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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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Thursday, May 31, 2007 ~ 1:39 p.m., Dan Mitchell Wrote: The average Swedish worker pays around 60 percent of his or her earnings in visible or hidden taxes. This situation is in the long run problematic, since high taxes combined
with generous welfare systems undermine social norms associated with hard work and responsibility. …many individuals with good jobs understand that they can significantly increase their standard of living if
they move to the US or the UK. Indeed thousands of Swedes with good educations already take advantage of this realization, often settling in London. …competition from the Baltic nations might very well be a more
important factor for Swedish enterprise. These countries are in many ways similar to Sweden and the geographical distance is slim. Wages are still much lower than in Sweden and the traditional working ethics
that to a large degree has eroded in the Swedish welfare system is very much alive on the other side of the Baltic Sea. Already many Swedish companies are choosing to establish themselves in the Baltic
countries, a trend that very well might accelerate with time. …it might very well become a common phenomenon for Swedish high income takers to settle in Tallinn rather than Stockholm. …We must never forget that
we constantly compete for capital, companies and hard working individuals with other nations.
Thursday, May 31, 2007 ~ 12:26 p.m., Dan Mitchell Wrote: Long-suffering taxpayers had £6.60 taken from them for every hour they worked last year, latest figures reveal. Last night's startling figure
is more than £1 above what the Treasury was taking five years ago and is higher than the minimum wage. A triple whammy of soaring council tax, stamp duty and inheritance tax has helped Chancellor
Gordon Brown raise the burden to its highest ever - with Middle Britain particularly badly hit. ...Friday June 1 marks this year's Tax Freedom Day, the date from which workers are deemed to start earning for
themselves, having handed over every pound earned so far this year in tax.
Thursday, May 31, 2007 ~ 8:16 a.m., Dan Mitchell Wrote: The federal government recorded a $1.3 trillion loss last year - far more than the official $248 billion deficit - when corporate-style accounting
standards are used, a USA TODAY analysis shows. The loss reflects a continued deterioration in the finances of Social Security and government retirement programs for civil servants and military
personnel. The loss - equal to $11,434 per household - is more than Americans paid in income taxes in 2006. ...Modern accounting requires that corporations, state governments and local governments count
expenses immediately when a transaction occurs, even if the payment will be made later. The federal government does not follow the rule, so promises for Social Security and Medicare don't show up when the
government reports its financial condition. Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase
from 2006. That amount is equal to $516,348 for every U.S. household. ...Unfunded promises made for Medicare, Social Security and federal retirement programs account for 85% of taxpayer liabilities. State and
local government retirement plans account for much of the rest. This hidden debt is the amount taxpayers would have to pay immediately to cover government's financial obligations.
Wednesday, May 30, 2007 ~ 10:55 a.m., Dan Mitchell Wrote: A tax-cut war is spreading across Europe as leaders of the Continent's biggest economies give up criticizing smaller neighbors for cutting
business-tax rates and decide to join them instead. …It comes after Ireland and new European Union members from Eastern Europe succeeded in attracting investment, and irking their larger rivals, with
tax rates of less than 20 percent, among the world's lowest. …The EU's average corporate tax rate at the end of 2006 was a record low of 26 percent, and more cuts are in the works this year. …The rush to lower
business taxes is a turnaround for the biggest European countries, whose governments once complained that their neighbors were engaging in "tax dumping" and threatened to cut aid to them. Just
three years ago, Sarkozy, then the French finance minister, sought EU support to implement a minimum corporate tax rate throughout the bloc. Feeding the complaints were business-tax reductions by Poland,
Slovakia and Hungary before their EU entry in 2004. Poland cut its levy to 19 percent from 27 percent. Slovakia adopted a flat-tax rate of 19 percent, down from 25 percent, and Hungary went to 16 percent from
18 percent. The lower rates helped lure operations from companies in higher-tax countries. PSA Peugeot Citroën, an automaker based in Paris, and Siemens, an engineering company based in Munich, for
example, moved some production to Slovakia. …Supporters of lower corporate taxes point to the success of Ireland, whose 12.5 percent rate, the lowest in the developed world, is down from 47 percent in 1988.
That proved a magnet for such U.S.-based technology companies as Microsoft, Intel and Dell and helped Ireland's economy grow more than three times the rate of the euro area in the past decade, while still
running a budget surplus in nine of the 10 years. …a study of 86 countries last year by KPMG International…showed corporate tax cuts allowed countries to attract and retain business investment with little
loss of revenue.
Wednesday, May 30, 2007 ~ 10:10 a.m., Dan Mitchell Wrote: When Congress passed a broad pension reform last year prodding companies to get their retirement programs in order, it seemed too good
to be true. Now we know it was. That's the lesson of an amazing bit of corporate welfare the Senate tucked into the Iraq war supplemental last week. Last year's bill included a hard-fought political compromise:
Carriers that agreed to a "hard freeze" of their pension plans would be allowed to use a higher interest rate in calculating their plans -- which
would reduce their net liabilities. The idea was to discourage airlines from buying union peace by running up their pension tabs, which they might later dump on taxpayers. A few airlines, such as Northwest and
Delta, took this medicine. Their competitors, namely American and Continental, headed back to the Beltway and last week their lobbying blew apart last year's compromise. Under the Senate's backroom fix,
the airlines can use a higher interest rate even if they promise higher pension benefits. The airlines claim this is about "leveling the playing
field," which makes little sense because American and Continental could have accepted the same rules all along. This is about giving those two a competitive advantage over other airlines that have already
agreed to play by the reform rules. The taxpayer-backed Pension Benefit Guaranty Corp. is obliged to bail out any company that can't meet its pension obligations, so there is once again little reason for these
airlines to practice any pension restraint. The PBGC conservatively estimates that this airline fixeroo will result in an additional $2 billion in underfunded pension obligations over the next 10 years.
Tuesday, May 29, 2007 ~ 12:17 p.m., Dan Mitchell Wrote: There are not many countries in which Sweden would be considered a tax haven, but one wealthy Norwegian says she plans to move across
the border now that the government has scrapped wealth tax. Caroline Hagen is the daughter of Norwegian financier Stein Erik Hagen, and plans to take advantage of the less severe taxes under the new
centre-right government. Her sister Camilla could soon follow. Stein Erik Hagen, whose family-owned holding company Canica has major shareholdings in a number of retail companies and consumer goods
firms, said that Sweden's decision to axe wealth tax would encourage many more wealthy Norwegians to cross the broder.
Tuesday, May 29, 2007 ~ 10:43 a.m., Dan Mitchell Wrote: Paucar, 37, embodies the best qualities of American immigrants. He is a splendidly self-sufficient entrepreneur. And he is wielding American
principles against some Americans who, in their decadent addiction to government assistance, are trying to litigate themselves to prosperity at
the expense of Paucar and the public. ...In 1937, New York City, full of liberalism's itch to regulate everything, knew, just knew, how many taxicab permits there should be. For 70 years the number (about
12,000) has not been significantly changed, so rising prices have been powerless to create new suppliers of taxi services. Under this government-created scarcity, a permit (``medallion'') now costs about
$500,000. Most people wealthy enough to buy medallions do not drive cabs, any more than plantation owners picked cotton. They lease their medallions at exorbitant rates to people like Paucar who drive, often
for less than $15 an hour, for long days. ... Paucar moved... Unfortunately, Minnesota has a ``progressive,'' meaning statist, tradition that can impede the progress of people like Paucar ... 343
taxis were permitted. He wanted to launch a fleet of 15. That would have required him to find 15 incumbent license-holders willing to sell
their licenses for up to $25,000 apiece. ...[He] helped persuade the City Council members, liberals all (12 members of the Democratic Farmer-Labor Party, one member of the Green Party), to vote to allow
45 new cabs per year until 2010, at which point the cap will disappear. In response, the cartel is asking a federal court to say the cartel's
constitutional rights have been violated. It says the cap -- a barrier to entry into the taxi business -- constituted an entitlement to profits that
now are being ``taken'' by government action. ...By challenging his adopted country to honor its principles of economic liberty and limited government, Paucar, assisted by the local chapter of the libertarian
Institute for Justice, is giving a timely demonstration of this fact: Some immigrants, with their acute understanding of why America beckons,
refresh our national vigor. It would be wonderful if every time someone like Paucar comes to America, a native-born American rent-seeker who has been corrupted by today's entitlement mentality would leave.
Monday, May 28, 2007 ~ 6:34 p.m., Dan Mitchell Wrote: ...on the Emerald Isle the election is about which party can best manage a 20-year boom. The campaign, in which Prime Minister Bertie Ahern's Fianna Fáil party seeks a third straight five-year mandate over rival centrist party Fine Gael, has been most remarkable for what the contestants don't bother to talk about. The country's low tax rates, particularly the 12.5% levy on corporations? Sacrosanct. ...Other countries should be so dull. The steady-as-she-goes Irish consensus owes largely to the spectacular growth experienced by the Celtic Tiger. Since a recession in 1986, when one in six Irishmen was out of work and the country was almost bankrupt, Ireland's economy has nearly quadrupled in size. GDP growth has averaged more than 6% a year over the past 20 years, spurred in large part by the government's tax-slashing. Unemployment has plummeted, down to 4.4% last year. Once one of the poorest countries in Europe, Ireland today has a per-capita GDP second only to Luxembourg. ...Irish voters seem content with where they are, and -- thankfully -- wise to the policies that got them there. http://online.wsj.com/article/SB117995984933012648.html?mod=opinion& ojcontent=otep (subscription required)
Sunday, May 27, 2007 ~ 10:26 p.m., Dan Mitchell Wrote: Germany's Finance Minister Peer Stein wants prostitutes to pay a flat tax of 25 euros a day, according to a report in Tuesday's edition of the
daily newspaper Bild. Sex workers would still file an annual tax declaration and, according to the number of clients, the tax authorities would either reimburse them part of the daily tax - or oblige them to
pay more, said the paper. …Prostitution has been legal in Germany since the beginning of 2002, and prostitutes in theory have social security cover, but like taxation, the system does not work well in
practice. According to a 2003 report, the German taxman misses out on about 2 billion euros from prostitution.
Sunday, May 27, 2007 ~ 3:33 p.m., Dan Mitchell Wrote: Gov. Jennifer Granholm and state House Democrats are pushing for an increase in the state's income tax rate to erase the budget deficit. The
income tax is the most easily comparable of taxes. At a 3.9 percent flat tax rate, Michigan's income tax compares extremely well with other
states and gives it a rare advantage. Pushing it to near 5 percent would throw that small edge away, particularly since fast-growing and highly
attractive states like Florida, Texas and Tennessee have no income tax, and more than a dozen states across the country have either cut their
income tax this year or are considering doing so. For Michigan to head in the opposite direction will give potential employers and residents yet one more reason to pass by the state. Even worse, the governor and
House Democrats reportedly want to place a graduated income tax on the ballot for the fall of 2008. A graduated tax would mimic the federal tax in creating different tax rates for different income levels. This
soak-the-rich approach by the Democrats will lessen Michigan's chances of attracting the high-tech entrepreneurs Granholm says she is counting on to turn around the state's economy. Why come here and give the
state a greater percentage of the profits from their risk taking when they can locate in other states that don't punish success? Politicians in Maine, by contrast, may finally be learning that high tax rates have hurt state competitiveness. Lawmakers are considering a couple of proposals to significantly reduce the state's onerous income tax rates in hope of luring new business. The Times Record reports: The Taxation Committee is considering two competing tax reform plans — one that would lower the income tax to a flat 6 percent and another
that would drop that rate to a flat 4.9 percent by adding a penny to the sales tax. …The committee has been working on its tax reform proposal for months. The goal is to replace the state's graduated income tax
system with a flat tax and bring down Maine's top income tax rate of 8.5 percent. That high rate kicks in at a low level — $18,250 of taxable income for individuals — and adds to Maine's reputation as one of the
most overtaxed state's in the county. …The plans are based on the same logic, said Rep. Dick Woodbury, an independent from Yarmouth, who is pushing the bolder version. He believes the lower income tax would help
attract more businesses to the state. …The proposal to decrease the income tax rate to 6 percent by expanding the sales tax base appeared to have the most support Monday among committee members, although
the 4.9 percent plan was picking up steam. "I like the 4.9 percent. It really does change the perception of Maine's income tax," said Sen. Joe
Perry, D-Penobscot, the Senate chairman of the Taxation Committee. …Rep. Scott Lansley, R-Sabattus, picked up on Woodbury"s theme that the lower income tax rate would attract more business here because it
would make the state more attractive to higher-paid professionals. "If the CEO moves here, the company's going to move here," Lansley said.
"Aren't we trying to attract more business? Aren't we trying to keep our young people here?"
