 |
|
|
|
|
|
|
|
||
 |
|||||||||
|
www.freedomandprosperity.org |
|||||||||
|
|||||||||
 |
|||||||||
|
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. |
|||||||||
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The Market Center Blog |
||||||||||
|
Observations and insights on the global fight |
||||||||||
|
CF&P's Market Center Blog Archives |
||||||||||
|
Wednesday, October 31, 2007 ~ 4:10 p.m., Dan Mitchell Wrote: In 1971, only about 32 percent of all Americans enjoyed air conditioning in their homes. By 2001, 76 percent of poor people had air conditioning. In 1971, only 43 percent of
Americans owned a color television; in 2001, 97 percent of poor people owned at least one. In 1971, 1 percent of American homes had a microwave oven; in 2001, 73 percent of poor people had one. Forty-six percent
of poor households own their homes. ...The average poor American has more living space than the average non-poor individual living in Paris, London, Vienna, Athens and other European cities. ...Poverty is not
static for people willing to work. A University of Michigan study shows that only 5 percent of those in the bottom fifth of the income distribution in 1975 remained there in 1991. What happened to them? They
moved up... Poverty in the United States, in an absolute sense, has virtually disappeared. ...No matter how poverty is defined, if I were an unborn spirit, condemned to a life of poverty, but God allowed me to
choose which nation I wanted to be poor in, I'd choose the United States. Our poor must be the envy of the world's poor.
Wednesday, October 31, 2007 ~ 3:53 p.m., Dan Mitchell Wrote: The United States' second-richest man has delivered a blunt message to the Bush administration: he wants to pay more tax. Warren
Buffett, the famous investor known as the "Sage of Omaha", has complained that he pays a lower rate of tax than any of his staff - including his receptionist. Mr Buffett, who is worth an estimated
$52bn (£25bn), said: "The taxation system has tilted towards the rich and away from the middle class in the last 10 years. It's dramatic; I
don't think it's appreciated and I think it should be addressed." …Buffett's remarks drew a robust response from the US Chamber of Commerce, which said the top 1% of US earners accounted for 39%
of tax revenue - and the highest earning 25% of the population delivered 86% of the tax-take. The Chamber of Commerce correctly notes that the tax code already is heavily biased against rich people, and it certainly is true that higher tax rates will hinder economic performance and make America more like Europe (which would hurt receptionists more than billionaires). But the reporter should have done some simple fact checking and discovered that Buffett has no idea what he's talking about regarding tax rates. I addressed this issue back in June, in response to another Warren-wants-the-rest-of-us-to-pay-more episode: It is probably safe to assume that Buffett receives lots of dividend income and that he also declares a considerable amount of capital
gains, both of which are subject to a 15 percent tax rate on an individual tax return. What he did not mention, however, is that corporations pay a 35 percent tax before distributing dividends to
shareholders, so the actual effective tax rate on that portion of Buffett's income is closer to 50 percent. ...The capital gains tax is another example of double taxation. An increase in the value of a
stock is a reflection of an anticipated increase in the future income stream from that stock. Yet that income stream will be taxed (usually two times!) when it occurs. The real effective rate on that portion of
Buffett's income is harder to calculate, but it certainly will be far higher than 15 percent. ...Shifting gears, Buffett's calculations almost
surely include Social Security payroll taxes, which only apply to the first $90,000 of income in exchange for not providing huge benefit payments to rich retirees. Indeed, the overall program is highly
progressive once benefit payments are added to the equation, so Buffett's secretary gets a better deal than he does from Social Security (though both would be better off with a system of personal
retirement accounts).
Wednesday, October 31, 2007 ~ 1:21 p.m., Dan Mitchell Wrote: The Iowa Department of Revenue is taxing jack-o'-lanterns this Halloween. The new department policy was implemented after officials decided that pumpkins are used primarily for Halloween decorations, not food, and should be taxed, said Renee Mulvey, the department's spokeswoman. ...Previously, pumpkins had been considered an edible squash and exempted from the tax. The department ruled this year that pumpkins are taxable - with some exceptions - if they are advertised for use as jack-'o-lanterns or decorations. But in the glorious tradition of bureaucracies everywhere, there is a form to fill out - at least for taxpayers who eat pumpkins: Iowans planning to eat pumpkins can still get a tax exemption if they fill out a form. ...This sounds like added bureaucracy, but Iowa taxpayers should be happy. By this time next year, the bureaucrats will decide that some people are falsely claiming that they are eating pumpkins in order to dodge the tax. So the new form will require families to send in photos of pumpkin pie. The following year, some bureaucrat will decide that some of the pies were actually bought in stores, so tax exemptions will only be allowed if a bureaucrat is invited over for dinner. I'm just kidding, of course. At least I think. On a more serious note, special tax exemptions for pumpkins based on their use is symptomatic of why the tax code is a mess. It's a mess in Washington, and it's a mess in the states. The common thread in all cases is that politicians try to micro-manage the economy (and raise campaign cash) by imposing penalties and creating loopholes. The ultimate victims are the small business owners who now will have even more of their time consumed by bureaucratic nonsense: Kautz, who has owned his farm for seven years, was particularly dismayed with the notion of requiring customers to fill out a form
verifying that they planned to eat the pumpkins they were buying. "It's another crazy, crazy, stupid thing," he said. Kautz said he will estimate how many pumpkins were bought for non-food purposes,
and then will send the tax on that amount to the revenue department. "It gets unfeasible for people to have small businesses," he said.
