been the global leader of capital formation. A century ago, J.P. Morgan and other capitalist titans moved their offices from London
to the U.S to recognize this achievement. Now they're moving back to London - a city that successfully advertises itself as a "Sarbanes-Oxley-free zone." According to the American Enterprise
Institute, the costs of the Sarbanes-Oxley law are north of $1.1 trillion. If accurate, this amounts to an 8% or 9% tax on every good and service
produced in the U.S. - a tax that is inevitably passed on to consumers like you and me. This burden is why numerous American companies are choosing to relist their companies overseas. In the past few years, the
statistical evidence for this capital flight has become undeniable. In 2001, the year before Sarbanes-Oxley was passed, half of the dollars raised in global IPOs were raised on a U.S. exchange. By 2005, that
amount had shrunk to only 5%. During the same year, the New York Stock Exchange had only six new foreign listings, but the London Stock Exchange had a whopping 129.
Monday, April 16, 2007 ~ 3:12 p.m., Dan Mitchell Wrote: ...in 2004, there was money enough to pay for another big glass headquarters and a 50% increase in staff to 2,700; to more than double
administrative costs to almost $1 billion... Now the Fund is bleeding $200 million to $300 million a year. But there is no talk of retrenchment.
Instead, the Fund seeks to become the arbiter of global exchange rates and the arbitrator of economic disputes between nations -- grandiose positions that are not needed, wanted nor enforceable in the world
economy. And the IMF seeks a new wellspring of funding to support the expansive lifestyle to which it has become accustomed. A Committee of Eminent Persons was assembled to find the money. ...The Committee
emerged with a proposal to use 13 million ounces, or an eighth of the gold stockpile [stored at the IMF], to establish an IMF endowment, an independent income stream for the Fund in perpetuity. But this isn't
really the IMF's gold. The bullion belongs to the U.S., Germany, Brazil, Ghana and other nations. More than one-quarter of it belongs to developing countries. If the IMF is allowed to open the door to this
vault, fears of new missions and unrestrained spending will be confirmed. The gold and the gain it can bring should be returned to national treasuries. India's poor could do more with the $1.5 billion that
is rightfully theirs than the IMF. ...A staff of 500 instead of 3,000 and a budget of $400 million instead of $1 billion would be easily sustained by
the investment income on the Fund's $10 billion of existing reserves.
Monday, April 16, 2007 ~ 1:36 p.m., Dan Mitchell Wrote: In December 2006, Montenegro's parliament approved a 15% flat tax on personal income. Effective July 1, 2007, it replaces the previous system of three rates... The new law sets the flat rate at 15% in 2007 and 2008, reduces it to 12% in 2009 and 9% in 2010. Montenegro has set the corporate profits tax rate at 9%, reduced from the previous two-rate system of 15% on taxable profit up to 100,000 and 20% on the gain exceeding 100,000. In 2010, Montenegro will have a unified flat tax of 9% on personal and corporate income. This will be one percentage point less than the 10% unified rate in Macedonia. Rabhushka's article also comments on the likely adoption of the flat tax in Albania and East Timor (where the IMF, not surprisingly, is advocating a higher-than-necessary tax rate): Prime Minister Sali Berisha of Albania secured approval of the Strategic Planning Committee that he chairs for a unified 10% flat tax on
personal and corporate income. The proposal has been sent to Albania's parliament for its consideration. If enacted in a timely manner, the 10%
tax on personal income would take effect on July 1, 2007. The proposed 10% flat tax on would slash Albania's corporate 20% tax in half effective January 1, 2008. ...Ramos-Horta plans to transform East Timor
into a free-trade nation, with no tariffs, sales tax, or excise taxes save on dangerous substances. He proposes to set personal and corporate
income tax rates at the same flat rate between 5 and 10%. His proposal is being drafted into law based on consultations with the World Bank, the United Nations Development Program, academics, and the
International Monetary Fund. Although the IMF had pushed for a flat rate between 15 and 20% to prevent East Timor from becoming a tax haven.
Monday, April 16, 2007 ~ 11:25 a.m., Dan Mitchell Wrote: Estonia was the first country in Central and Eastern Europe to enact a flat tax on personal and business income. Taking effect on January 1,
1994, the rate was set at 26%. Since then the rate has been lowered to 22%... The Baltic News Service reported on March 13, 2007, that the four Estonian parties agreed on tax reform that would reduce the
flat-tax rate to 18%... Secretary-General Kristen Michal of the Reform Party stated that it was Prime Minister Ansip's goal to lift Estonia to one
of the five wealthiest countries in Europe. How was this to be done? The first item in his list of economic measures was to reduce the flat-tax rate
to a much lower 12%. ...Prime Minister Ansip was asked if he would like to add extra brackets to the country's tax system to make it more progressive like Finland. Ansip replied that his government's revenues
had increased 22% and 15% respectively in the past two years, which made it difficult for him to complain about Estonia's flat tax. Indeed, his biggest problem was how to spend public money wisely, without waste.
Sunday, April 15, 2007 ~ 7:26 p.m., Dan Mitchell Wrote: ...one potential new revenue source, common in most states, remains unthinkable and unmentionable in Florida: a personal income tax. "It's
a terrible way to tax,'' said House Policy and Budget Committee Chairman Ray Sansom "We would never consider something like that. That would be the last thing. It's sort of over our dead bodies.'' Sansom,
R-Destin, said House Republicans never gave income tax the slightest thought when they came up with their tax-swap proposal. ...Senate Democrats also never considered an income tax when they drew up their
proposal... Florida's income tax aversion dates to 1924, when voters banned it through an amendment to the state constitution. The state remains a tax haven more than 70 years later... Politicians saw the ban
as a way to attract wealthy people and encourage them to invest in Florida at a time when other states just were beginning to tax incomes.
Sunday, April 15, 2007 ~ 5:31 p.m., Dan Mitchell Wrote: The Russian State Duma, the lower house of parliament, has voted to reject two amendments to the Russian tax code that would replace
Russia's flat rate of tax on personal income with a progressive system whereby those who earn more pay more tax. The amendments concerned article 224 of the tax code, which stipulates that Russian tax
residents pay income tax at a rate of 13% regardless of their income, and were introduced by the nationalist Rodina party, who argue that the
current tax system disproportionately hits the poorest taxpayers. One of the amendments proposed no tax on individual incomes up to 60,000 rubles per year, a 10% tax on incomes from 60,000 to 120,000 rubles, a
13% tax on incomes from 120,000 to 1.2 million rubles, a 20% tax on income from 1.2 million to 3.6 million rubles and a 30% tax on income over 3.6 million rubles. The bill was opposed by both Deputy Prime
Minister Alexander Zhukov and the speaker of the State Duma, Boris Gryzlov.
Sunday, April 15, 2007 ~ 11:35 a.m., Dan Mitchell Wrote: The United Kingdom government is reportedly working on proposals that would allow British-based multinationals to repatriate billions of
pounds in profits earned overseas free of tax. According to a report by the Financial Times, the Treasury is preparing to launch a consultation
document this Spring which will discuss a number of options, including an European-style "participation exemption" for foreign dividends, as
well as a different approach to the anti-avoidance rules that impose tax on profits generated in low-tax jurisdictions. The move by the British government is being viewed as part of its effort to improve the
corporate tax regime, after several warnings from business groups that recent additions to UK tax legislation are making the country increasingly uncompetitive compared with its economic rivals.