Saturday, May 26, 2007 ~ 3:34 p.m., Dan Mitchell Wrote: Any Alabamian seeking an inflatable girlfriend or battery-operated boyfriend will have to buy it out of state -- possession is still legal. But
in-state retailers like Williams will be out of business. Get this: The court reasoned that the ban is constitutional because Alabama has an interest ``in preserving and promoting public morality.'' …Beg pardon,
but unless people were using Williams' merchandise on park benches, it's hard to see what public morality has to do with this. Hard to see anything, in fact, except another government intrusion into our private
lives. One need not be a purveyor of sex toys to be profoundly troubled by that. …For a long time, Reagan's words were the prime directive of the American conservative movement. But something has happened to
that movement in the past 26 years. Those who once promised to get government off the backs of the people, who swore an oath against its intrusion into our lives, now gleefully use it to poke, prod, peer and
interfere. …The issue is not sex, it is not death and it is not morality. It is, rather, the fact that you and I have certain rights, chief among them
the right to be left alone if we're not bothering anybody. But conservative lawmakers, the same people who think corporations should be left alone in matters of pollution and public safety, seem to
think they have a perfect right to break down the bedroom door of some schmo romancing a blow-up doll. …I offer them this reading from the book of Reagan: ''It is no coincidence,'' he said, ``that our present
troubles parallel and are proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government.''
Friday, May 25, 2007 ~ 2:00 p.m., Dan Mitchell Wrote: Globalisation, especially the increased mobility of capital and highly-skilled labour, fosters greater tax competition. While corporation
tax is only one among many factors that shape firms' location decisions, it has a significant impact. Most OECD countries have cut their corporate tax rates over the past decade, some by a considerable
amount. Similarly, empirical evidence indicates that lower income tax rates can be attractive to highly skilled migrants. Many governments have also reduced the top marginal rate of income tax, which is an
important determinant of the effective tax rate for highly skilled workers. On average across OECD countries, the top marginal income tax rate fell from 45% in 1995 to 37% in 2005. …Globalisation also
encourages the pursuit of efficiency gains in tax systems. To the extent that globalisation encourages a move to less elastic tax bases, it should improve the efficiency of tax systems. …On the other hand, tax
competition could potentially reduce the ability of the tax system to contribute to the achievement of income redistribution objectives. The Wall Street Journal likes the new report, focusing on the evidence that lower corporate tax rates are generating a Laffer Curve effect. The editorial makes the key point that the goal of lower tax rates is not to increase government, but rather to increase growth and opportunity – which is why it calls for further rate reductions: Globalization skeptics claim the world is locked in a tax-rate race to the bottom. Luckily, they're right -- taxes are falling. But this trend also
makes government finances better, strengthens economies and creates jobs. In "Making the Most of Globalization," released yesterday, the
OECD draws a direct link between lower tax rates and fiscal well-being. Over the past decade, most OECD countries cut corporate taxes, some by a great chunk, and saw average state revenues go up -- not just in
absolute terms. …corporate-tax proceeds have also risen as a percentage of GDP. So there's plenty of room to cut further. By scrapping tax exemptions and lowering headline rates, governments
have attracted investment, boosted growth and corporate profits, and improved tax compliance. It's a nice demonstration of the Laffer curve at work.
Friday, May 25, 2007 ~ 1:11 p.m., Dan Mitchell Wrote: Taxpayer-funded lobbying groups descend on Washington and state capitals every time legislation to limit the size, cost, and intrusiveness of
government is under consideration. Such lobbying efforts may go largely unnoticed, but they are a significant barrier to the enactment of pro-growth, limited-government policies. State governments, local
governments, public universities, transportation authorities, and public water utilities spent an astonishing $132.7 million on federal lobbying in
2006, up 148 percent from an already sizable $53.6 million in 1998. Across this entire period, taxpayer-funded lobbying of Congress totaled at least $875.9 million. …Making matters worse, a loophole in
congressional rules states that if you are a lobbyist for a government entity, you are exempt from the Senate's $50 gift limit and the House's gift ban. Taxpayer-funded lobbyists can give any gifts they want,
without limit or disclosure requirements.
Friday, May 25, 2007 ~ 12:39 p.m., Dan Mitchell Wrote: ... with one swift and decisive decree, all subsidies were eliminated. ...The fortune of farmers now depended on their ability to meet
consumers' demands. Overproduction no longer occurred. One year, under the subsidy regime, six million lambs were rendered into fertilizer because no one wanted them; sheep farming had been the crown prince
of the subsidy king. Without subsidies farmers were forced to diversify and produce those goods that were most sought after in the marketplace. Sheep stock decreased, while the number of dairy cows
increased. ...farmers had to keep costs down and this meant using resources efficiently. Subsidies for fertilizer had resulted in its wasteful
application. Without subsidies, fertilizer use decreased, water quality increased, and yields were not affected. ...land productivity increased 85
percent. Lamb carcass weights rose 34 percent, and the quantity of milk solids produced per dairy cow increased by more than 30 percent. Annual productivity gains before reform were about 1.5 percent. For
the first 9 years after reform, they averaged 6 percent -- higher than any other sector in the country's economy. Many had worried that the end of
subsidies would destroy agriculture in the country, yet the agricultural sector grew as a percentage of GDP. ...Real land values, which initially
plummeted, have recovered and surpassed their pre-reform level. Over time, nearly all embraced the idea of a market-driven agricultural sector. Farmers learned not only how to survive, but to thrive in a
subsidy-free world. Common sentiment now is that subsidy elimination was "the best thing that ever happened to farming." ...Over the past 20
years, as New Zealand's farms flourished without assistance, the opportunity cost to American consumers and taxpayers of U.S. farm programs has totaled more than $1.7 trillion.
Friday, May 25, 2007 ~ 11:00 a.m., Dan Mitchell Wrote: Swiss Communications Minister Moritz Leuenberger has suggested a 'tax on information' to help bridge the digital divide between wealthy
countries with good communication infrastructure and poor countries where most of the population have no access to modern communications. Leuenberger revealed his proposal to a United
Nations meeting convened to follow up on the World Summit on the Information Society (WSIS), held jointly in Geneva and Tunis in 2003 and 2005. ...Leuenberger surmised that such a tax could be raised on
information content which is paid for and computers.
Friday, May 25, 2007 ~ 9:39 a.m., Dan Mitchell Wrote: Their amendment to Mr. Frank's bill, which passed by voice vote Thursday night, guts the one provision that made it worth the effort.
What's left is a regulator who would lack the authority to limit the risk that Fannie and Freddie's $1.4 trillion mortgage-backed securities portfolios pose to the financial system, plus a $500 million a year
boondoggle that goes by the euphemism "affordable housing fund." ...That leaves the White House and Treasury with some decisions. Administration officials were cautious about the Bean-Neugebauer
amendment when first proposed, but Fannie and Freddie's friends are betting the Administration wants a deal enough to accept even a bad
one. However, a "reform" that does nothing to reduce the problem of putting so much housing risk into two companies, and which also
includes an annual $500 million donation to "housing" activists such as Acorn is worse than the status quo.
Thursday, May 24, 2007 ~ 11:41 p.m., Dan Mitchell Wrote: A new study by the Congressional Budget Office says the poor have been getting less poor. On average, CBO found that low-wage
households with children had incomes after inflation that were more than one-third higher in 2005 than in 1991. The CBO results don't fit the prevailing media stereotype of the U.S. economy as a richer take all
affair -- which may explain why you haven't read about them. ...The poorest even had higher earnings growth than the richest 20%. The earnings of these poor households are about 80% higher today than in
the early 1990s. ...CBO says...earnings from work climbed sharply as the 1996 welfare reform pushed at least one family breadwinner into the
job market. ...earnings for low-income families have still nearly doubled in the years since welfare reform became law. Some two million welfare
mothers have left the dole for jobs since the mid-1990s. Far from being a disaster for the poor, as most on the left claimed when it was debated,
welfare reform has proven to be a boon. ...The report also rebuts the claim, fashionable in some precincts on CNN, that the middle class is
losing ground. ...every class saw significant gains in income. ...the CBO study found that, with the exception of chronically poor families who have no breadwinner, low-income job holders are climbing the income
ladder. When CBO examined surveys of the same poor families over a two year period, 2001-2003, it found that "the average income for those
households increased by nearly 45%." That's especially impressive considering that those were two of the weakest years for economic growth across the 15 years of the larger study.
Thursday, May 24, 2007 ~ 8:45 p.m., Dan Mitchell Wrote: When everyone in politics jumps on a bandwagon like ethanol, I start to wonder if there's something wrong with it. And there is. Except for that
fact that ethanol comes from corn, nothing you're told about it is true. ...If ethanol's so good, why does it need government subsidies? Shouldn't
producers be eager to make it, knowing that thrilled consumers will reward them with profits? But consumers won't reward them, because without subsidies, ethanol would cost much more than gasoline. The
claim that using ethanol will save energy is another myth. Studies show that the amount of energy ethanol produces and the amount needed to
make it are roughly the same. ...even turning all of America's corn into ethanol would meet only 12 percent of our gasoline demand. ...the standard mixture of 90 percent ethanol and 10 percent gasoline pollutes
worse than gasoline. ...Surely, ethanol must be good for something. And here we finally have a fact. It is good for something -- or at least someone: corn farmers and processors of ethanol, such as Archer
Daniels Midland, the big food processor known for its savvy at getting subsidies out of the taxpayers. And it's good for vote-hungry presidential hopefuls. Iowa is a key state in the presidential-nomination
sweepstakes.
Thursday, May 24, 2007 ~ 8:21 p.m., Dan Mitchell Wrote: Sarbanes-Oxley and its amplification by our rapidly growing litigation industry have turned our securities markets upside down. ...private
equity is available at higher valuations than public equity across certain sectors of the market. The ironic consequence of this "inverted equity
curve" is that the guardians of the public markets are discouraging risk taking, diminishing wealth creation and ultimately hurting small investors. ...Sarbanes-Oxley is more dangerous for its specter of
criminalization than its fees. The interaction between SarbOx, the tort bar and prosecutors with threatened after-the-fact criminalization of accounting disagreements has resulted in smart officers and directors
leaving public boards. ...16 of the past 17 largest IPOs were done overseas. SarbOx is forcing offshore those who understand and can craft deals. ...The secret to our past success was little interference,
disclosure of rather than prohibition of conflicts, a great sense of risk taking and free competition. If we move away from those principles, we can expect to eventually become second-class world citizens with
second-class growth in wealth. ...The folks who brought us SarbOx and the litigation festival are diminishing our wealth and ability to grow.
Thursday, May 24, 2007 ~ 5:56 p.m., Dan Mitchell Wrote: The 202-page Law of the Sea Treaty entered into force in 1994 and has been ratified by 153 countries. The treaty created the International
Seabed Authority, giving it total jurisdiction over all the oceans and everything in them, including the ocean floor with "all" its riches
("solid, liquid or gaseous mineral resources"), along with the power to regulate 70 percent of the world's surface. Headquartered in Jamaica,
the International Seabed Authority has an assembly, a council, a bureaucracy and commissions, all drawing tax-free salaries. If the United States ratifies the treaty, Americans would have the same vote in
the International Seabed Authority as Cuba, an unprecedented surrender of U.S. sovereignty, independence of action and wealth. Even worse, the threat gives the International Seabed Authority the power to
levy international taxes. No one should be fooled by the treaty's attempt to conceal this by labeling the taxes assessments, fees, permits, payments or contributions. The purpose of the taxing power is to
compel the United States to pay billions of private-enterprise dollars to International Seabed Authority bureaucrats, who can then transfer U.S. wealth to socialist, anti-American nations (euphemistically called
"developing countries") ruled by corrupt dictators. ...Bush apparently expects conservatives to be mollified by the argument that the Navy
supports the treaty. But conservatives are smart enough to know that it's impossible for the Navy to oppose the commander in chief's position.
The notion that the U.S. Navy needs approval from foreign bureaucrats in Jamaica in order to enjoy passage through international straits, or for permission to do what our Navy is already doing (such as moving
our ships to the waters near Iran), is offensive and insulting to U.S. sovereignty.
Thursday, May 24, 2007 ~ 2:33 p.m., Dan Mitchell Wrote: Trade unions across the EU are preparing themselves to go on the offensive against the "big beasts" of private equity and hedge funds,
believing their profit-oriented drive is undermining the bloc's social fabric. "No one wants just a single market, they want something else
out of Europe – some security against the big beasts that are in the single market like private equity and hedge funds," the head of the European Trade Union Confederation John Monks (ETUC) told
EUobserver. >…Referring to "casino capitalism," he said venture capitalists were only interested in buying a company, boosting the share
price and selling, "leaving companies weakened by big debt." …Critics say they often operate beyond normal regulations and are not
transparent. The issue first generally entered the public consciousness in 2005 when Franz Muntefering, now German vice-chancellor, referred to hedge funds - which borrow large sums to bet in financial markets –
as "locusts" waiting to swoop in and strip German companies of their assets, causing major job losses.
Wednesday, May 23, 2007 ~ 3:16 p.m., Dan Mitchell Wrote: [This is what] the Indian government, both state and federal, does best -- taking land from A and giving it to B. Most of the fault lies with
India's socialist founding fathers. Ironically, Indians had greater protection from private land "takings" under the British. Section 299 of
the 1935 Government of India Act clearly stated that no person was to be deprived of his property save for public purposes and with compensation. … Socialist members like Jawaharlal Nehru, Bhimrao
Ramji Ambedkar, Sir Benegal Narsingh Rau and Govind Ballabh Pant worried that such a strict limit on governmental power would prevent
"beneficial social legislation." These leaders of the Indian National Congress Party had promised to reconstruct an egalitarian agrarian
economy and abolish the zamindari (feudal) system and transfer land to the tiller. A strict anti-takings clause would have foiled these plans. Unfortunately, the socialists managed to outshout the Madisonians.
"Public use" became "public purpose" and "just compensation" just became "compensation." Even then, this wasn't the happy ending the
Congress Party had hoped for because they had to pay vast sums of compensation for acquisitions. This paralyzed their land reform agenda. So they set about amending the constitution to eclipse even this little
protection. Within a year the clause was amended and land reform legislation was ousted from the jurisdiction of the courts through its inclusion on the so-called Ninth Schedule, a list of laws immune from
any kind of judicial review. These amendments effectively removed takings disputes from the jurisdiction of the courts, giving the government carte blanche to acquire any property it wanted. The final
blow to private property came in 1978 with the 44th amendment to the Constitution. The fundamental right to private property was abolished and was relegated to the position of a legal right. Further, the eminent
domain clause was deleted from the Constitution, allowing the government to acquire any land for any purpose without compensation. … As a result, in today's India there is no real right to private property
and no protection against government land acquisitions. The rich feudal lords whose land was stripped in the 1950s and the poor peasants in Nandigram today suffer the same fate -- a complete demolition of their
private property rights. Talk about egalitarianism.
Wednesday, May 23, 2007 ~ 12:47 p.m., Dan Mitchell Wrote: The shine is off corn ethanol, and oh, what a comedown it has been. It was only in January that President Bush was calling for a yet a bijillion
more gallons of the wonder-stuff in his State of the Union address, and Iowa's Chuck Grassley was practically doing the Macarena in his seat. And why shouldn't Mr. Grassley and fellow ethanol handmaidens have
boogied? They'd forced their first mandate through Congress, corn farmers were rolling in dough, billions in taxpayer dollars were spurring dozens of new ethanol plants--and here was the commander-in-chief
calling for yet more yellow dollars. All in the name of national security, too! Corn ethanol seemed unstoppable, but a remarkable thing happened on the road from Des Moines. Just as the smart people
warned, the government's decision to play energy market God and forcibly divert huge amounts of corn stocks into ethanol has played havoc with key sectors of the economy. Corn prices have nearly
doubled, which means livestock owners can't afford to feed their animals, and food and drink manufacturers are struggling to buy corn and corn syrup. Environmentalists are sour over new stresses on
farmland; international aid groups are moaning that the U.S. is cutting back its charitable food giving, and many of these folks are taking out
their anger on Congress. ...The hugely influential National Cattlemen's Beef Association has gone so far as to outline a series of public demands, including an end to any government tax credits (subsidies) for
ethanol and an axe to the import tariff on foreign ethanol. Put another way, the cattlemen are so angry that they are demanding free markets
and free trade--a first. ...The National Turkey Federation estimates its feed costs have gone up nearly $600 million annually and is surely letting loose on members from turkey states such as Minnesota and
Missouri. The National Chicken Council, which represents companies that produce, process and market chickens, has been hitting the southern political caucus, putting pressure on senators from big poultry
states such as Georgia, Arkansas and Alabama. Chicken giant Tyson's, the second largest employer in Arkansas (after Wal-Mart), even felt the
need to warn about the effect of rising corn prices on its business in its first quarter earnings statement. Food and drink manufacturers, which
rely heavily on corn and corn syrup for their products, are also making the Washington rounds. The Grocery Manufacturers Association this week called for Congress to undertake a study before it imposed a
bigger ethanol mandate. Soft-drink companies such as Coca-Cola (of Mr. Chambliss's Georgia) are also up in arms.
Tuesday, May 22, 2007 ~ 11:33 a.m., Dan Mitchell Wrote: The German finance minister has threatened to go after Ireland's low corporation tax system that he says leads to unfair competition with
Germany and other EU countries. ...Ireland has the second-lowest corporation tax rate in the EU at 12.5%, which is credited for creating the celtic tiger, attracting massive foreign investment and jobs.
Germany has the highest at 38.6%. In 2004 over EUR33 billion flooded into the country, almost the same as went to Germany. German minister Peer Steinbruck warned that Ireland and other low tax countries in
Eastern Europe were involved in what he called cutthroat competition that was not sustainable in the long run. ...The German government is adopting a two pronged attack - first in pushing the European
Commission to develop an EU-wide harmonised tax base and secondly by reopening the EU's Code of Conduct on unfair tax competition. ...Politicians from all parties, Internal Markets Commissioner Charlie
McCreevy and business interests have all warned that the plan to harmonise the corporate tax base must be killed. Taoiseach Bertie Ahern has said that harmonizing the tax base across the EU could
seriously affect the country's ability to compete for investment and jobs in the global economy. ...Mr McCreevy has said that those pushing for the Common Consolidated Corporation Tax Base (CCCTB) see this as
the first step in having a single uniform corporate tax rate across the union.
Tuesday, May 22, 2007 ~ 10:45 a.m., Dan Mitchell Wrote: Why does an administration that says we don't need a "permission slip" to defend ourselves seem determined to sign away our freedom of the
seas to the United Nations? ...During her confirmation hearings for secretary of state in January 2005, Condoleezza Rice was asked by Foreign Relations Committee Chairman Lugar if the Bush
administration favored ratification of the Law of the Sea Treaty, or LOST. ...Assuming she was authorized to say that by President Bush,
who courageously "unsigned" the treaty creating the International Criminal Court because it would infringe on American sovereignty and
the rights of U.S. citizens, the question was - and is - why? LOST was a bad idea when Reagan refused to sign it in 1982 and actually fired the
State Department staff members who helped negotiate it. It was drafted at the behest of Soviet bloc and Third World dictators interested in a scheme to weaken U.S. power and sovereignty while transferring wealth
from the industrialized to the developing world. ...The United Nations Convention on the Law of the Sea would do to our maritime activities - military and economic - what the International Criminal Court would
have done to our system of criminal justice. That is, place them under the thumb of a supra-national body, in this case the discredited and corrupt U.N. LOST would create an International Seabed Authority
(ISA) with the power to regulate 70% of the Earth's surface, placing seabed mining, fishing rights and deep-sea oil exploration under control
of a global bureaucracy. It even provides for a global tax that would be paid directly to the ISA by companies seeking to mine the world's oceans. Talk about an incentive to corruption.
Tuesday, May 22, 2007 ~ 10:21 a.m., Dan Mitchell Wrote: Good news for free trade and free travel: on April 30, the United States and the European Union signed an "open skies" agreement designed to
liberalize transatlantic air travel. Scheduled to take effect in March 2008, the agreement removes most restrictions on routes and fares between the United States and Europe... The other interesting effect is
on tax competition. With routes free and open, countries can compete for flights by lowering taxes. With routes opened up, countries will be
able to tailor their taxes to attract flights, promoting price competition throughout the continent. Britain's recently doubled air passenger duty
raised fares to London by as much as £160.00 round trip, which has caused shifts in traffic away from London (traditionally a cheaper European gateway) to Amsterdam, Frankfurt, and other European
hubs. When countries compete to cut taxes on air travel, the traveler wins.
Monday, May 21, 2007 ~ 2:59 p.m., Dan Mitchell Wrote: The Swiss government has rejected formal negotiations with the European Union in a bid to resolve a controversy over the country's
corporate tax system. ...Finance Minister Hans:Rudolf Merz and Foreign Minister Micheline Calmy:Rey said on Wednesday that Switzerland would not surrender its sovereignty on tax matters. The
statement came in the wake of a decision earlier this week by EU ministers to open official negotiations with Switzerland. ...Over the past few weeks several ministers have come out against holding formal
negotiations with Brussels in the tax row. Merz said the cabinet and the cantons, which have wide:ranging autonomy in fiscal matters, wanted to ensure that Switzerland remains competitive.
Monday, May 21, 2007 ~ 1:37 p.m., Dan Mitchell Wrote: Young Europeans are more eager than ever to work and study in the United States. A brain drain from France and Germany has sent some
of their best and brightest to the United States. A top destination is Silicon Valley; an estimated 80,000 young French people, known for their math skills, have migrated there in pursuit of jobs with high-tech
firms. When I spoke last year with about 50 Germans studying at MIT and Harvard, not one of them expressed a desire to return home. They all wanted to live and work in the United States, where, they said,
opportunities are far more abundant. Many complained that the sclerotic welfare states in Europe punish those who work and reward those who don't. So they're fleeing the crushing tax burden at home for
more lucrative challenges in the United States. Europe's leaders are slowly waking up to the fact that, with shrinking birth rates and a diminished work force, the continent may no longer be able to afford
lavish social benefits, such as universal health care, retirement on full pensions as early as age 50 and up to nine weeks of paid vacation per
year. They are exploring best practices in the United States to see how to rekindle entrepreneurial spirit and push people off welfare rolls.
Monday, May 21, 2007 ~ 11:49 a.m., Dan Mitchell Wrote: New Zealand Finance Minister Michael Cullen has announced a 3% cut in the country's rate of corporate income tax along with a series of
other measures designed to improve the nation's international business competitiveness. The most significant component of Cullen's 2007 Budget, announced in parliament on Thursday, was the decision to
reduce the rate of corporate tax to 30% from April 1, 2008. "Business has long argued that such a reduction will assist in boosting productivity and competitiveness and attracting more foreign direct
investment increasing labour productivity and wage rates," Cullen stated, adding that the move would also "reduce the attractiveness of structuring businesses so as to report minimal profits within New
Zealand." ...according to Cullen, the review of the international business tax regime could be of greater significance than the corporate
rate cut or the research and development tax credit in contributing to future economic growth and could cost far less. "Our current tax rules
in relation to New Zealand companies investing in offshore activity impose additional costs that are not faced by businesses resident in other countries. This has created an incentive for New Zealand firms to
migrate," Cullen observed. Currently, New Zealand taxes New Zealand residents on their worldwide income. This includes any income that is earned by a foreign company that is controlled by New Zealand
residents. ...A new international tax package proposes: the introduction of a tax exemption for active income; tax exemption for ordinary dividends from controlled foreign companies.
Monday, May 21, 2007 ~ 10:21 a.m., Dan Mitchell Wrote: On April 27, the FDA rejected Arcoxia (etoricoxib), a new COX-2 inhibitor from Merck. The FDA explained that it didn't see the need for
another drug like this. Robert Meyer, director of the FDA's Office of Drug Evaluation II, told reporters that, "simply having another drug on
the market" wasn't "sufficient reason to approve the product unless there was a unique role defined." The FDA is supposed to judge
whether a drug is safe and efficacious and that's all. … But the FDA slyly added a third requirement: Is Arcoxia better than what's currently on the market? According to the law, this isn't part of the FDA's
approval process and for three good reasons. First, it would be difficult and expensive to show, before it's marketed, that a new drug is better
than all competing drugs. It already costs on average just shy of a billion dollars to get a new drug approved. A study by Joseph DiMasi, an economist at the Tufts Center for the Study of Drug Development in
Boston, found that the cost of getting one new drug approved was $802 million in 2000 dollars ($956 million in 2007 dollars). … And this $1 billion figure was before the FDA dreamed up this new requirement. …
The third reason drug companies don't have to prove their drug is better than existing drugs is summed up in one word: competition. Take the worst case and assume that Arcoxia is no better than any existing drug
for anyone but is as good for some patients. In that "worst case," Arcoxia would compete with existing drugs. Two centuries of economic
theory and evidence show that competition is good. A new drug that competes with existing drugs is likely to cause drug prices to fall and competitors to stay on their toes. … The FDA knows that it can make
two types of errors. If it approves a drug later found to be dangerous, bad things happen. As one former FDA employee, Hoover Institution's
Henry Miller, put it, "This kind of mistake is highly visible and has immediate consequences -- the media pounces, the public denounces and
Congress pronounces." If the FDA fails to approve a good drug, few bad things happen -- to the FDA.