Seemingly heeding these calls, Chancellor of the Exchequer Gordon Brown announced in his budget statement last month a 2% cut in corporate tax to 28%, bringing the UK below the OECD corporate tax
average. ...it is anticipated that the change would be welcomed by companies, as they would no longer have to apply complex tax strategies to minimise taxes on repatriated profits.
Saturday, April 14, 2007 ~ 3:38 p.m., Dan Mitchell Wrote: [Rep Frank's] bill would tax Fannie and Freddie to the tune of 1.2 basis points of their total book of business -- or just over 1/100th of 1% of all
the mortgages Fannie and Freddie have bought and packaged to sell to investors. That's more than $500 million a year, with potential to grow. The Bush Administration has insisted that the fund be disbursed based
on non-political criteria, but, c'mon, this is Washington. While the first year's payout is supposed to go for housing on the Gulf Coast, a honey
pot this sweet will soon be passed out based on the interests of the most powerful Members. The larger political danger is that such a fund gives
Congress an even greater stake in seeing Fan and Fred grow. The fund amounts to an annual dividend payout to Congress. The Fannie Tax would thus make it even less likely that these "government-sponsored
enterprises" (GSEs) will ever be weaned off their implicit taxpayer subsidy and act like normal private companies. Congress could also look
at this earmarked tax precedent and try to apply it elsewhere -- say, on the profits of energy companies for a "global warming fund." ...the
current meltdown in the subprime and Alt-A mortgage markets has led to calls -- by the same people now dunning Fan and Fred -- for all kinds of new lending oversight, rules and restrictions. Mr. Frank's latest
brainstorm is to stick investors in mortgage-backed securities with the losses when subprime borrowers default. It's hard to imagine a measure
better designed to cut off credit to those Mr. Frank claims to want to help. If investors don't have legal certainty about the debt they are buying, they won't lend the money.
Saturday, April 14, 2007 ~ 1:31 p.m., Dan Mitchell Wrote: ...from a purely economic perspective, illegal immigration is arguably preferable to legal immigration. ...the illegal route is for the moment
vastly more efficient than the cumbersome legal system. Illegal immigration responds to economic signals in ways that legal immigration does not. Illegal migrants tend to arrive in larger numbers
when the U.S. economy is booming and move to regions where job growth is strong. Legal immigration, in contrast, is subject to bureaucratic delays, which tend to disassociate legal inflows from U.S.
labor-market conditions. The lengthy visa application process requires employers to plan their hiring far in advance. Once here, guest workers cannot easily move between jobs, limiting their benefit to the U.S.
economy.
Friday, April 13, 2007 ~ 3:44 p.m., Dan Mitchell Wrote: The U.S. has consistently outgrown its European allies for many years. There is little dispute among economists that the U.S.'s big advantage is
its relatively small government. Federal government outlays take up about 20 percent of U.S. gross domestic product; in France, it's almost 55 percent. ...The latest budgetary maneuverings in the U.S. have
virtually guaranteed that a good bit of that advantage will disappear, at least if Democrats remain in power. The current laws, as written, have
put the U.S. on the road to France. The primary culprit is our programs for retirees. According to the latest long-run outlook of the Congressional Budget Office, government spending may take up fully 50
percent of GDP by 2050. Yet revenue will increase tremendously over the same time period. Revenue relative to GDP, currently a smidgen more than 18 percent, will climb to 23.7 percent by 2050 and
extrapolate out to a whopping 27.5 percent by 2075. A spending binge is coming, and a good chunk of the revenue needed to pay for it is coming as well. The bad news for fans of small government is this: Even if
spending were reined in enough to keep it equal to revenue, the size of the government will increase by about 50 percent in the coming decades.
Friday, April 13, 2007 ~ 2:15 p.m., Dan Mitchell Wrote: With the Sarbanes-Oxley regulatory regime making life miserable for many public companies, a number of troubled firms have innovatively
turned to private equity to better their fortunes - or even save themselves. ...So why do prominent members of both parties in Congress, and even the Bush administration's Justice Department, seem
poised to declare war on private equity? ...It's not surprising that Democrat Barney Frank, chairman of the House Financial Services Committee, plans hearings on private equity. More alarming, Charles
Grassley, ranking Republican on the Senate Finance Committee, is considering joining that panel's Democratic chairman, Max Baucus of Montana, in pounding the PE industry with a massive tax increase.
Private equity firms usually take a 20% profit share, or "carry," on their complex deals. Under current law, the carry is subject to the 15%
long-term capital gains tax. Grassley wants it taxed at the 35% rate for ordinary income. The New York Times has hailed this "Grassley Tax" on
jobs and capital as the first step toward a general capital gains tax hike - a surefire means of pulling the rug out from under the vibrant economy. ...Congress will get just $5 billion to $7 billion in annual
revenues from the Grassley Tax - hardly worth its ruinous economic costs. ...Does the senior senator from Iowa, who likes to tout himself as
a tax cutter, really want his epitaph to end up being: "Sen. Chuck Grassley, R-France"?
Thursday, April 12, 2007 ~ 12:30 p.m., Dan Mitchell Wrote: Brussels has launched a drive to close the gaping loopholes in a two-year-old European savings law... early evidence is that the directive
is failing to bite. Switzerland, the world's biggest offshore financial centre, only raised EUR100m in the first six months of the law's operation. Meanwhile Mr Kovacs is worried that some savers have
moved to Hong Kong and Singapore - not covered by the directive - and he is trying to arrange reciprocal deals with them. ...Whether he can persuade EU member states and third countries to give their unanimous
agreement is questionable: diplomats say big offshore financial centres like Switzerland, Luxembourg and Austria only agreed to the directive precisely because it contained so many loopholes. ...A Commission
working document...proposes...extending the directive's reach to include companies and trusts. It also floats the idea of blocking the deliberate routing of interest payments through branches of banks located in
jurisdictions not covered by the directive, whose reach also includes several Caribbean islands, the Channel Islands and the Isle of Man. The
working paper suggests that the tougher definition of "beneficial ownership" used for anti-money laundering obligations should be
adopted for the savings directive. This would bring discretionary trusts and companies into its scope. It suggests imposing a new obligation on EU banks to report - or withhold - interest payments made through
non-EU branches. ...It suggests reconsidering whether interest-generating securities "wrapped" within life insurance, pension or annuity contracts should be exempt from the directive.
Thursday, April 12, 2007 ~ 12:02 p.m., Dan Mitchell Wrote: In an interview with French business daily La Tribune, Xavier Bertrand, a spokesman for the centre-right presidential candidate, said that
Sarkozy wants to lower the rate of France's corporate tax to 25%, bringing the tax down to about the average rate in the European Union. However, unlike France's European partners, Sarkozy is keen to link a
cut in corporate tax to a series of governance criteria, and companies would have to demonstrate that their employment, wage and investment
strategies were "synchronised". ...Sarkozy fears that with key European competitors having recently announced corporate tax cuts, including Germany, Spain and the UK, France risks becoming increasingly
unattractive as a place to do business and cannot afford to do nothing. Under plans agreed by Germany's coalition government, the effective corporate tax burden there will fall to below 30% from almost 40% in
January 2008, while the UK's Chancellor of the Exchequer Gordon Brown announced a 2% cut in corporate tax in his recent budget speech. The old EU15 also continue to face growing tax competition from the
new EU entrants in Central and Eastern Europe, such as the Czech Republic, where the government has announced proposals for a 15% flat tax on personal income and a 5% cut in corporate tax to 19%.