Sunday, May 20, 2007 ~ 5:09 p.m., Dan Mitchell Wrote: … give the president an "F" for economic or environmental common sense. That's because his two main suggestions …tightening
automobile-fuel-efficiency standards and mandating even greater amounts of ethanol consumption — will fail to substantially reduce oil consumption or reduce greenhouse-gas emissions. … Remarkably, the
president is getting a lot of applause for proposing initiatives that will without any doubt whatsoever increase the price of cars and gasoline at
the same time. … Fuel efficiency is not a free good. All things being equal, it costs more money to manufacture a fuel efficient car than it does to manufacture a fuel-inefficient car. … the National Research
Council reported a few years ago that improvements in automotive fuel efficiency would increase sticker prices for passenger cars by $1,018-$3,578 depending upon how aggressive those fuel efficiency
improvements were and the vehicle class in question. … mandating ethanol and other biofuels consumption will increase fuel prices at the pump. …If ethanol were cheaper than gasoline, there would be no need
for a consumption mandate in the first place. … increasing ethanol consumption would almost certainly increase greenhouse-gas emissions above where they would otherwise be. That's the conclusion of two
recent studies issued by academics at MIT's Laboratory for Energy and Environment and the University of California. Expanding corn production means migrating from more to less productive corn-growing
lands, which will in turn necessitate an increase in the use of energy inputs — primarily in the form of fertilizer and irrigation — that are
required to grow commercially viable yields. Analysis shows that total greenhouse-gas emissions will increase as a consequence. … Ethanol likewise increases total air pollution according to a thorough review of
the literature published in 2005 by Australian academic Robert Niven and a study subsequently published last February by Mark Jacobsen of Stanford. Niven's review also found a whole host of other
environmental problems such as water pollution and ecological destruction that would follow from turning America's heartland into a giant fuels factory.
Sunday, May 20, 2007 ~ 1:11 p.m., Dan Mitchell Wrote: ...mandating college campuses be gun-free zones provides as much safety as holding your hands over your eyes. Danger is either there or
it's not. Holding your hands over your eyes so you can't see danger has nothing to do with whether danger is approaching. ...The fact that carrying a firearm onto a gun-free campus is against the law or against
school policy does not constrain the behavior of someone who has already decided to kill. ...The Founders of our nation got it right when they adopted the Bill of Rights. They understood that there will always
be twisted or demented people who are willing to harm others. They understood that even the best external police cannot be there every hour of every day. So they gave us the Second Amendment.
Saturday, May 19, 2007 ~ 4:33 p.m., Dan Mitchell Wrote: ...the post office will run a staggering $5.2 billion deficit this year. ...Sure, government is growing and putting its nose into all sorts of new
things all the time, but there are very few businesses the government runs entirely, as it does with first-class mail delivery. Most of the
important stuff Americans buy - food, clothing, and shelter - is produced almost entirely by the private sector. The result? Nearly everyone is fed,
clothed and housed. What's so special about mail delivery that the government must do it? ...companies such as FedEx and UPS can deliver packages, which could include letters - but they are limited by
law to "extremely urgent" letters (such as overnight deliveries) and forced by law to keep their prices much higher than those of the post
office. The postal monopoly costs you, me and all of us who have no choice but to be the post office's customers if we want to send standard
letters, and yet the post office still can't come close to breaking even. Meanwhile, the inflation-adjusted cost of other things has plummeted.
Consider how much a long-distance telephone call costs compared with 10, 20 or 30 years ago. The price of gasoline seems to keep going up, but adjusted for inflation it has mostly gone down over the decades.
Friday, May 18, 2007 ~ 10:55 a.m., Dan Mitchell Wrote: It started in Estonia. In 1994, the government of Mart Laar, already proven as one of central and eastern Europe's most daring reformers,
instituted a flat tax. … Simple taxes, easy to pay and difficult to evade, boosted Estonia's competitiveness, lured foreign investment and helped make the Baltic republic Europe's fastest growing economy. …
Meanwhile elsewhere in eastern Europe a flat tax revolution is afoot. It is no longer enough to harmonise tax codes with European Union expectations. Even longtime EU member states themselves are being
forced to scale down against more competitive tax regimes to the east, or risk losing business. … On tax, Croatia is a slow learner. Serbia (14
per cent flat tax on personal income and 10 per cent corporate income tax), Montenegro (9 per cent flat tax on corporate income) and Romania (16 per cent flat tax on personal and corporate income) have
bought in to the flat tax idea, and the list of converts is growing rapidly.
Friday, May 18, 2007 ~ 10:26 a.m., Dan Mitchell Wrote: Businesses should wake up to the fact that, if work to harmonise European Union tax systems succeeds, they will face huge uncertainty
regarding their tax liabilities, pay higher tax bills and face a more rigid corporate tax regime. Lázsló Kovács, the tax commissioner, is firmly set
on introducing a legislative proposal by the end of 2008 to harmonise the corporate tax base across the Union. ...Separate accounting for cross-border transactions within a group would be eliminated, and
group profit would be shared by means of a set formula between member states and taxed at the rate applicable in each state. ...To date, business has expressed surprisingly little scepticism about this untested
assertion. Such a sanguine attitude is misplaced. ...companies doing business in Europe would pay higher tax bills. ...CCCTB would drive some investment to more flexible and competitive tax jurisdictions
outside the EU. Business lobbies have only backed the scheme if CCCTB is optional for companies. But, for how long could it remain optional? If simplicity and a reduction in administration costs are part
of the raison d'être , then running an additional system side by side with national tax regimes makes no sense. The Commission said in 2006
that: "CCCTB should initially [my italics] be proposed as optional for companies", and on May 2 it said: "CCCTB should be optional . . .
where these [existing rules] are maintained alongside the CCCTB by member states." ...Despite assurances that it does not intend to extend
this work to cover the tax rate, the Commission has a long history of pushing for harmonised tax rates - and a common tax base is a prerequisite of tax rate harmonisation. When the Commission embarked
on this initiative, France and Germany made no secret that their end-game was tax rate harmonisation.
Friday, May 18, 2007 ~ 9:03 a.m., Dan Mitchell Wrote: The U.S. is the world's largest food donor, handing out 4 million metric tons, or more than half the world's total. Whenever and wherever
there's famine, we help. But as a new Government Accountability Office report shows, we don't do it very efficiently. Fully 65% of our food aid
budget goes to overhead, leaving just 35% to directly help the poor in famine areas. Even the United Nations looks efficient by comparison; it
manages to squander "only" 50% of its own food budget on overhead. ...Vast tons of aid dumped from abroad can harm fragile economies, as
local farmers are driven out of business by the free largesse. Studies of Ethiopia's 2005 famine found that U.S. aid actually lengthened it.
Thursday, May 17, 2007 ~ 10:17 a.m., Dan Mitchell Wrote: These new retail health clinics are opening in big box stores and local pharmacies around the country to treat common maladies at prices
lower than a typical doctor's visit and much lower than the emergency room. No appointment necessary. Open daytime, evenings and weekends. Most take insurance. Much like the response to Hurricane
Katrina, private companies are far ahead of the government in answering Americans' needs, this time for more accessible and more affordable health care. Political leaders across the country seeking to
expand government's role in health care should take note. ...Rick Kellerman, president of the American Academy of Family Physicians, concedes, "The retail clinics are sending physicians a message that our
current model of care is not always easy to access." The threat of competition from the in-store clinics means some doctors are keeping their practices open later and on Saturdays and holding an hour open
for same-day appointments. Competition works. ...The market is providing cheaper medicines, more affordable care -- and it is also helping the uninsured. A Harris Interactive poll conducted in March for
The Wall Street Journal said that 22% of those visiting the clinics were uninsured. Wal-Mart says that half of its clinic visitors are uninsured.
Thursday, May 17, 2007 ~ 9:50 a.m., Dan Mitchell Wrote: Democratic Governor Rod Blagojevich's tax increase to finance health care became the political rout of the year. The Democratic House in
Springfield killed the proposal, 107-0, after Mr. Blagojevich came out against his own idea when it became clear he was going to be humiliated. Only a month earlier he had said he was prepared to wage
"the fight of the century" in defense of his plan to impose a $7.6 billion "gross receipts tax" on Illinois businesses. Easily re-elected in
November, the Governor used every trick in the "progressive" political playbook to sell his proposal. Instead of a general tax increase, he
claimed it would be "targeted" for universal health care and education. Instead of raising individual taxes, he aimed at business and even built
in an exemption for smaller firms. ...Liberal special interest groups--including the state AFL-CIO and the Illinois Education Association--initially supported him. ...The Tax Foundation estimated
that Mr. Blagojevich's proposal would have been the largest state tax hike in the last decade, as a share of state general fund revenue--at 27% nearly double the next closest, which was Nevada's 14% increase in
2004. In per capita terms, the tax hike would average about $550 per Illinois resident. All of this piled on top of the $1.5 billion in new taxes
and fees that the Governor imposed in his first term. State revenue has been rising at a respectable 5% annual pace, but spending is rising faster. Jonathan Williams of the Tax Foundation says the Governor's
proposed budget this year calls for a 13.2% spending increase, which comes on top of a near double digit increase a year ago. The cumulative impact of this rising tax and spending burden has been to drive
businesses out of the state. "To describe every major CEO in Illinois as fat cats is a mistake," said Chicago Mayor Daley. "They don't have to
be here. They can go to Wisconsin. They can go to Indiana. They can go to India. They can go to China. So if you want to beat up businesses, go
beat 'em up, and when they leave, just wave to 'em and they're going to wave back to you." ...In today's global economy, the margin for policy mistakes is smaller, even for individual states.
Thursday, May 17, 2007 ~ 9:38 a.m., Dan Mitchell Wrote: ...today we have an amazing amount of lighting choices: CFLs [compact fluorescent lamps], incandescents, LEDs, halogen bulbs, an
amazing assortment of options. But politicians now want to limit those choices. ...They want to mandate CFLs by outlawing incandescents. ...Funny thing is, there's mercury in those CFLs. Mercury is what makes
the light. And, when you break one of those bulbs, clean-up should be done carefully. Worse yet, if you listen to those same people (politicians, environmental alarmists) about how dangerous even the smallest
amount of mercury can be, you'd hire thousand-dollar clean-up crews every time you break a bulb. ...Truth is, of course, this is a world of trade-offs. Nothing is completely safe. And even environmentalists find
themselves backing one dangerous technology over another.
Wednesday, May 16, 2007 ~ 11:44 a.m., Dan Mitchell Wrote: President Bush is going to make a fateful mistake. He will announce that his administration will make a concerted effort to secure the
prompt ratification of a deeply flawed multilateral accord universally known by its acronym - LOST, as in the Law of the Sea Treaty. ...things might have rested [with the status quo] - with the United States
continuing to do what it has done since President Reagan's day: remain a non-party to the Law of the Sea Treaty, observing its unobjectionable provisions concerning navigation and transit rights, while not
subjecting itself to the accord's myriad supranational institutions. The latter purport to govern the international sea beds and, according to
some, the oceans and even the airspace above them. Regrettably, a new correlation of forces is operating in Washington. The Bush administration is now under the influence of American Transnational
Progressives... Like those of virtually every other international organization, LOST's institutions (executive, legislative and judicial, if you please) are rigged-games. The United States will be routinely
outvoted or otherwise unable to prevent infringements on its sovereignty and, yes, in all likelihood over time even its military operations. ...roughly 60 percent of LOST's provisions have to do with
the supranational management of two-thirds of the world's surface and its resources.
Wednesday, May 16, 2007 ~ 11:31 a.m., Dan Mitchell Wrote: There are more women in top jobs in North America and in Latin America than in the European Union, a major new study by the International Labour Organization (ILO) shows. In the Global Report on Equality at Work 2007 - launched on Thursday (10 May) - North American women take up 41.2 percent of legislative or managing positions while the numbers are 35 percent for women in South America and the Caribbean and 30.6 percent for women in the EU. Ironically, though not surprisingly, the bureaucrats at the ILO seem to think that more government is required to boost the role of women in the workforce. Too bad they did not grasp the implications of their own statistics: A major theme of the ILO report is the persistent gender gaps in employment and pay and the need for integrated policies addressing sex
discrimination in remuneration and occupational segregation by sex, while reconciling work and family responsibilities.
Wednesday, May 16, 2007 ~ 10:00 a.m., Dan Mitchell Wrote: Secretary of Education Margaret Spellings wants to extend the testing and standards requirements of the No Child Left Behind Act to colleges.
...But national standards and testing in higher education will only strengthen a bureaucracy that already plagues an otherwise highly competitive system. Mr. Bush and Ms. Spellings will be not be around
long enough to write the rules of this new program. They will leave behind them a much larger department, now armed with the tools to influence education to a much greater extent. Ms. Spellings often uses
the language of Lyndon Johnson's Great Society in her speeches. Since Sept. 11, 2001, spending on higher education has grown at rates greater than, say, the Defense Department. National standards are unnecessary
in higher education. There are already plenty of accountability tools available to students and their parents -- starting with the ability to pick
up and go elsewhere. There are more than 2,000 accredited four-year colleges in the country. ...Ms. Spellings is now attempting to impose the mandate through the backdoor by forcing college accreditation
agencies to start demanding that the tests be imposed.
Tuesday, May 15, 2007 ~ 12:48 p.m., Dan Mitchell Wrote: ...the countries that are economically and politically free are underperforming the countries that are economically but not politically
free. For example, unfree China had a growth rate of 9.5 percent from 2001 to 2005. But China was not the whole story-Malaysia's GDP grew 9.5 percent from 1991 to 1995, Singapore's GDP grew 6.4 percent from
1996 to 2000, and Russia's grew 6.1 percent from 2001 to 2005. The unfree governments now understand that they have to provide a good economy to keep citizens happy, and they understand that free-market
economies work best. Also, nearly all of the unfree nations are developing countries. History shows they grow faster, at least for a while, than mature nations. But being unfree may be an economic
advantage. Dictatorships are not hamstrung by the preferences of voters for, say, a pervasive welfare state. Advocates for freedom usually - and with great justification - blame politicians for these outcomes, but a new book by Bryan Caplan says voters deserve part of the
blame. Both Cafe Hayek http://cafehayek.typepad.com/hayek/2007/05/
Tuesday, May 15, 2007 ~ 12:35 p.m., Dan Mitchell Wrote: EU Commissioner Charlie McCreevy yesterday broke ranks with his Brussels colleagues and officials in an unprecedented outspoken attack
on their "long-term, hidden agenda" for a common corporation tax base. Mr McCreevy told a business lunch in Dublin the proposal currently under consideration, and due to become Community law next
year, is a "sinister" idea that "refuses to die". He attacked the way permanent officials in the Commission sought to smuggle the proposal
through by saying it would be "optional" when it was really "an unworkable charade" and "underhand tactic to destroy tax competition
in Europe". ...The deliberately unworkable proposals amounted to a Trojan horse to enable the Commission take control of taxation, he said. Individual member states - especially the smaller ones - would no
either longer be able, or have the incentive, to manage effectively their public finances or direct foreign investment.
Tuesday, May 15, 2007 ~ 10:57 a.m., Dan Mitchell Wrote: The Croatian tax system is not far behind the Austrian system, and is a competitive and modern system, said Christian Widhal from Vienna
University at a round table on taxes held in Zagreb Monday. ..."Don't change taxes. Don't practice on people as people are tired of tax changes. A stable tax system is fundamental for the stimulation of
investments. Not even the rates are as crucial as stability, longevity and predictability of the tax system," said [Chamber of Economy Chairman] Vidosevic. ...Suker also brushed up on the discussion
concerning a flat rate on income, profit and added value taxes, concluding that such a rate would not be profitable for Croatia, due to such specifics as the war aftermath. Too bad nobody asked Professor Widhal why Croatia should seek to have a tax system similar to Austria's. Unless, of course, Croatia wants to stumble along with growth of 1 percent yearly while its flat tax neighbors grow by 5 percent annually. And too bad nobody asked the Chamber of Economy Chairman why stability is a good thing when tax rates are so high that economic activity leaves the country or goes underground. Last but not least, too bad nobody asked Finance Minister Suker why the tax system should be "profitable" for the government instead of the Croatian people.
Tuesday, May 15, 2007 ~ 10:22 a.m., Dan Mitchell Wrote: Edwards is quick to acknowledge his spending on health care, energy and poverty reduction comes at a cost, with more plans to come. All
told, his proposals would equal more than $1 trillion if he could get them enacted into law and operational during two White House terms. ... To pay for some of his priorities, Edwards would roll back Bush's tax
cuts on Americans making more than $200,000 a year. He also said he would consider raising capital gains taxes to help fund his plans and raise or eliminate the $90,000 cap on individual earnings subject to
Social Security taxes to help cover the projected shortfall in the system. ... Edwards' ideas have already opened him to accusations of being just
another tax-and-spend liberal, a label put on Walter Mondale, the 1984 Democratic presidential nominee who said he would raise taxes and then lost 49 states to President Reagan. ... Edwards has been the most
forthcoming Democratic candidate when it comes to describing the details of how he would like to run the country. His chief rivals - Sens. Hillary Rodham Clinton and Barack Obama - have offered few hints
about their policy proposals.
Tuesday, May 15, 2007 ~ 9:13 a.m., Dan Mitchell Wrote: Mr. Obama would ratchet up CAFE standards by 4% a year beginning in 2009, or about one mile per gallon per year. Congressional
Democrats are pushing legislation that would raise them to 35 miles per gallon by 2020, and the Bush Administration is hawking its own, more
modest plan as well. This is all the triumph of politics over experience. ...the indirect tax of mileage standards is an exceptionally inefficient
way to influence consumption. CAFE doesn't affect how many vehicles are on the road (a figure that keeps going up). And by making cars and
trucks more fuel-efficient, it may encourage people to drive more. If you get more miles to the gallon, then driving becomes cheaper, so driving
demand goes up and offsets any overall efficiency gains. ...There is a tradeoff between safety and efficiency. The National Academy of Sciences concluded that CAFE standards contributed to as many as
3,200 additional fatalities each year, because downsized cars are less safe in accidents. Other studies from the Brookings Institution and the
Competitive Enterprise Institute put that number significantly higher. ...The Congressional Budget Office estimates that raising CAFE standards by 3.8 miles per gallon would cost $3.6 billion per year, which
would reduce consumption by 10% over 15 years. The National Highway Traffic Safety Administration estimates this would add $3,000 to $5,000 to the price of an American vehicle. The United Auto Workers
says it could cost the jobs of 17,000 auto workers and 50,000 auto-parts workers. ...and More Subsidies for Bad Choices. The other side of Obama's recent proposal is that he wants to bribe the auto industry to accept his new regulations by promising to pick up part of the tab for retiree health care costs. But as a Townhall.com column reports, subsidizing a cost encourages profligacy and often precludes needed reform: American politicians should have learned by now that when the federal government helps pay for any program, that help only feeds the
program's growth. Take Medicaid. In many states, the feds pay for half the cost of this massive program to provide health care for the poor; the
states pay the rest. The way it's supposed to work is that states, knowing that they must pay their half each year, will keep costs down. Instead,
many states rationalize huge increases in Medicaid spending because they know that for each extra dollar they add to the program, they have to pay only 50 cents. Federal guarantees of student loans for college
students have followed the same dynamic. Instead of making college more affordable, the guarantees encourage schools to hike tuition without suffering a drop in demand. Meanwhile, in borrowing money,
students can easily lose sight of the full cost of college until it's too late. Obama's plan would have similar effects. Shaving 10 percent off
Detroit's retiree health care costs won't help the automakers return to profitability; in fact, it likely will discourage the automakers and union
workers from making the necessary painful choices to get those costs under control.
Monday, May 14, 2007 ~ 11:47 a.m., Dan Mitchell Wrote: Paulson warned that the US is starting to lose its edge in terms of tax competitiveness as emerging economies compete fiercely for foreign
investment. ...According to the US Treasury, in the last few years, the United States has not received as high a share of total worldwide FDI
as it did before 2000. Paulson said that this trend could be due to the growth of opportunities in emerging markets, burdensome US legal, regulatory and corporate tax regimes, or the misperception that the
United States is no longer open to foreign direct investments. In any event, the Treasury Secretary said that such statistics were "cause for
some concern". ...He went on to tell the Forum that: "The United States has historically been the best place in the world to do business and is a
magnet for foreign investment, so it's important to reaffirm both our openness to foreign direct investment and the benefits investment brings
to the US economy. And as we seek to attract foreign capital, we must realize that we have a constantly changing world where there are an increasing number of attractive economies across the globe competing
for investment dollars. Against this backdrop, we must assess the cost versus the benefits of our regulatory structure and certain aspects of
our legal system that may discourage foreign investment." Paulson said that tax competitiveness was an integral part of maintaining foreign
interest in the US economy, perhaps hinting that the administration's goal of substantial tax reform is no longer the lost cause that supporters
of tax code simplification had begun to fear. "Our corporate tax system is also increasingly putting us at a competitive disadvantage with some -
with a few other nations which tax companies or capital at lower rates than does the US," he stated.
Monday, May 14, 2007 ~ 11:18 a.m., Dan Mitchell Wrote: In a development somewhat counter to its apple-cheeked image, Vermont has become a leading tax haven for U.S. companies. As
described in a recent New York Times report, the state markets itself alongside Bermuda and the Cayman Islands as the answer to certain types of tax headaches. ...Vermont law has permitted the creation of
insurance captives for more than 20 years. But it only began aggressively marketing them about a decade ago, presenting captives as a sound alternative to the insurance business that thrives outside U.S.
borders. Today, more than 560 American companies have set up camp in Vermont, which also hosts an annual captive-insurance industry conference.
Monday, May 14, 2007 ~ 10:28 a.m., Dan Mitchell Wrote: So far this year, tax revenues total $1.505 trillion, an increase of 11.2 percent over the same period last year. That figure includes $383.6
billion collected in April, the largest monthly tax collection on record. ...For the first seven months of this budget year, which began Oct. 1, revenue collections and government spending are at all-time highs.
...White House Budget Director Rob Portman said the surge in tax revenues over the past two years was directly related to the economic rebound spurred by the Bush tax cuts. He said Congress should reject
efforts to roll back the tax relief.
Monday, May 14, 2007 ~ 9:48 a.m., Dan Mitchell Wrote: The state is 38th on the U.S. Chamber of Commerce's rankings of state liability systems. It suffers badly in comparison to neighboring Texas,
which has used its sweeping 2003 tort reform to lure business across the border. Malpractice premiums are high, and rural areas in Oklahoma report shortages of such specialty doctors as obstetricians. The good
news is that Oklahomans understand the trouble and want change. A public furor erupted in 2003, when former state Senate leader Stratton Taylor -- a partner in a personal injury law firm -- was caught inviting
trial lawyers unhappy with the Texas tort reform to sue in Oklahoma. Tort reform has since become a top election issue. ...The bill's reforms
included a stricter definition of "frivolous" lawsuits, a cap on pain and suffering awards, new standards for expert witnesses and the
elimination of joint and several liability. Most impressive, it would have required anyone who wanted to join a class-action lawsuit to sign an agreement to actually be represented by an attorney. The bill would
have gone a long way toward making Oklahoma a far more welcoming place for new business and job creation. Mr. Henry has been claiming to support reform for three years, and at one point he promised to "out
Texas" Texas on the issue. Then again, Mr. Henry is himself an attorney and was elected with the help of trial bar donations. He may also have
assumed he'd never have to act on his promises because a heretofore Democratic Senate could always be counted on to kill any reform. Well, Mr. Henry has now shown his untrue colors.
Monday, May 14, 2007 ~ 7:32 a.m., Dan Mitchell Wrote: The bank's rationale, never strong, has evaporated. ...The great prerequisite for curing poverty is, however, economic growth, and the
world has learned, during a 63-year retreat from statism, that the prerequisite for growth is free markets allocating private capital to
efficient uses. ...It is difficult to demonstrate that World Bank loans have produced growth, let alone as much growth as private capital would have produced. Furthermore, when the bank provides debt relief, it
creates what economists call moral hazard, an incentive for perverse behavior -- particularly, improvident borrowing. The bank's transactions with nongovernmental organizations are, strictly speaking,
irresponsible... The bank's real mission statement is the non sequitur that makes government undertakings immortal: We were created for a reason, therefore there must forever be a reason for us to exist.
Sunday, May 13, 2007 ~ 7:28 p.m., Dan Mitchell Wrote: A service station that offered discounted gas to senior citizens and people supporting youth sports has been ordered by the state to raise its
prices. ...the state Department of Agriculture...says those deals violate Wisconsin's Unfair Sales Act, which requires stations to sell gas for about 9.2 percent more than the wholesale price. Bhandari said he
received a letter from the state auditor last month saying the state would sue him if he did not raise his prices.
Sunday, May 13, 2007 ~ 6:04 p.m., Dan Mitchell Wrote: State Controller John Chiang has come up with some fresh and scary numbers on what it will cost to pay for promised health care benefits to
state employees over the next three decades. The tab: $47.9 billion. If that sounds worrisome, consider that Chiang makes the questionable
assumption that the current steep rise in health care costs will ease over time, from 10 percent this year to 4.5 percent 10 years from now. If that
hopeful scenario doesn't play out, the total obligation to state taxpayers could be much higher. In fact, it could be in the upper range of the $40
billion to $70 billion that the Legislative Analyst's Office estimated last year. And that's just for state employees. Cities, school districts and community colleges face an estimated $90 billion in health care
obligations. …Chiang and other state leaders need to confront one of the tougher questions posed by this ticking fiscal time bomb: Can and should the state continue to offer these same benefits to future
employees?
Sunday, May 13, 2007 ~ 4:27 p.m., Dan Mitchell Wrote: Americans are sending more money than ever to Washington; revenues for the first seven months of fiscal 2007 are up 11.3%, or $153 billion.
This Beltway bonanza has helped to slash the projected federal budget deficit by more than half from the same point last year. Across the past
three Aprils, federal red ink has sunk by nearly $300 billion. The deficit this year could tumble to $150 billion, or an economically trivial 1% of
GDP. This revenue boom certainly casts doubt on the political wails about tax loopholes for the rich. So far this year, the taxes paid on so-called nonwithheld income, which are dollars that don't come from
normal wages and salaries, have climbed by nearly 30%. This is income largely derived from capital gains, dividends and other investment sources -- i.e., the tax rates that President Bush cut in 2003. Individual
income taxes are also up by 17.5% -- a handsome fiscal dividend from rising wages and low unemployment. In other good news, the pace of federal spending, which was pedal-to-the-metal in Mr. Bush's first term,
has finally decelerated. So far this year federal outlays have climbed by 3%, and, save for Medicare and Medicaid, federal expenditures are nearly flat from 2006.