Thursday, April 12, 2007 ~ 7:47 a.m., Dan Mitchell Wrote: The widely acclaimed Slovak public finance reform implemented a flat 19 percent rate on personal income tax, corporate income tax and
value-added tax (VAT). It also included large cuts in social subsidies, along with expansive pension and health care reform. The changes were instrumental in the World Bank naming Slovakia the top economic
reformer of 2004. Since then, the Slovak unemployment rate has dropped from 18 to 10 percent, while gross domestic product (GDP) growth in 2006 rose to 8.3 percent. The average growth GDP growth in
Europe is 2.8 percent and is around 5 percent in the CEE. "The Slovak public finance reform will be studied in economic textbooks all over the
world one day," said Vladimír Pikora, macroeconomic analyst at brokerage Next Finance.
Thursday, April 12, 2007 ~ 6:22 a.m., Dan Mitchell Wrote: ...the government...says it will abolish [the wealth tax] this year. This tax on the "rich" dates back to 1947 and is imposed on assets -- the
family Volvo, house, bank accounts -- above 1.5 million kronor ($215,000) for singles and three million kronor for couples. The current rate is 0.75%, down from 1.5% last year. That's on top of income taxes,
which range between 29% and a top marginal rate of about 60%. Wealth taxes used to be de rigueur in Europe, where there are only a few holdouts. France's is between 0.5% and 1.8% on assets above $1 million.
In Spain, it's 0.2% to 2.5% on assets above $223,000. But rather than transferring wealth, wealth taxes transfer the wealthy. In Sweden, tennis star Björn Borg, ABBA's Björn Ulvaeus and Ikea founder Ingvar
Kamprad are among the mega-rich who have fled the country, taking their money with them. Getting rid of the wealth tax is "a step on the way back toward making Sweden an entrepreneurial country," said
Finance Minister Anders Borg. That's sound capitalist advice from the cradle of welfare socialism.
Wednesday, April 11, 2007 ~ 10:47 p.m., Dan Mitchell Wrote: In a bid to promote growth and improve the business climate, the administration of Albanian Prime Minister Sali Berisha plans a major
overhaul of the tax system. The biggest change is a switch to a flat tax. "As of January 1st, 2008, Albania will have implemented the 10% flat
tax system, one of the lowest in Europe," Berisha told a business community meeting in late March. Corporate taxes, currently at 20%, are to be slashed in half. Social security contributions from businesses
will likewise be capped at 10%. The government and other supporters of the reform say it will widen the taxable base and simplify tax administration, while also making Albania an easier place to invest.
According to Finance Minister Ridvan Bode, the changes will lead to a more streamlined fiscal system. "The flat tax helps eliminate the potential arbitrage between corporate tax, dividend taxes and the
income tax," he says. VAT and other taxes will also be gradually reduced in order to woo investors, the minister added. ...In the past, the IMF has been wary of plans to reduce taxes in Albania. This time,
however, it seems more receptive -- provided the overhaul is combined with more effective revenue collection. "We will negotiate with the Albanian government about the tax reduction, depending on the tax
collection," IMF representative Ann Margaret Westin told the press.
Tuesday, April 10, 2007 ~ 1:39 p.m., Dan Mitchell Wrote: In 1913, the CCH Standard Federal Tax Reporter, which spells out the U.S. tax code in all its riveting detail, was 400 pages long. In 2007, it
contained 67,204 pages. As the tax code turns ever more unwieldy, deciphering it has become more art than science, tax experts say. With the April 17 deadline approaching, USA TODAY decided to test this
theory by asking three veteran tax pros - two enrolled agents and one certified public accountant - to prepare a tax return for a hypothetical
family, the Baileys. ...All the preparers came up with varying results. To its credit, USA Today draws the obvious conclusion and denounces the current tax code. Unfortunately, other than making some generic comments about the need for reform, the newspaper does not explain why fundamental reform like a flat tax is the only solution: The fact that they couldn't agree is testament to how impossibly complex the tax code has become. It also illustrates the utter contempt Congress
has for the Baileys and their real-life contemporaries. This year, individuals and companies will spend about $300 billion, according to the non-partisan Tax Foundation, on tax preparation costs. To put that
in perspective, that is a 20% levy on top of the $1.5 trillion they will actually pay in taxes. Some 60% of filers - including IRS Commissioner Mark Everson - will pay a professional to do their taxes for them.
Tuesday, April 10, 2007 ~ 11:16 a.m., Dan Mitchell Wrote: In a French presidential campaign with recurrent anti-capitalist undertones, the Socialist Party candidate, Ségolène Royal, took aim at
banks Tuesday, accusing them of penalizing the poor with low interest rates on savings and high overdraft fees. ...Banks should pay customers more interest on current accounts than the 0.5 percent to 3 percent
common today, Royal said. They should also credit bank accounts on the day a transfer is made, and give every young person with a "project" a free EUR10,000 loan that would be guaranteed by the state.
Tuesday, April 10, 2007 ~ 9:48 a.m., Dan Mitchell Wrote: Michigan's private sector is contracting compared to the expanding tax bases of every other state. The economic fog will lift when policies are enacted that make Michigan a good place to do business for newcomers as well as for existing firms. This won't happen if the legislators in Lansing, the state capital -- who advocate heavier tax burdens on the remaining taxpayers to subsidize or attract firms handpicked by government officials -- get their way. These targeted subsidies simply redistribute scarce income. Nor is the governor, Jennifer Granholm, moving in the right direction. Her recent call to impose a 2% tax on most services is a nonstarter. But she's also calling for a new tax on the estates of wealthy residents, giving those with the means an even more urgent reason to leave. Michigan's slide will continue. If Michigan policy makers want the state to prosper, they should return to the policies that originally helped create wealth. First on the list would be repeal of the personal income tax: Michigan was a formidable competitor prior to 1967, when the state had no personal income tax. Why not return to these days by abolishing the
state's 3.9% personal income tax and replace it with nothing? Even a slow phase-out of the tax will allow the state to vie for business, new
jobs and private-sector investment with fast-growing Florida, Texas and the nearly half-dozen other states that do not levy an income tax. If
Florida and Texas -- two of the fastest growing states in the union -- can survive without income taxes, Michigan can too.