Saturday, May 12, 2007 ~ 7:26 p.m., Dan Mitchell Wrote: He wants the EU to move in a French direction, offering citizens "protection" from the outside world. …During the campaign, he called
on the EU to protect its citizens from unfair competition from abroad, particularly Asia, and from fiscal, social and environmental "dumping" from poorer EU members in eastern Europe. That approach is at odds
with the "open Europe" model being promoted by most northern, central and eastern European countries.
Saturday, May 12, 2007 ~ 1:18 p.m., Dan Mitchell Wrote: Swedes are among the healthiest people in the world according to the World Health Organization. And yet 13% of working-age Swedes live on
some type of disability benefit -- the highest proportion on the globe. To explain this, many Swedish policy makers, doctors and economists
blame a welfare system that is too lax and does little to verify individual claims. …governments from Finland to Portugal are trying to cut back
and get more people to work. Sweden's bloated sick bay, which includes roughly 744,000 people on extended leave, has caused soul-searching about whether the system coddles Swedes and encourages them to feel
sick. …During the 2002 monthlong World Cup soccer finals, short-term sick leave among Swedish men suspiciously rose by 55%. Earlier this year, police in Sweden's capital city Stockholm investigated the local
chapter of the Hell's Angels biker gang for suspected benefit fraud, because 70% of the gang were on extended sickness benefits. The same doctor had certified them all as suffering from depression. …In Europe,
roughly 20% of the working-age population -- or 60 million people -- depend on various government benefits as their sole or main income, compared with 13% in the U.S. That's a major economic handicap.
…Assar Lindbeck, one of Sweden's best-known economists, says the lenient welfare state has changed the country over the past generation. In place of the old Protestant work ethic, it has become acceptable to
feel unable to work and to live on benefits, he says. "I would not call it cheating," Prof. Lindbeck says. "I would call it a drift in attitudes and social norms."
Friday, May 11, 2007 ~ 10:17 p.m., Dan Mitchell Wrote: British cancer patients are substantially more likely to die of the disease than those in other western European countries because of poor access
to the latest drugs, according to an authoritative report to be published today. While more than half of patients in France, Spain, Germany and
Italy have access to new treatments provided since 1985, the proportion in the UK is four out of 10. French women with cancer are 34 per cent
more likely than those in the UK to still be alive five years after being diagnosed, while French male patients have a 23 per cent higher survival rate after the same period. …The researchers, whose report is
published in the journal Annals of Oncology, found that Austria, France, Switzerland and the US were leaders in using new cancer drugs. …The proportion of colorectal cancer patients with access to the drug
Avastin was 10 times higher in the US than it was in Europe, with the UK having a lower uptake than the European average.
Thursday, May 10, 2007 ~ 3:33 p.m., Dan Mitchell Wrote: Government grew under Clinton, and grew even faster under his successor. Government is so big today that more than half the
population gets a major part of its income from the state. …the portion of Americans feeding substantially at the public trough stands at 52.6
percent. In 2000, it was 49.4. It seems unbelievable that in 1950, only 28.3 percent of Americans lived off the taxpayers. …One out of five Americans works for some level of government or for a firm that
depends on taxpayer financing. One in five also draws Social Security or a federal pension. …federal domestic spending under President Bush has risen 27 percent in real terms, while discretionary non-entitlement
spending has gone up 4.5 percent a year. (Clinton's annual increase was "only" to 2.1 percent.) …Government has no wealth of its own. Before
it gives anything to anyone, it must take from those who produced it. But the taking could discourage future production, leaving less to be distributed by the politicians. …The European welfare states are
learning that producers don't leave themselves available for milking forever. Their economies are sluggish, and unemployment is high.
Thursday, May 10, 2007 ~ 1:51 p.m., Dan Mitchell Wrote: It won't be surprising if in a couple of years Bulgaria introduces a flat 10-per cent tax on incomes, Georgi Angelov, senior economist at Open
Society Institute, said, as quoted by Pari daily. Radical reforms are carried out more easily in countries with radical problems, such as those
in Eastern Europe. A quarter of the countries in Europe levy a flat tax. The first to introduce a flat tax rate was Estonia - 26 per cent in 1994.
The tax has been cut to 22 per cent already and the fashion has spread to neighbouring countries like Lithuania, Latvia, Russia and Ukraine. The example has been followed by Slovakia, Romania, Georgia, Serbia
and Macedonia, with the Czech Republic and Albania expected to apply the lowest rate of 10 per cent from 2008. According to Angelov, one of
the reasons for that is that Bulgaria has so far focused on reducing the corporate tax. Now that the tax has been cut to 10 per cent, the logical
step is to reduce labour taxation by implementing a single rate. Just a few years ago, a 10 per cent tax was wishful thinking, but now it is a fact.
Thursday, May 10, 2007 ~ 12:06 p.m., Dan Mitchell Wrote: ...a growing number of states are telling Congress what it can do with its de facto national ID card decree. So far, seven states have enacted
statutes or resolutions opposing the implementation of Real ID, and Oklahoma is on the verge of becoming the eighth. Oklahoma City and Tulsa aren't known as liberal hotbeds. Anti-Real ID measures have
passed at least one chamber of legislatures in 14 states and been introduced in 11 others. ...A study released last year by the National Governors Association, which opposes the law, put the implementation
price tag at $11 billion. But an analysis by the Department of Homeland Security released in March concedes that the costs will be at least double that amount. Under Real ID, which is scheduled to go into effect
next year, all 245 million current license holders in the U.S. are required to head down to the local Department of Motor Vehicles with certified
source documents -- such as a birth certificate or Social Security card -- to apply for the new standardized national ID. And people from states
that don't play ball won't be able to use their licenses to board planes or enter federal buildings. In California today, where a nation-high 25
million licenses are issued, residents can renew by mail. Real ID requires that you appear in person. So Americans can be grateful that DMVs nationwide are known as models of hassle-free efficiency; be sure to
book a free afternoon. Americans are rational. And in a post-9/11 world, they are willing to trade some freedom and convenience for more security. But it's not at all clear that Real ID will make us safer.
Deputizing motor vehicle office clerks, who would be entrusted with sensitive information and access to a national databank, also entails considerable privacy risk.
Wednesday, May 9, 2007 ~ 3:51 p.m., Dan Mitchell Wrote: ...the solution to poverty is decentralized entrepreneurial activity under capitalism. ...In the United States, the poverty threshold for a family of
four is just under $20,000 a year in income. However, consider what would happen if you were to force every family of four all over the world the world to live on $20,000 a year. The majority of families
would say, "Thank you." Outside the United States, there are more people living under our poverty threshold than over it. ...If $500 a year
per person represents extreme poverty, then consider that in the year 1800 the average income per person in the world was half that. What we consider extreme poverty today would have been considered
upper-middle-class two hundred years ago. ...the capitalist system accounts for more than 100 percent of the reduction in poverty that has
taken place over the past hundred years. ...Ironically, the biggest factor retarding the capitalist solution to poverty may well be the crusade to end poverty using conscious planning.
Wednesday, May 9, 2007 ~ 1:34 p.m., Dan Mitchell Wrote: The United States decision last week to withdraw from one of its WTO commitments after it finally lost its battle with Antigua and Barbuda
over on-line gaming has evoked a storm of outrage and concern. ...The WTO treaty allows a country to withdraw commitments to open its services market to foreign investors, but since the treaty was originally
negotiated multilaterally (as with all WTO treaties) the US will now have to negotiate with any of the other 149 member countries that objects to the move and wants to renegotiate any of their own
commitments in return. To call this opening Pandora's box must surely be an understatement. Adjectives used by commentators over the weekend to describe the US action included 'absurd' and 'disingenuous'.
...Senior officials in Antigua and Barbuda were taken aback by the decision. "While we had of course been aware of the possibility of the
United States taking such an action, we frankly considered it extremely unlikely," said Dr Errol Cort, Antigua's Minister for Finance and the
Economy. "It is almost incomprehensible that the United States would take such an action in the face of an adverse dispute resolution ruling.
This is going to have very severe consequences for the global free trade movement." ...Actually, for the US to take this action at such a crucial
moment in the WTO Doha Round negotiations is nothing short of tragic. What does the USTR think will now be in the minds of its negotiating partners among the dozens of economically weak developing countries
who rely on the rule of law to hold their own in the trading ring against such Titans as the United States and China?
Wednesday, May 9, 2007 ~ 11:29 a.m., Dan Mitchell Wrote: Healthcare is notorious for runaway prices, which are due, in part, to this financing scheme: multiple payers. ...With multiple payers providing
assured payments the market is subverted -- there is no pricing discipline. This leads inexorably to price inflation, which in the case of healthcare outruns the overall inflation rate big-time. Another
enterprise that depends on multiple payers, assured payment, and heavy government involvement is higher education. And it, too, has raging inflation. ...Despite healthcare's soaring inflation rate, healthcare
reformers want to throw yet more money at it. ...The cure for healthcare inflation-and a great many other things, for that matter-is competition.
And the way to get competition is by withholding funds, not assuring them.
Tuesday, May 8, 2007 ~ 2:07 p.m., Dan Mitchell Wrote: According to the OECD report in 2000, thirty-five countries with offshore jurisdictions had tax practices that were "harmful" presumably
to them. Among these practices were low or no tax, bearer share companies, poor regulation and an absence of tax information exchange agreements. It didn't occur to the OECD countries then - and
it appears to continue to escape them now - that high taxes force individuals and companies to seek legitimate ways of avoiding them, and that lower and fairer taxes would most probably keep a larger
portion of income and savings within domestic jurisdictions. A recent report, written by Camille Stoll-Davey of Oxford University and entitled
"Assessing the Playing Field", suggests that OECD member countries do not operate to a higher standard than so-called offshore centres and
in important cases they operate to a lower standard. ...Many US states, including Delaware and Nevada, do not require companies to provide beneficial ownership information. Yet Delaware companies are arguably
the corporate vehicles most frequently used by non-residents of the United States for so-called offshore transactions. The USA, UK, Canada, France, Germany, Italy, Switzerland, Austria, Luxembourg
and Costa Rica still permit bearer share companies... Major players in international finance like Hong Kong and Singapore restrict exchanging tax information to domestic interests and Switzerland restricts it to
cases of tax fraud and the like.
Tuesday, May 8, 2007 ~ 12:41 p.m., Dan Mitchell Wrote: In one of its first acts last year as an independent country, Macedonia (population: two million) legislated radical tax reforms. On Jan. 1,
2007, the country introduced a flat-rate tax of 12 per cent on both personal and corporate income, matching the rate introduced two years ago by Georgia (population: 5.6 million). On Jan. 1, 2008, Macedonia
will cut its rate to 10 per cent - and achieve one of the lowest tax rates in the world. Macedonia's tax revenues will almost certainly rise. The country's new, young (age: 36 years) free-market Prime Minister,
Nikola Gruevski, cites the phenomenon of voluntary compliance that accompanies flat-tax regimes. "This reform will decrease tax evasion,"
he says, "and encourage people to meet their obligations to the state." As Russia (population: 144 million) vividly demonstrated when it
adopted a flat tax (replacing a 40-per-cent rate on personal income with a 13-per-cent rate) in 2000, low rates are persuasive tax collectors.
Russia's revenues rose 25 per cent in the first year, 25 per cent in the second year, 15 per cent in the third year. People who violently resist
getting scalped will submit voluntarily for a trim. ...Around the world, tax rate competition is getting keener. Countries that resist flat-tax reform are nevertheless lowering rates. Poland (population: 37.5
million) has moved three-quarters of the way to a flat tax - with a single rate of 19 per cent for all corporate income, capital gains, dividends and self-employed individuals. Spain (population: 40 million) has
introduced a flat rate of 18 per cent for all income derived from savings. Effective this year, Iceland (population: 300,000) taxes all personal income at a flat rate of 32 per cent - which appears high
because it includes municipal as well as national taxes. It now taxes capital gains, dividends, interest income and rental income at a flat rate of 10 per cent.
Tuesday, May 8, 2007 ~ 12:11 p.m., Dan Mitchell Wrote: Governments around the world are engaged in increasingly aggressive tax competition. This is most clearly seen in headline rates of
corporation tax. Four years ago, in 2003, the UK had the fourth lowest rate in the EU. Today, despite an unchanged rate of 30%, it has the 21st
lowest rate in the EU. This dramatic decline in the rankings has come about for two reasons. One is the accession of new EU member states in 2004 and 2007 (of the 12 new members, all but one have a tax rate
lower than that of the UK). Also, six of the pre-2004 members have reduced their rates from 30% or more to less than 30%. ...Some argue that competition will halt as governments resist the pressure to give up
all their revenue. Perhaps there might be a convergence at, say, 15%. Why stop at 15%, though? There will always be countries that see an advantage in undercutting their neighbours. In the early 1980s, the
average Organisation for Economic Co-operation and Development corporation tax rate was about 50%. The rates now would have been scarcely believable then.
Monday, May 7, 2007 ~ 3:32 p.m., Dan Mitchell Wrote: This week Senators Max Baucus and Charles Grassley, the chairman and ranking minority member of the Finance Committee, will hold
"informal meetings" to ponder a 133% tax hike on private equity firms. There's no good rationale for this beyond the fact that Congress wants
money and private equity funds have lots of it. Private equity firms will raise and deploy a record one-half trillion dollars of investment capital
this year -- funds that provide start-up and expansion-phase money for firms large and small. ...Senator Grassley says he suspects "subterfuge"
that allows fund managers to underpay their taxes. The managing partners of equity funds generally receive compensation in two ways. They charge the fund investors a 1% or 2% management fee for finding
high-return business opportunities and for orchestrating the portfolio. Those fees are taxed at the personal income tax up to 35%. But fund managers also typically lay claim to a 20% slice of the fund's future
profits. That return is called "carried interest" and is taxed at the long-term capital gain rate of 15%. Congress is considering reclassifying that income as labor compensation and taxing it at the
35% income tax rate. ...Far from being a clever tax dodge, carried interest plays a central role in the performance of private equity funds:
It establishes an incentive structure which aligns the financial interests of the managers and investors. ...The biggest losers from a private equity tax hike may be pension funds, which have become large
investors in these funds; their high performance has made millions of Americans wealthier in their retirement.
Monday, May 7, 2007 ~ 2:23 p.m., Dan Mitchell Wrote: The number of people claiming non-domicile tax status has nearly doubled in three years, fuelling fears that Britain is becoming the
world's first onshore tax haven. ...The tax break...is now increasingly used by City tycoons and overseas billionaires who are flocking to London to take advantage of a loophole that allows them to keep their
vast fortunes intact. ...Labour MP Stephen Pound has called on Sir Ronald Cohen, Gordon Brown's closest ally in the City, to come clean over whether he benefits from non-domiciled tax status. Cohen, a
substantial Labour donor who founded Apax Partners, Britain's most successful private equity firm, exerts strong influence over the Chancellor. He has repeatedly refused to disclose his tax status.
Monday, May 7, 2007 ~ 11:55 a.m., Dan Mitchell Wrote: American taxpayers supply some 17% of the bank's capital, and a new round of fund raising for the bank's International Development
Association is about to commence. If Congress is going to ante up the $7 billion or so the bank is expected to request, the least it can do is insist on more accountability…. Of its roughly 10,000 employees, no
fewer than 1,396 have salaries higher than the U.S. Secretary of State; clearly "fighting poverty" does not mean taking a vow of poverty at
"multilateral" institutions. At the time of Ms. Riza's departure from the bank, she was a Grade "G" (senior professional) employee; the typical
salary in that grade hovers around the $124,000 mark. For the next level, Grade "H"--the level to which Ms. Riza was due to be promoted--salaries average in the $170,000 range, with an upper band
of $232,360. No fewer than 17% of bank employees are in this happy bracket. Even sweeter, all of this is tax-free to non-Americans. U.S. employees have to pay U.S. tax but have their income taxes reimbursed
by the bank. As with any public bureaucracy, these jobs are also impossible to lose for anything other than gross incompetence or venality.
Monday, May 7, 2007 ~ 10:10 a.m., Dan Mitchell Wrote: Employment growth in Texas has been significantly higher than in Arkansas during periods of economic expansion. The population in
Dallas has nearly tripled in the post-WWII period, while the population in Little Rock has barely doubled in size. Per capita personal income in
Texas is 94 percent of the U.S total. In Arkansas it's 77 percent of the nation's total, a level that has hardly budged since the 1970s. The list of
statistical disparities is long, and there's a good reason why: While Arkansas and Texas share a common border, each taxes income and capital in radically different ways. Arkansas has a top income-tax rate
of 7 percent, the highest among the bordering states. Texas, however, does not impose an income tax. The imbalance is the same for capital gains: Arkansas taxes them. Texas does not. As a result, we can see a
very basic economic principle at work: Talent and capital always will flow toward higher returns.
Sunday, May 6, 2007 ~ 6:47 p.m., Dan Mitchell Wrote: The four-year study in Indonesia and Malaysia, where 85% of commercial palm oil is grown, by a team from Wetlands, Delft
Hydraulics and the Alterra Research Center of Wageningen University, details the environmental harm caused by the use of palm oil as an alternative energy source. The study found that 1.4 billion tons of
carbon dioxide go up in smoke every year from rain forest fires set to clear new land for biofuel plantations. Another 600 million tons seeps into the air from drained peat swamps. That 2 billion tons of CO2
constitutes 8% of the earth's total fossil fuel emissions. In the U.S., the alternative fuel du jour is ethanol. It can be made from corn or sugar or
perhaps even wood chips and leftover copies of the New York Times. But here too there are consequences to its use that may exceed any benefits. We already know that ethanol consumes more energy in its
manufacture than it produces when consumed, that it is difficult to transport and evaporates easily. We also know that using virtually all available land to produce an ethanol crop like corn would make only a
small dent in our energy mix, and that by competing with crops grown for food, raises food costs.
Saturday, May 5, 2007 ~ 5:04 p.m., Dan Mitchell Wrote: Standing in the heart of London's financial district, Sarkozy heaped compliments upon his country's historic enemy. The British capital was,
he said, a "town that seems more and more prosperous and dynamic every time I come here." More important, it had become "one of the
great French cities." He understood, furthermore, that hundreds of thousands of Frenchmen had moved to Britain because "they are
risk-takers, and risk is a bad word" in France. ...even a Sarkozy victory in the final round of voting on Sunday won't persuade all of the 2 million-plus French exiles to go home. Asked by a French polling
company, TNS Sofres, "Are you satisfied with your life abroad?" 93 percent of French emigres surveyed recently said "yes." ...there is
nothing odd about the fact that the French now vote with their feet. There are better-paying jobs in London, taxes are lower in London, the economy grows faster in London: C'est la vie -- and tough luck for
Paris. ...For the past decade, French, German and other European leaders have tried to unify European tax laws and regulations, the
better to "even out the playing field" -- or (depending on your point of view) to make life equally difficult everywhere.
Saturday, May 5, 2007 ~ 11:17 a.m., Dan Mitchell Wrote: A holy alliance of church groups and bishops is demanding that Gordon Brown closes legal loopholes used by the super-rich to avoid tax. …A
new moral crusade against loopholes that have led to Britain being labelled a tax haven by the International Monetary Fund comes after the Treasury revealed that, since 2002, only three officials have been
working on its review of non-dom status but have so far come up with no conclusions. …Non-dom status allows the wealthy to legally escape paying tax on earnings abroad. It is thought Archbishop of Canterbury
Rowan Williams is concerned at how tax breaks enjoyed by an elite group run contrary to a social justice agenda. …Niall Cooper, national coordinator of ecumenical Christian charity Church Action on Poverty,
said: 'Most of the population does not have the opportunity to avoid tax. Tax isn't a voluntary activity.'
Friday, May 4, 2007 ~ 12:53 p.m., Dan Mitchell Wrote: The Internal Revenue Service is curtailing audits of many people who use offshore tax havens, even when agents see signs of tax evasion, because agents fear they cannot meet a three-year deadline for finishing an examination, Congressional investigators have found. In a report to be released on Thursday, the Government Accountability Office found that I.R.S. agents are so hobbled by "dilatory tactics" by offshore taxpayers and other problems that it takes almost two and a half years to complete a typical audit. …The average assessment of unpaid taxes tripled to $17,500 for the limited number of audits that were allowed to run longer than three years, and it shot up to nearly $100,000 for the small number allowed to run four or five years. …As part of its inquiry, the G.A.O. examined 12 offshore tax audits. …Audits can be pursued for more than three years, but agents have to meet tough requirements and their findings can be dismissed and the agents reprimanded if the unpaid taxes turn out to be smaller than expected. It's also worth noting that the story allowed a left-wing law professor to make an extremely weak claim about the amount of tax evasion taking place offshore, even
though the so-called offshore sector does not show up in IRS tax-gap estimates (http://www.irs.ustreas.gov/pub/irs-utl/tax_gap_facts-figures.pdf) and the
Congressional Research Service has found (http://www.freedomandprosperity.org/ …Reuven S. Avi-Yonah, a professor of law at the University of Michigan who will testify at the Senate hearing on Thursday, estimated last year
that the United States could be losing as much as $50 billion from international tax maneuvering.
Friday, May 4, 2007 ~ 12:08 p.m., Dan Mitchell Wrote: Plans for a common European corporate tax system will provoke a clash in Brussels tomorrow amid claims they could undermine national
tax sovereignty and stop poor countries luring investment through tax breaks. Charlie McCreevy, European Union internal market commissioner, is expected to lead the protests, arguing the project is
complex, detrimental to some countries, and could lead to a concentration of tax powers in Brussels. ...Mr Kovacs's report, seen by the Financial Times, will give his critics ammunition to argue that the
tax plan will throw up administrative problems and could eliminate tax competition. ...Mr McCreevy believes a centralisation of tax powers in
Brussels breaches national tax sovereignty. The commissioner will also highlight the complexity of establishing a common tax base and deciding how to allocate revenues between member states. The paper
acknowledges "there will be differences between this new base and the current individual tax bases". ...Some countries, including Britain and
low-tax jurisdictions such as Ireland, Estonia and Slovakia, have said they would not take part in the scheme.
Friday, May 4, 2007 ~ 10:10 a.m., Dan Mitchell Wrote: ...high marginal tax rates put a large "tax wedge" between the income people get from earnings and investments and the value that society
places on the output of those investments, and that this stunts economic growth by discouraging earning and investing. It wasn't a novel insight;
James Mirrlees, an economist who had analyzed tax rates in Britain in the 1970s and who advised the Labour Party, concluded that the top marginal tax rate should be about 20%. ...supply-siders should now be
leading the effort to reform the Alternative Minimum Tax in a way that encourages economic growth. And they could do so in a way that, over
time, turns the AMT into a taxpayer-friendly, flat tax rate for the middle class. ...The AMT has been rightly called a "stealth tax" because so few
people are aware of it until it reaches out and bites them. But it's also a modified flat tax rate, and further reforms should make it flatter and
lower. That way, even moderate inflation could "stealthily" move us, over about 10 years or so, to a flat tax for most Americans. ...If a
flat-tax rate regime is desirable, then the sensible reform would be to modify the AMT to get it closer to a flat tax. The three ways to do so, as
the above comparison suggests, would be to reduce the exempt level below $45,000, reduce the AMT's marginal tax rates and further limit the items that are deductible. ...But 26% and 28% are high tax rates for
a flat-tax system. So -- and here's the good news for taxpayers -- another reform of the AMT should be to lower these rates to one rate, say 24% or even 20%. Although few people remember this now, the
AMT rate as recently as 1986 was 20%. ...A flat tax rate is also desirable because it gives lower-income people a disincentive to advocate more federal government programs, because they will see
themselves as paying for those programs. On a state level it gives people, especially those with higher incomes, a reason not to support creating more state and local government programs, because they no
longer will be able to deduct their state tax bills from their federally taxable income.
Friday, May 4, 2007 ~ 9:32 a.m., Dan Mitchell Wrote: The bill, boldly named "the America COMPETES Act," authorized an additional $16 billion over four years as part of a $60 billion effort to
"double spending for physical sciences research, recruit 10,000 new math and science teachers and retrain 250,000 more, provide grants to
researchers and invest more in high-risk, high-payoff research." As Alexander noted, "these were recommendations of a National Academy
of Sciences task force" that he and others had asked to tell Congress the 10 things it most urgently needs to do "to help America keep its
brainpower advantage so we can keep our jobs from going to China and India." Back in December 2005, I wrote about the report that Alexander, and Sens. Jeff Bingaman and Pete Domenici, both of New
Mexico, had requested - and about the bipartisan support that seemed to be available for this "competitiveness" agenda. ...Alexander said,
"Senators and their staffs worked across party lines for two years. Senior committee members, chairmen and ranking members, waived jurisdictional prerogatives. The administration participated in extensive
'homework sessions' with senators and outside experts. The effort was so bipartisan that when the Senate shifted to the Democrats in January, the new majority leader and minority leader introduced the same bill
their predecessors had in the last Congress. Seventy senators co-sponsored the legislation. ... The final vote was 88-8." ...this is the model that Congress and the president need to follow - if any of the
major challenges facing the country are to be met. "There are issues that are too big for either party to solve by itself," Alexander told me. "Globalization and competitiveness are two of them.