Monday, April 9, 2007 ~ 9:49 a.m., Andrew Quinlan Wrote: Hong Kong and Singapore have enjoyed rapid growth and now rank among the world's wealthiest jurisdictions-thanks, in part, to their low tax rates and open markets. But no good deed goes unpunished. Today, both thriving jurisdictions face possible economic sanctions courtesy of the U.S. Congress. … Two proposals attacking low-tax jurisdictions are currently making the rounds in Washington. The first, Michigan Senator Carl Levin's "Stop Tax Haven Abuse Act," would change U.S. tax laws to deter Americans from investing in 34 low-tax jurisdictions. Inclusion on the list is based on Mr. Levin's claim that a jurisdiction has been described as a "secrecy jurisdiction" by the U.S. Internal Revenue Service in court filings against allegedly tax-dodging third parties. In Asia, Singapore and Hong Kong would be among the jurisdictions effectively blacklisted. Even worse, the bill authorizes sweeping financial sanctions for jurisdictions that do not changes their tax and/or privacy laws to facilitate the extraterritorial enforcement of U.S. tax law. … The other, equally pernicious, proposal is sponsored by Democratic Senator Byron Dorgan of North Dakota. His bill creates a blacklist of 40 nations and territories, though Senator Dorgan's two-page bill does not explain how nations got on his blacklist or how they could get off the list. The legislation would require American companies to act as if income earned in those jurisdictions were U.S.-source income, a change that would dramatically boost their tax burdens. Hong Kong and Singapore aren't currently on Senator Dorgan's list, though that could change as the bill wends its way through the legislative process. … The blacklists may expand at the Treasury Secretary's pleasure. Given the toxic combination of anti-free trade sentiment and hunger for new tax revenue bubbling in the Democratic Congress, there is speculation that the sponsors of the two bills may create a combined blacklist of 46 jurisdictions. But even if a jurisdiction escapes that list, both proposed bills would give the Treasury Secretary unchecked authority to add new "tax havens" to the list. CF&P just returned from a two-week trip meeting with government officials in Asia. These proposals, particularly the Levin legislation, already are causing unease in Asia. The Hong Kong and Singapore governments are very aware of the threat posed by these pieces of legislation. The private sector in both jurisdictions also is paying attention, particularly since Senator Levin implies that his legislation will boost tax collections by $100 billion yearly. This suggests a steep increase in the tax burden, though it is likely that there would be very little if any additional tax revenue since American investors and companies would change their behavior to avoid the tax-most likely by pulling money out of the blacklisted jurisdictions. Center for Freedom and Prosperity leads opposition to Levin and Dorgan bills: Ironically, America may be the biggest victim if the Levin and Dorgan bills are approved. The Center for Freedom and Prosperity already has
sent a letter to Treasury Secretary Henry Paulson explaining why the Levin and Dorgan proposals are contrary to U.S. interests. Signed by
representatives of 45 think tanks, free-market groups and taxpayer organizations, the letter attacks the proposals on three fronts. … First, in a competitive globalized world, discriminating against American
investors, entrepreneurs and companies would create opportunities for other nations to grab market share. Second, the bills disproportionately target poor nations, as about three-fourths of the blacklisted
jurisdictions are from the developing world, further reducing America's list of friends around the world. Lastly, the bills almost surely would get America in trouble with the World Trade Organization because of
national-treatment and most-favored-nation obligations.
Monday, April 9, 2007 ~ 9:07 a.m., Dan Mitchell Wrote: ...a new government report...has revealed just how vulnerable taxpayer data contained on employee laptops is to theft, fraud and other criminal
abuses. The report by the Treasury Inspector General for Tax Administration (TIGTA) found that hundreds of IRS laptop computers and other computer devices had been lost or stolen, employees were not
properly encrypting data on the computer devices, and password controls over laptop computers were not adequate. TIGTA concluded that as a result, "it is likely that sensitive data for a significant number
of taxpayers have been unnecessarily exposed to potential identity theft and/or other fraudulent schemes." The report prompted harsh criticism
from Grassley, the senior Republican on the Finance Committee, who commented that: "Thieves are very good at mining sensitive data for
their own end. One stolen IRS laptop could put thousands of taxpayers in jeopardy. It's hard to see why this is still a problem when the IRS knew
about it more than three years ago." ...The TIGTA report shows that theft of IRS computer equipment potentially containing sensitive information on thousands of taxpayers is running at alarmingly high
levels. Between January 2, 2003, and June 13, 2006, IRS employees reported the loss or theft of at least 490 computers. A large number of IRS laptops were stolen from employees' vehicles and residences, but 111
incidents occurred within IRS facilities, where employees were likely not storing their laptop computers in lockable cabinets while they were away
from the office. ...TIGTA also evaluated the security of backup data stored at four offsite facilities and found that data was not encrypted and adequately protected at the four sites. For example, at one site,
non-IRS employees had full access to the storage area and the IRS backup media. Envelopes and boxes with backup media were open and not resealed. At another site, one employee who retired in March 2006
had full access rights to the non-IRS offsite facility when TIGTA inspectors visited in July 2006.
Monday, April 9, 2007 ~ 8:34 a.m., Dan Mitchell Wrote: ...two divergent hypotheses emerged to explain America's dominance in the capital markets. On the one hand, economists pointed to structural
features to explain America's singular position. After World War II, the U.S. was the world's only source of capital. Europe and Asia, especially
Japan, were emerging from vast physical and economic devastation. In sharp contrast the U.S. was building, not rebuilding. The accumulation
of U.S. savings and pension assets created the largest pool of investment capital in history. Professional bureaucrats at the Securities and Exchange Commission and their allies in the corporate and securities
bar had another theory. America, they said, was dominant thanks to its superior government regulations and protections for investors. According to this hypothesis, if a company didn't want to go public in the
U.S. it must have something to hide. On this view, the additional regulatory freight brought into play by the 2002 Sarbanes-Oxley Act should have been a godsend. By restoring the confidence in U.S.
corporate governance that had been shaken by the Enron-era corporate scandals, America would assure its continued dominance of world capital markets well into the new millennium. Alas, things have not quite
turned out that way. Whatever good might be said of Sarbanes-Oxley (and there isn't much good to be said for its intrusive, circulatory and duplicative grab-bag of rules), the statute has triggered a complete
change in the way the world views the U.S. as a center for capital formation. ...prior to Sarbox, issuers seen as trying to avoid the U.S. capital markets stuck out like a sore thumb. This made their securities
hard to sell and served to entrench the U.S. as the dominant venue among the world's capital markets. Sarbox upset this comfortable post-war competitive equilibrium. It is now becoming not just
acceptable, but actually fashionable, for issuers to avoid U.S. markets. Unfortunately for the U.S., this means that even if the SEC granted
relief to foreign issuers tomorrow -- or even if the entire statute were repealed -- the game has now changed. Lots of companies already have gone public in London and Hong Kong (both of which have surpassed
the U.S. in the market for IPOs) with great success; there is no longer any need to make an excuse for doing so. From a domestic policy perspective, this may be the largest hidden cost and unforeseen
consequence of Sarbox. The U.S. has lost its first-mover advantage; there is no longer any fear that investors will think a company desiring
to go public necessarily has something to hide if it chooses to avoid the litigation burden and SEC compliance issues in the U.S. Sarbox has given issuers what they have been waiting for: a reasonable basis for
avoiding the U.S. capital markets. All of a sudden it is no longer fashionable to be a U.S. public company: It's for suckers who can't
access the piles of sophisticated "global" capital available elsewhere. U.S. financial institutions -- Bear Stearns, Goldman Sachs, Morgan
Stanley, Merrill Lynch, JPMorgan Chase and Citigroup -- are moving their traditional business offshore to follow their clients. Nicholas Andrews, the Hong Kong-based head of Asia equities at JPMorgan, has
gone so far as to tell the press, "It's irrelevant to us where companies list, we're able to help them in whichever market makes sense the most
for their business." Moreover, as noted by the Committee on Capital Regulation led by Messrs. Hubbard and Thornton, U.S. companies are staying private rather than face the dreaded one-two punch of the U.S.
plaintiffs' bar and the SEC's regulatory juggernaut. Even more startlingly, some U.S. issuers are tapping foreign capital markets. Up from zero 10 years ago, last year more than a dozen U.S. companies
went public -- in the U.K. ...
Monday, April 9, 2007 ~ 8:12 a.m., Dan Mitchell Wrote: The Bush Administration did the economy a favor this week by making a recess appointment of economist Susan Dudley as czar for federal
regulation policy. Ms. Dudley, a leading authority on the costs and benefits of regulations, will be director of the Office of Information and Regulatory Affairs (OIRA). ...the Dudley nomination...really brought
opposition from the far side of the Democratic moon. The issue here is cost-benefit analysis, which is critical to ensuring that the tens of thousands of federal rules handed down by Uncle Sam, at a cost of more
than $1 trillion a year (nearly $10,000 per household), do in fact enhance the environment and public safety without choking the economy. Meet the Dudley opposition. The Natural Resources Defense
Council calls her a "radical reactionary" who "stands against regulating poison and pollution." Public Citizen published a 60-page jeremiad on
her record. Joan Claybrook summed up the left's displeasure: "the free market [is] her guiding light." Has the day arrived that this is
disqualifying for federal office? ...In the left's economic universe, a regulation is, of its nature, going to produce only benefit; consideration
of costs is so much background noise. That mindset, however, can lead to multiplying rules of the command-and-control variety that in time can derail the economy. There's a big difference between requiring
reductions in radiation exposure from X-ray equipment ($23,000 per life saved) and radiation emission controls at uranium fuel cycle facilities
($34 billion per life-year saved). To escape these effects, every President since Jimmy Carter has supported weighing cost versus benefits.
Sunday, April 8, 2007 ~ 12:59 p.m., Dan Mitchell Wrote: The office of the Architect of the Capitol, which is responsible for stocking paper towels in bathrooms throughout the Capitol complex,
recently released its requirements for paper supplies to potential vendors. …The specifications, written with the detail only your massive federal bureaucracy could provide, spell out eight requirements for
towels fit for the Capitol. Among them: "C-fold paper towels provided shall have a minimum unfolded width of 10.25 inches, with a permissible variance of plus .25 or minus .50 inches, and maximum length of 14
inches. Each towel shall have a minimum area of 130 square inches. The folded width of each towel shall be 3 inches, with a permissible variance
of plus .25 or minus .50 inches. The rate of absorption of paper towel material provided shall not be greater than 20 seconds for the absorption of 0.1 milliliter of water on any representative sample of
paper towel as submitted. The color of the paper towel shall be white, with a minimum brightness rating of 70 when measured in accordance with the requirements of test method T-452 of the Technical Association
of the Pulp and Paper Industries. The minimum thickness of 12 single plies of the paper towel material provided shall be 0.070 inch when
measured under an applied pressure of 0.5 psig." And we won't even get into the "average bursting strength" requirement of the two-ply toilet paper.
Sunday, April 8, 2007 ~ 11:11 a.m., Dan Mitchell Wrote: ...school choice programs - developed to free poor urban and rural children from failing public schools - represent this century's defining
civil rights issue. While the battle is brewing in Texas and Florida, nowhere is it more crucial than in Ohio. Here, newly elected Governor Ted Strickland, in a nod to his political allies in the state teachers'
unions, is waging an aggressive attack on school vouchers and charter schools. ...large numbers of Ohio's public schools, particularly those in
the state's urban areas, fail to teach our children. Public school failure can be measured in many ways. For example, over 115,550 students in
Ohio's eight largest cities are attending 251 schools not meeting even the state's minimal education standards. ...Ohio's charter schools and vouchers are changing the dynamic and offering a solution. The
programs infuse the underperforming public education system with a healthy dose of free market competition. And through that competition, improve education across the board.
Sunday, April 8, 2007 ~ 9:41 a.m., Dan Mitchell Wrote: I'm used to the government telling me that I shouldn't hold up liquor stores, or kill people because they looked at me the wrong way, or that I
have to pay taxes, or which side of the road to drive on, or even how deep to bury my irrigation system. I can live with those things. But this
notion that I can only water my lawn at certain times seems like a whole new encroachment on my liberty. Then again, perhaps I shouldn't be surprised. Rather than defending liberties, which was what I was taught
that the purpose of government was, it seems that modern government has decided that its role is instead to circumscribe them as much as possible. ...the South Florida Water Management District had decided to
drop the level of Lake Okeechobee three feet, to reduce the chances of a catastrophic overflow and flood in the event of a storm last year. A storm that never happened. So much for the prescience of government
bureaucrats. As a result, because the lake is the major repository of water for south Florida, there was little slack in the system when we got
an abnormally low amount of rainfall this year... So here we are, in the spring of 2007, with rain below average, with a low lake level, little else
in the way of reservoirs, and a water shortage. What is the response? Well, a rational response might be to price a scarce commodity such that
people will use it only as they need it, and not frivolously. ...Instead, we get the response of the local commissars. So, not allowing the market to
work, and not allowing prices to provide signals to the participants, they have decided to run our lives for us. Not well, mind you, but that's not
the point, is it? I live at an odd numbered address. That means that if I want to water my lawn, I can only do it on Monday, Wednesday and Saturday mornings, from four to eight AM. I can water my plants with a
hose on the same days, but only between five and seven PM. My neighbors across the street, and behind my house on the next block, get Sunday, Tuesday and Thursday. ...Over thirty years ago, in the first
OPEC oil embargo, the government, rather than allowing prices to rise to account for the reduced supply, told people when they could purchase
gas based on the parity of their license plate -- even one day, odd the next. My recollection was that this did nothing to alleviate the shortage
-- the lines remained. The problem was only solved when Nixon-era price controls on oil were lifted, the market was allowed to work, and oil
prices eventually (and it didn't take all that long) fell to historical lows. ...here's a radical concept. How about pricing the commodity to the
market? Maybe, if people had to pay more for water to water their lawn, they'd use less of it? Yes, I know that it's hard to believe, but there really
are some people out there who buy less of something if the price is higher.
Saturday, April 7, 2007 ~ 3:41 p.m., Dan Mitchell Wrote: The Czech government has announced a raft of major tax reform plans, which include a flat tax on personal income, a significant reduction in
tax on corporate income, and changes to the value-added tax regime. Under the proposals announced by Finance Minister Miroslav Kalousek, if approved Czech taxpayers will pay a 15% flat tax on their personal
income, while companies will see their income tax rate drop to 19% from the current 24% by 2010. At present personal income tax rates vary according to wages, and range from 12% to 32%. The lower rate of
value-added tax will increase under these reforms to 9% from 5%, but the headline rate will remain unchanged at 19%. ...with the tax cuts accompanied by some major cuts in welfare spending, such as
unemployment benefits and healthcare, the government is sure to encounter opposition from the left.
Saturday, April 7, 2007 ~ 11:36 a.m., Dan Mitchell Wrote: Nicolas Sarkozy, the frontrunner in the French presidential election campaign, on Monday urged the European Union to develop a
co-ordinated economic strategy to protect its citizens from globalisation and to retain its popular legitimacy. ...Mr Sarkozy suggested the European Central Bank should weaken the euro to stimulate economic
growth rather than focus exclusively on combating inflation. ...François Fillon, a senior adviser to Mr Sarkozy, said it would be "very difficult"
to persuade French voters to re-engage with the EU without a concerted industrial and economic strategy.