Thursday, May 3, 2007 ~ 11:04 p.m., Dan Mitchell Wrote: Some people avoid working in the Czech Republic because of its high tax rates. The reform will spread the tax burden and simplify the
system, raising employment interest and returning revenue the government has lost to tax dodgers, Žůrek said. The simple formula will
make the cost of paying taxes lower than the cost of breaching the tax law. For example, Slovakia's flat-tax reform yielded lower rates but higher tax revenues, from new investors and formerly evasive
taxpayers. Now, Bratislava is one of the best places to employ people in the region. …Should the proposal pass, the Czech Republic will become the world's 14th country — and the 10th in Central Europe — with a
form of the flat tax. The trend's geographic concentration, which began with Estonia in 1991, has a simple reason. "Regional tax competition," said Tomáš Bartovský, Industry and Trade Ministry spokesman. Lower
income taxes in neighboring countries lure investment away from the country, he said.
Thursday, May 3, 2007 ~ 10:00 p.m., Dan Mitchell Wrote: The European Parliament's bureau, the body that oversees the assembly's administration, has voted to prevent publication of a list
naming the 475 MEPs who benefit from a pension scheme worth more than £1,400 a month to Euro-MPs with the taxpayer matching every euro personally contributed with two from the public purse. Payments
are controversial because, for "administrative reasons", the MEP's personal contributions are taken automatically from office expenses. No
one checks whether the politician actually pays anything into the fund from his own salary. Many in Brussels believe that a "large proportion"
of Euro-MPs are using their office payments to get a free second pension on top of national schemes.
Thursday, May 3, 2007 ~ 7:57 p.m., Dan Mitchell Wrote: At his first EU summit, in Brussels in June, a President Sarkozy would push hard for a new tariff on imports from outside the European Union
to protect jobs and discourage firms from moving production outside the area, he said. …Mr Sarkozy said that he would also press for harmonised business taxes — a project long rejected by Britain and
other states. It was time to reduce the power of the national veto in such areas, he said. His proposal for a protective "European preference" in trade is also opposed by Britain and conflicts with the Union's
free-trade policies.
Thursday, May 3, 2007 ~ 5:35 p.m., Dan Mitchell Wrote: As the report acknowledges, women with college degrees tend to go into fields like education, psychology and the humanities, which typically pay
less than the sectors preferred by men, such as engineering, math and business. They are also more likely than men to work for nonprofit groups and local governments, which do not offer salaries that Alex
Rodriguez would envy. As they get older, many women elect to work less so they can spend time with their children. A decade after graduation, 39 percent of women are out of the work force or working part time --
compared with only 3 percent of men. …women in full-time jobs work an average of 42 hours a week, compared to 45 for men. Men are also far more likely to work more than 50 hours a week. …June O'Neill, an
economist at Baruch College and former director of the Congressional Budget Office, has uncovered something that debunks the discrimination thesis. Take out the effects of marriage and
child-rearing, and the difference between the genders suddenly vanishes. "For men and women who never marry and never have children, there is no earnings gap," she said in an interview.
Wednesday, May 2, 2007 ~ 12:02 p.m., Dan Mitchell Wrote: Jokes about offshore tax havens with more mailboxes than people are plentiful in the world's onshore financial centres. But it looks as if the
jesters have got it wrong: the real offshore tax havens may be the UK, the US and other supposedly "onshore" financial centres. ...Delaware,
for example, falls short of some of the demands of the Organisation for Economic Co-operation and Development - a club of large, rich economies - on small countries for tax reporting. Little wonder that it
hosts mailboxes for more than half of US corporations and 60 per cent of Fortune 500 companies. The vast majority of US states do not require - let alone verify - owner-ship information when a company is
formed. Companies need to provide almost as much information to register a web address. It is hypocritical of rich countries to rail against offshore tax havens.
Wednesday, May 2, 2007 ~ 11:46 a.m., Dan Mitchell Wrote: Democrats want to go after high-income earners, whom they call "rich." What is surprising is how high rates must be raised to make their
plan's numbers add up. The top AMT rate would increase to 31.5% from 28%. Democratic tax experts also recommend eliminating the lower rate for capital gains and dividends for those subject to the AMT. This
would raise the capital gains tax rate to about 31% from its present 15% rate. …The changes in the AMT rate, and the treatment of dividends and capital gains, still leaves Mr. Rangel at least $600 billion
short of paying for the AMT fix. House Democrats have acknowledged that to close this final gap, they will have to look to personal income taxes. Rep. Richard Neal of Massachusetts, the head of the Ways and
Means tax panel, says this will require raising the top tax rate of 35% by no more than three to five percentage points. Mr. Neal should check his math. Tax experts on Capitol Hill and in the Treasury Department
calculate that to get $60 billion a year from the top 1% of income earners would more likely require rate hikes of 10 to 15 percentage points. This would lift the top federal marginal income tax rate as high
as 50%. "I can't think of a better way to throw the economy into recession and end the bull market expansion of recent years than to raise tax rates like this," warns Michael Darda, chief economist for
MKM Partners. It's hard to argue with that assessment. Overnight, the U.S. would go from being a nation with one of the lowest set of income-tax rates to one of the highest in the developed world. …In
countries as diverse as Ireland, China, India, Japan, Russia and Hong Kong, tax rates are flat or falling, part of a world-wide effort to reward
growth and get more of it. Yet Reaganomics, alive nearly everywhere else, is dead in the halls of the United States Congress.
Wednesday, May 2, 2007 ~ 11:24 a.m., Dan Mitchell Wrote: How do you know when taxes are too high? Well, one reliable guide is when Europe has lower tax rates. …The U.S. does poorly in
international comparisons of corporate tax rates. Last year, the Australian Treasury issued a report titled "International Comparison of
Australia Taxes." When looking at ten leading OECD nations - Australia, Canada, Ireland, Japan, Netherlands, New Zealand, Spain, Switzerland, United Kingdom and the U.S. - only Japan had a higher
corporate tax rate than the U.S. An April 17 Wall Street Journal article ("Europe Competes for Investment With Lower Corporate Tax Rates")
noted some additional facts that U.S. policymakers should be watching and responding to in the end. Consider that the combined U.S. federal
and state (average) corporate tax rate is just over 39%. That compared to average corporate tax rates of 36.5% among G-7 nations, 30% for Asia-Pacific countries, 28.5% in Latin America, 28.5% also among 30
OECD nations, and 25.8% in the European Union. The Journal also noted recent tax-cutting trends. Next year, Germany's corporate tax rate will fall from 39% to less than 30%. Great Britain recently
announced a cut from 30% to 28%. And Spain is in a phased reduction from 35% to 30%. …The U.S. is supposed to be a leader in providing pro-growth tax relief. It certainly should not be trailing behind much of
the world. …A good first step to promote investment and growth would be to…at least get our corporate tax rate in line with the average for the EU, i.e., about 25%. The U.S. is in an intense, worldwide
competition for business and investment. Reducing corporate income and capital gains tax rates is simply smart economics - making the U.S. a less costly place to invest, build, create jobs, and, oh yes, make a
profit.
Wednesday, May 2, 2007 ~ 10:55 a.m., Dan Mitchell Wrote: THIS affluent city-state of 4.5 million people is aiming to be a sanctuary for the world's wealthy and their money, Asia's answer to Geneva and
Zurich. …Now the tiny enclave at the tip of the Malay peninsula is trying to carve out a new niche for itself in the global economy by
bolstering banking secrecy laws and offering generous tax incentives. "I can't think of any other place where private banking is growing so much
as in Singapore," said Henrik Mikkelsen, a private banker at Commerzbank in Singapore. "We want to be the Switzerland of Asia." …Almost 40 private banks now have regional operations in Singapore,
including Swiss stalwarts such as Bank Julius Baer. Citigroup's headquarters for all private banking outside the United States is now in Singapore, as is the global banking headquarters of Standard Chartered
Bank of Britain. …Robert Chandran, who emigrated to the US from India and made fortunes in California real estate and the fuel oil business. In 2005, contemplating retirement, he moved his company and
family here, bought a luxury condominium downtown and space in a waterfront resort with parking for yachts. He traded in his American passport for one from Singapore. Chandran said he was lured by
Singapore's blend of Western conveniences with Asian values and by the Government's zeal for keeping Singapore competitive. "They don't have
global taxation," he said, which means that his capital gains and interest income from outside Singapore are not taxed here. …Tax rates
are low as well. Singapore does not tax capital gains or interest income. Its top income tax rate is 20 per cent, and it does not tax income earned outside Singapore. …Singapore had already beefed up its banking
secrecy laws in 2001. While many banks are moving their back offices to India, bankers here say Singapore's secrecy rules are so tight, they
are moving the data centres handling their private banking transactions from India to Singapore. …Singapore's secrecy rules do not extend to anyone involved in terrorism or smuggling.
Wednesday, May 2, 2007 ~ 10:30 a.m., Dan Mitchell Wrote: Most Americans are familiar with the "public markets," which consist of the New York Stock Exchange, the Nasdaq and other stock markets.
These are open to investors of every stripe and are where the stocks of most of the world's best-known companies are traded. Nearly anyone can invest, and these exchanges are comprehensively regulated by the
Securities and Exchange Commission. Less well understood is another, more restricted market known after SEC Rule 144a that governs participation in it. As on stock exchanges, this market allows for the
buying and selling of the stock of companies that offer their shares for sale. But participation is strictly limited. To be what is called a
"qualified buyer" in this market, you must be a financial institution with at least $100 million in investable assets. If you meet these criteria, you
are free to buy stocks of both U.S. and foreign companies that have never offered their shares to the investing public. And here's the real beauty of it: Companies that issue stock under Rule 144a can access
America's deep pools of capital without submitting to public-company accounting rules or to the tender mercies of Sarbanes-Oxley. In exchange, however, they must strictly limit the number of qualified U.S.
investors in their company -- to 500 total for U.S.-based firms and 300 for foreign-based. They are also barred from offering comparable securities for sale in the public market. The 144a market is also for the
most part nontransparent, often illiquid and thus in some ways riskier. But increasingly, this is a trade that institutional investors and companies seeking capital are willing to make. There are estimated to
be about 1,000 companies whose stocks trade in the 144a market. And last year, for perhaps the first time, more capital was raised in the U.S.
by issuing these so-called unregistered securities than through IPOs on all the major stock exchanges combined. …This leaves our politicians with two choices. They can move to meddle with and diminish this
second securities market -- which will only drive more business away from U.S. shores. Or they can address the overregulation that is hurting public markets and prompting both investors and companies to seek
alternatives.
Tuesday, May 1, 2007 ~ 10:46 a.m., Dan Mitchell Wrote: Berlin is considering introducing minimum... Left-wing politicians and journalists dominate the debate. Minimum wages, they say, are
necessary to maintain the living standards of the poor. They argue that minimum wages pose no problem for the economy: After all, most other European countries have them already. They fail to acknowledge,
however, the negative experience these countries had with minimum wages. The vast majority of empirical studies show they tend to cost jobs. In France, for example, a 1% increase in the real minimum wage
reduces the employment probability of a young man by 2.5%. If the minimum wage is sufficiently low, as is the case in the U.K. and the U.S., where only about 1% of the work force earn it, it poses no major
problem for the labor market. However, if it is as high as in France, where 15% of the work force earn minimum wages, it contributes to chronic unemployment by pricing the low-skilled out of the market. The
French youth riots that shocked the world two autumns in a row can be attributed to the high unemployment among the young, which in turn is partly caused by the high minimum wage. What the left further
overlooks is that Germany already has an implicit minimum wage resulting from its extensive welfare system. An unemployed couple with two children typically receives a monthly net income of €1,600 -- and
that doesn't even count free health insurance, worth another €600 per month, and free pension and old-age nursing insurance. As this income
is paid under the condition that people do not work and is cut to the extent that they do, it defines a minimum wage that the private sector
would have to exceed in order to be able to attract workers. …The basic problem for the army of low-skilled is that no entrepreneur will employ a person who adds less value than the wage he must be paid. At the
same time, hardly any unemployed person will take a job whose net wage is not sufficiently above welfare payments.
Tuesday, May 1, 2007 ~ 9:56 a.m., Dan Mitchell Wrote: Plans that include a dizzying array of new taxes totaling $4 billion. This, in a state of five million people with a biennial state budget of $31.5
billion. And this, too, in a state whose general fund is running a $2.2 billion surplus -- even after an automatic, built-in increase of $1 billion.
Nevertheless, Democrats have introduced bills raising all income tax rates, including one for the highest top rate in the nation at 9.7%. In the
name of transportation, i.e., mass transit, they've proposed increasing the gas tax 50%, to 30 cents per gallon at the pump, as well as raising
the state sales tax by a half-cent. Add to that levies on everything from beer to mortgages to paint. …Minnesotans are hardly under-taxed. According to the U.S. Census Bureau, the state tax burden in the home
state of Walter Mondale and Al Franken already ranks sixth-highest per capita in the nation. The state has decoupled its estate tax from federal
relief; it still taxes capital gains as ordinary income. Though it's hard to shed tears for the subsidy-seeking big business community here, a
corporate tax rate of 9.8% is one reason for the anemic job growth of late.
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