Friday, April 6, 2007 ~ 5:09 p.m., Dan Mitchell Wrote: Estonian lawmakers on Wednesday gave Prime Minister Andrus Ansip the go-ahead to form a new center-right government that is expected to
cut the Baltic country's flat income tax. ...Ansip's center-right Reform Party, the conservative IRL union and the centrist Social Democrats
agreed earlier this week on a coalition platform. They plan to continue market-friendly policies in the country of 1.3 million, including reducing
the flat tax from 22 percent to 18 percent by 2011. High-tech Estonia has one of the European Union's fastest-growing economies, and some economists credit the flat tax, which means everyone pays the same tax
rate as opposed to the progressive rate that most European countries use.
Friday, April 6, 2007 ~ 2:28 p.m., Dan Mitchell Wrote: What's at issue is Major League Baseball's right -- in a free-enterprise economy -- to package and market its products. In this case, the product
is a package called "Extra Innings," which last year attracted about half a million cable and satellite subscribers who could afford $179 annually
for the kick of having access to some 60 out-of-market games a week. MLB offers a similar deal via its Web site, MLB.TV, where customers can watch up to six games simultaneously on their computer screen. In
2009, however, MLB plans to start its own Baseball Channel, and so it's been shopping for partners with two goals in mind. One is to get broadcast expertise and risk-sharing for the always-expensive launch of
a new channel. MLB also wanted a commitment from carriers to transmit the Baseball Channel to 80% of their digital subscribers. To make a long story short, DirecTV stepped up to the plate and met MLB's
terms -- while InDemand, the consortium of cable giants Comcast, Time Warner and Cox, along with Echostar's Dish TV, did not. Last month,
MLB announced that, as of April 1, "Extra Innings" would be broadcast exclusively on DirectTV, which would also have 20% equity in the new
Baseball Channel. Sore losers InDemand and Echostar ran to Congress. They found eager ears on Senators Kerry and Specter, who happen to represent cities which are Comcast's (headquartered in Philadelphia)
biggest strongholds. ...Last time we looked, access to every baseball game was not a human right. If it were, and if that were the Senators' true concern, they might have made a fuss about local games in
Philadelphia (including the Eagles, Phillies and Flyers) being available only to customers of Comcast, from the Comcast Sports Network. ...On
the bright side, while baseball officials continued to talk with InDemand and Echostar yesterday, the League has stood firm so far -- asserting its
right to do honest business without government interference, and pointing out that it has offered every interested party a fair bite of the pie.
Thursday, April 5, 2007 ~ 1:50 p.m., Dan Mitchell Wrote: While the government is unlikely to turn Mumbai into a tax haven like Mauritius, a major overhaul of the tax regime is likely to be part of the
agenda of turning Mumbai into an international financial center (IFC). The executive committee on the issue in its report has pressed for far reaching financial reforms...bringing about a "general regime of
uniformly low marginal tax rates, applied universally across the board with as few tax incentives, exceptions and exemptions as possible." ...One of its key recommendations is abolishing the controversial
securities transaction tax (STT) and stamp duties, as they are cascading taxes and so force businesses to leave venues with high effective
taxation. ...The panel suggested a low or zero taxation of capital gains, as it would put India at par with other countries. The report suggests
that limited liability partnerships be turned into tax-efficient pass throughs.
Thursday, April 5, 2007 ~ 11:32 a.m., Dan Mitchell Wrote: The European Union and Australia have started a war of words over climate change, with Canberra calling on Brussels to live up to its own
global warming promises before lecturing others. "You've got the spokesman for a group of countries lecturing us about not having signed
Kyoto, yet the great bulk of the countries on whose behalf he speaks are falling well behind their Kyoto targets and are doing less well than
Australia in meeting them," Australia's prime minister John Howard said on Monday (2 April), reacting to critical comments made by EU environment commissioner Stavros Dimas the same day. ...according to
the Australian leader, 12 EU countries are likely to miss their Kyoto targets with the critical spotlight focusing on Portugal, Denmark, Ireland, Spain and Italy. "Our answer to the spokesman for the
European Union is look to your own affairs, get your countries complying with the targets you've proclaimed," Mr Howard said, stressing any binding targets would harm Australia's economy, which
relies on its position as the world's second largest coal exporter.
Thursday, April 5, 2007 ~ 11:06 a.m., Dan Mitchell Wrote: Payday lenders offer short term loans, typically of between $100 to $500, to workers who need cash in advance of their next paycheck.
Consumer groups and banking industry critics complain that the fees charged on payday loans are "predatory" and ensnare the poor in a
"debt trap." The Center for Responsible Lending, a liberal activist group, claims the industry costs Americans $4.2 billion a year by
charging exorbitant fees. ...payday loans offer a valuable service to moderate income workers. Most borrowers have incomes between $25,000 and $50,000, and payday loans are cheaper than most
alternatives for those facing short-term financial distress. Critics complain that the annual percentage rate (APR) on a two-week loan of $100 with a $15 fee amounts to a predatory 390%. But the equivalent
APR cost to the borrower of writing a bounced check can exceed 1,300%, while a credit card late fee charge can reach 700%. Some borrowers will also go to loan sharks as an alternative, and we know
how high their "fees" can be. ...The most common proposals in Congress would cap payday loan interest rates at 36% APR. This would cut the fee
to $1.38 for a $100 loan, less than the charge for a typical $100 ATM fee, and far below the check transaction cost. This could shut down much of the industry. But to what end? This debate is much like the
controversy over bank ATM fees a few years ago. Consumer advocates demanded laws capping fees, and where those took effect the result was not so much lower charges but fewer ATMs and thus less convenience.
Wednesday, April 4, 2007 ~ 12:12 p.m., Dan Mitchell Wrote: Ireland's European Commissioner, Charlie McCreevy, has launched a strong attack on the European Commission's efforts to introduce a
common business tax base across Europe. McCreevy has warned of the danger of a ''bully-boys' charter'' which would favour large states over smaller members like Ireland. ...McCreevy said the tax harmonisation
issue was being ''aggressively pushed forward by some in Europe''. ...Referring repeatedly to ''tax harmonisation forces'', McCreevy warned that, were they successful, it would threaten inward investment to the
EU, undermine competitiveness and discriminate against smaller EU states. Despite outright opposition from a number of member states, including Ireland, the commission has continued to lay the groundwork
for the adoption of a common tax base, which is feared by many to be a prelude to the harmonisation of tax rates across Europe. Such a move
would inevitably lead to considerably higher tax rates in Ireland, which has among the lowest corporate and personal tax rates in Europe. Brussels sources say there is increasing resentment about the success of
Ireland's low-tax strategy - which is seen by many as ''unfair tax competition''.
Wednesday, April 4, 2007 ~ 11:50 a.m., Dan Mitchell Wrote: ...there is quite extensive tax competition within the EU. Developments in the last 10 years show this to be fairly evident. Statutory corporate
tax during this period has gone down on average by between eight to ten percentage points. The difference between the average corporate tax in the older 15 member states and the 10 newer member states widened
slightly. Sixteen out of 25 countries reduced their rate during the four years up to 2006. No country increased it.
Wednesday, April 4, 2007 ~ 10:10 a.m., Dan Mitchell Wrote: On Thursday the House voted against giving $4,500 vouchers to low-income kids in failing public schools, 56-63... school choice
advocates had every reason to believe they would win... Earlier in the week they had won several procedural votes with as wide as a seven-vote margin, and Speaker of the House Bobby Harrell was
promising to help line up votes. ...Rep. Smith...held a press conference Thursday flanked by his 11-year-old son at which he declared that by electing voucher opponent Democrat Jim Rex as state education
superintendent last year, the voters had rejected school choice. Mr. Rex won his election by just 455 votes out of more than a million cast, but before long the House was voting down giving poor parents the same
choice Mr. Smith exercises in sending his son to the expensive private Heathwood Hall Episcopal School in Columbia. ...school choice was defeated by Democrats who came out to defend the public education
status quo and Republicans (representing districts stocked with parents who have already exercised their choice by moving to neighborhoods with good public schools) who joined with them. There are an estimated
200,000 students trapped in failing public schools in South Carolina; about 117,000 of them are minorities.
Wednesday, April 4, 2007 ~ 7:34 a.m., Dan Mitchell Wrote: One of the great untold stories is how armed private citizens, exercising their constitutional right to self-defense, have repeatedly saved their
lives and others' and have helped reduce violent crime. Since 1991, according to NRAILA.org, 23 states have adopted RTC laws. In the same period, the number of privately owned firearms has risen by nearly
70 million and violent crime is down 38%. In 2005, RTC states had, on average, a 22% lower violent crime rate, a 30% lower murder rate, a 46% lower robbery rate and a 12% lower aggravated-assault rate.
Researchers John Lott and David Mustard have found that 'allowing citizens to carry concealed weapons deters violent crimes, and it appears
to produce no increase in accidental deaths. If those states that did not have right-to-carry concealed gun provisions had adopted them in 1992,
approximately 1,570 murders, 4,177 rapes and over 60,000 aggravated assaults would have been avoided yearly.'
Tuesday, April 3, 2007 ~ 10:43 p.m., Dan Mitchell Wrote: A European Union target to slash greenhouse gas emissions 20 percent by 2020 could cost the bloc up to 1.1 trillion euros ($1.5 trillion),
according to a new study by consulting group McKinsey & Co. ..."We expect, based on a well-balanced, sensible use of available environmental protection technologies, annual costs of between 60 and
80 billion euros out to the year 2020," the newspaper quoted McKinsey energy expert Thomas Vahlenkamp as saying. That would result in total
costs of between 800 billion to 1.1 trillion euros over the next 14 years. So what are Europe's politicians planning to do? According tot he EU Observer, they want to misallocate capital by using government to steer money into selected energy-saving projects. If Jimmy Carter's synfuels program is any indication, taxpayers are poised to throw money down a rat-hole: Earlier this month, member states legally bound themselves to using 20 percent of energy from renewable sources and cutting CO2 emissions by
20 percent by 2020, but it remained unclear who would pay for the revolutionary switch from gas, oil and coal to green power and all the energy-saving measures. ...Speaking to MEPs in the industry committee
on Tuesday (27 March) the boss of the European Investment Bank (EIB), Philippe Maystadt, gave some hints about how the enormous cost may be met, with the bank earmarking EUR800 million a year of lending for
renewable energy projects in 2007 to 2010. ...German finance minister Peer Steinbruck - speaking at the EU summit on 9 March - also suggested that the EU's EUR7 billion a year science and research budget
could lead to technological breakthroughs, member states could probably offer tax incentives for renewable-type firms and the 2009 EU budget review should take the climate goals into account.
Tuesday, April 3, 2007 ~ 8:15 p.m., Dan Mitchell Wrote: Congress is preparing to rewrite farm policy this year, which means the farm lobby will try to tap taxpayers for another $18 billion or so per year to subsidize agribusiness. Some things in politics can't be changed. But is it asking too much for Congress at least to cut off subsidies to the richest Americans, many of whom don't even farm for a living? That's the question at the heart of a debate over a Bush Administration proposal that would reduce the eligibility cap for farm subsidies to an annual adjusted gross income (or AGI) of $200,000, averaged over three years. The current cap is $2.5 million in AGI, which means that subsidies now go to many Americans whose income is among the top 2.3% of all taxpayers. ...In 2004, 276 Washington, D.C. "farmers" filed an IRS "Schedule F" -- for taxpayers who actively participate in their farms -- and 80 of them reported AGI of more than $200,000. If you've been to the District of Columbia lately, you've probably noticed it isn't overrun with corn fields. The D.C. 80 almost certainly do something else as their main occupation, and we'd like to know how many of them also cadge farm payments on the side. Who are these mystery farmers anyway? Nationwide there were nearly 85,000 Schedule F filers who earned more than $200,000 in 2004, and 25,000 of those received farm payments. Unfortunately, but not surprisingly, this modest initiative is meeting resistance on Capitol Hill. Republican and Democratic politicians want to keep the gravy train rolling down the tracks: With all the political and media chatter about "inequality" these days, you'd think this welfare for the rich would cause a stir. But this is
Washington, where corporate welfare is a bipartisan industry. The lower AGI subsidy cap has turned out to be the most controversial Bush farm
proposal and is running into stiff opposition on Capitol Hill. "I'm not sure that Congress is going to go along with that whole concept of the
$200,000 AGI. At least I'm not supportive of it," declared Missouri Republican Jo Ann Emerson at a recent hearing. Arkansas Democrat Blanche Lincoln, who runs the subsidy subcommittee in the Senate, also
opposes reducing farm welfare for the rich.
Tuesday, April 3, 2007 ~ 12:17 a.m., Dan Mitchell Wrote: For a manufacturer to make an agreement with retailers to sell only at a specified minimum price is illegal -- even when it promotes competition
and offers benefits to consumers. ...established federal law that treats resale price maintenance agreements as invariably malignant. This view
stands up under scrutiny like butter under a hot sun. The assumption is that if you let manufacturers control retail prices, they'll hose consumers
for their own profit. But if they wanted to hose consumers, they could just raise the wholesale price they charge to retailers. That way, they
would get the full proceeds of the rip-off, instead of sharing them with stores. So it's reasonable to assume there is some motive besides price-gouging at work. ...Why would a company making purses or
televisions or running shoes want to keep prices at a certain minimum? Maybe to induce stores to offer exceptional service or technical assistance. A store can afford to do that only if it can charge a
commensurate price. But a service-oriented store can't charge a commensurate price if a consumer can come in, get lots of help and then go across the street to Discounts Galore and buy the item at 30 percent
off. By setting a floor, the manufacturer can prevent "free-riding" by bargain outlets. In our hypercompetitive retail environment, if the
strategy doesn't serve customers, manufacturers who use it won't survive. Consumers who can't get one brand at a discount price will defect to other brands.
Tuesday, April 3, 2007 ~ 12:02 a.m., Dan Mitchell Wrote: Marxist states claim food is a right for all. But the hunger their people suffer is in fact just another monstrous instance of state failure. In all
three, private property is outlawed and expropriated. The people who don't escape have no means of bettering themselves under state control.
They live as serfs, as land goes fallow. While wielding absolute power, all three states fail to provide even the most basic needs of their citizens.
They are the causes of hunger in the world. ...Somehow Singapore and Hong Kong, two Asian states which grow no food either, manage to avoid famine. The difference is they produce value from their free minds
and their industry under capitalist incentives, with governments that don't seek to control all economic activity. There's plenty of food, and virtually no hunger, in both city-states.
Monday, April 2, 2007 ~ 2:00 p.m., Dan Mitchell Wrote: Maybe the next Bjorn Borg won't feel compelled to move to Monaco now that Sweden plans to scrap a decades-old "wealth" tax that imposes levies on assets - not just on income. ...The move, expected to be approved by parliament later this year, underscores the country's efforts to keep successful Swedes and their capital at home by changing its fabled but costly welfare state. "It's not sustainable to keep taxes that radically diverge from other countries," Finance Minister Anders Borg, who is not related to the tennis great, told The Associated Press on Thursday. "Not if you want the money to stay in the country." Sweden is not alone. The article notes that other nations have been forced to eliminate this punitive levy on capital: Several European countries have dropped taxes on wealth in the last decade, including Denmark, the Netherlands and Finland. Switzerland and Monaco seem to be the favored destinations on Sweden's tax exiles. At least the new government recognizes the damage caused by punitive tax rates. The wealth tax is being abolished in an effort to lure talented entrepreneur and capital back to Sweden: ...the wealthiest Swedes have fled the country, including IKEA founder Ingvar Kamprad, No. 4 on Forbes magazine's list of the world's richest
people. He lives in Switzerland. Five-time Wimbledon winner Bjorn Borg moved to tax-haven Monaco in the late 1970s. The principality is also home to many Swedish sports stars such as Alpine skier Anja Paerson,
high-jumper Kajsa Bergqvist and triple jumper Christian Olsson. The government says more than 500 billion kronor, the equivalent of almost
C$83 billion of Swedish capital, is outside of the country's borders. "This is money that, if it was brought home, could be invested to create jobs
and welfare in Sweden," the country's coalition leaders said in a joint statement this week. Stefan Persson, the main owner of fashion retailer
H&M, threatened to leave the country in the 1990s because of the wealth tax. The Social Democratic government at the time changed the law, giving him an exemption. ...Borg, the finance minister...added it
was necessary for Sweden to remain competitive in an increasingly globalized economy. "It's a step on the way back toward making Sweden an entrepreneurial society," he said.
Monday, April 2, 2007 ~ 12:45 p.m., Dan Mitchell Wrote: The pressure to cheat, Dr. Antenucci said, comes from the big payoff. "The top tax rate is 35 percent. In this investment investment
environment, people scratch to make a 5 percent to 8 percent return, and there is 35 percent sitting right there." ..."When people read about a
$500 coffee pot being sold to the government, people don't want to pay their taxes," he said. ...The professors advocate attacking the problem
on several fronts. First, create a tax system where cheating is extremely difficult. One way would be to switch to a flat tax or national sales tax.
Monday, April 2, 2007 ~ 11:11 a.m., Dan Mitchell Wrote: As part of his first budget, Mr. Strickland is proposing to abolish a two-year-old voucher program that provides a $5,000 tuition
scholarship for up to 14,000 children who attend schools certified by the state to be in "academic emergency." That can mean as many as one in
three schools in some parts of the state, and in Columbus nearly one in two. The program is new, and was designed as a follow-on to the successful Cleveland voucher program. Both programs have been major
political targets of the teachers unions that supported Mr. Strickland's election, making him the first Democratic Governor in Ohio in 16 years.
Mr. Strickland decided that the Cleveland program had too much local political support to take on, so instead he's trying to kill the statewide voucher plan before it can develop its own constituency. ...Mr.
Strickland's other excuse for this assault on school choice for the poor is that the state needs to save money. Yet the voucher program costs a
mere $13 million out of a $53 billion state budget that includes big new spending increases on education and bonuses for the public-school bureaucracy. The Columbus Dispatch reports that from 2001 to 2006,
spending per pupil in Columbus schools rose to $11,918 from $9,078. As everywhere, the problem in Ohio schools isn't money; it's the status quo
of union-enforced mediocrity. We'd have thought that with Ohio's many other problems, a new Governor would have better things to do than deny opportunity for poor kids to escape the worst schools in the state.
Sunday, April 1, 2007 ~ 10:20 p.m., Dan Mitchell Wrote: The European Commission is set to press ahead with introducing a single EU company tax base by 2010 in only a limited number of
member states, circumventing national veto power in the sensitive tax area. ...EU member states are deeply divided over possible harmonization, with 12 capitals in favour, five to seven against and the
rest remaining undecided. Britain, Ireland and the Baltic states fear that the next step for Brussels would be interference in the levels of their
corporate taxes, an area where EU states compete with each other as well.
Sunday, April 1, 2007 ~ 8:34 p.m., Dan Mitchell Wrote: Czech Prime Minister Mirek Topolanek has reportedly stated that his government's plan to introduce a flat income tax is a near certainty. In
comments made to the daily Hospodarske Noviny newspaper, Topolanek said that at the moment, a 15% flat tax rate is "certain". ...The reform
package will be published by the government in April. ...Initially, the coalition had planned to introduce a flat tax at a rate of 17% to 19%.
Corporate tax in the Czech Republic was reduced to 24% last year, and personal income tax rates are levied at progressive rates to a maximum of 32%. Given the government's precarious hold on power, it is unclear whether the proposal will be enacted. A Czech news service notes that the economic community likes the flat tax, but there is some concern that it will not get enough votes: Analysts are cautiously optimistic that the government's upcoming flat tax and other tax reforms, set to be announced April 3, may strengthen
public finances. However, while all the analysts spoken to by CBW agree a tax reform is much needed, and that the proposals published thus far would have a positive impact on the economy, they caution that the
draft legislation is still a long way from the law books and is likely to change before it gets there. ...David Marek, macroeconomic analyst, with brokerage Patria Finance said that the lower corporate tax rates
are the most important part of the reform because they will give the Czech Republic one of the lower corporate tax rates in Europe and encourage foreign direct investment. But if it did get enacted, it would create additional pressure on Western Europe's welfare states. One can only imagine that French and German politicians are praying that the flat tax is not adopted.
Sunday, April 1, 2007 ~ 7:11 p.m., Dan Mitchell Wrote: America's lowest-earning one-fifth of households received roughly $8.21 in government spending for each dollar of taxes paid in 2004.
Households with middle-incomes received $1.30 per tax dollar, and America's highest-earning households received $0.41. Government spending targeted at the lowest-earning 60 percent of U.S. households is
larger than what they paid in federal, state and local taxes. In 2004, between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income
quintiles through government taxes and spending policy. This huge shift of resources punishes those who produce and rewards those who do not. This hurts economic performance by distorting incentives. Investor's Business Daily identifies another problem that may be equally troublesome. Massive amounts of redistribution create an entitlement mentality. People being to think that government owes them a living. And as an editorial from IBD notes, public opinion data are trending in the wrong direction: ...the U.S. tax code is becoming more progressive, not less. No one minds helping the truly needy. But as with welfare in the pre-1996
reform era, reliance on government can become a habit - imposing huge costs on our national economy. Worse, a 'what's in it for me?' attitude seems increasingly the norm. Once a nation of stoic, self-reliant
individualists, America now seems full of people who think other taxpayers owe them something. They see the 'system' as a giant cow to be milked - and damn the cow. This is backed up by polling data. In a
1994 Pew poll, 57% agreed with the statement 'Government should care for those who can't care for themselves.' Today, it's 69%. |
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