...Other Iowa pumpkin sellers also expressed confusion about the new policy. ...None said they are asking customers to fill out the tax-exemption certificate.
Wednesday, October 31, 2007 ~ 11:32 a.m., Dan Mitchell Wrote: France has thrown its support behind a European Commission idea to tax environment polluters and also urged Brussels to consider EU
levies for imports from non-Kyoto countries, such as the US and Australia. ...His speech came at the final session of the expert platform which had debated climate change issues for the past four
months. Mr Sarkozy argued that Europe should "examine the option of taxing products imported from countries that do not respect the Kyoto Protocol." He urged European Commission president Jose
Manuel Barroso, present at the speakers' podium, to discuss in the next six months the implications of "unfair competition" by firms outside the EU.
Tuesday, October 30, 2007 ~ 12:31 p.m., Dan Mitchell Wrote: Mr. Rangel's bill increases tax rates by 4% on individuals earning above $150,000 and couples earning over $200,000. This increase
will come on top of the rollback of the 2001 and 2003 Bush tax cuts. The combined result: America's top income-tax rate will skyrocket from the current 35% rate to a top rate of 44%. Let's be clear --
that's a 25% tax hike. So much for low-tax America and high-tax Europe; this would put the nation's top rates among the highest of all developed nations. This is an especially heavy burden for American
farmers and small businessmen who pay taxes as individuals. According to an Oct. 25 memo from Ways and Means Committee Ranking Member Jim McCrery (R., La.), the net result will be the
biggest tax increase in U.S. history, totaling $3.5 trillion in higher taxes over the next 10 years. Mr. Rangel does shuffle the corporate-tax code, dropping the top rate to 30.5% from the current
35%. It's rather refreshing to see that he recognizes that America's corporate-tax rate is too high and hurts our competitiveness. But this glimmer of progress is swamped by the plan's range of new taxes on
capital investment and punitive measures towards American companies that operate globally. ... Compliance with the 60,000-page tax code costs Americans seven billion man-hours and over $140
billion in fees to accountants and consultants, all before a single check is cut to the government. While the AMT may be repealed by this bill, the inefficiencies and burdens that keep Washington
lobbyists employed full time remain.
Tuesday, October 30, 2007 ~ 11:47 a.m., Dan Mitchell Wrote: Is global capitalism making the poor even poorer, or is it in fact rescuing millions of people out of their misery? ... Ever since the
Industrial Revolution, poverty has been significantly reduced throughout the world. Two hundred years ago, the average income per person worldwide was the equivalent of less than $2 a day; the
figure is $17 today. ... The fact that 20 percent of the world's population is extremely poor should not make us forget that millions of lives have improved dramatically in the last three decades.
Illiteracy has dropped from 44 percent to 18 percent, and only three countries out of a total of 102 included in the U.N.'s Human Development Index have seen their socioeconomic conditions
deteriorate. ... The progress of the market economy that began to free the world of its shackles continues at an even faster pace today despite the many restrictions still faced by the people who create
wealth and exchange it, and despite the fears that these momentous times understandably inspire in those who have difficulty adapting. What a heartening thought.
Tuesday, October 30, 2007 ~ 11:30 a.m., Dan Mitchell Wrote: ... at least one London-based hedge fund has already agreed to move one-third of its staff to Switzerland in recent months, while a
representative body for cantons in the country's west is actively canvassing British firms. The campaign has been ratcheted up following the government's decision to up capital gains tax, as
announced in the pre-Budget report earlier this month. From April next year, the tax levied on private equity and entrepreneurs will nearly double, from 10% to a flat-rate of 18%. Provided monies
earned on transactions are treated as private gains rather than income, entrepreneurs pay no capital gains tax in Switzerland. Development Economic Western Switzerland (Dews), which
represents the cantons of Jura, Vaud, Neuchatel and Valais, has been sending letters to financial services firms about the area's favourable tax rates.
Monday, October 29, 2007 ~ 2:56 p.m., Dan Mitchell Wrote: For the past half century, Europe was supposed to be building a free market. But old habits die hard, and many Continental politicians
think more and better regulation is the route to prosperity. Their control over access to a consumer market of 500 million lets them try to force the rest of the world, in particular that economic giant
across the Atlantic, to play by its cumbersome rules. This is Europe's way of staying competitive. The result is a quiet but concerted war on American commerce. Antitrust policy in Brussels, particularly for
high-tech firms, is a battlefield. Mario Monti, the former EU competition czar who issued the ruling against Microsoft's "bundling" of software on its operating system, told Italian
newspaper Corriere della Sera last month that putting that company and other American giants in their place was "the true strength of a united Europe." ...so-called environmentalism drives a lot of EU
regulation. One of the costliest is Brussels' plan to force any airline flying to or from Europe, regardless of nationality, to participate in its carbon cap-and-trade scheme by 2012. ...Unelected officials in
Brussels and protectionist politicians in national EU capitals are skewing the global economic playing field. Washington lets Europe's regulatory imperialism run largely unchecked. The Transatlantic
Economic Council pushed by German Chancellor Angela Merkel is a possible venue for starting to fight back. But her call to "harmonize"
regulations to boost trade ought to send up red flags across the pond. In euro-speak, that translates as more rules for everyone written in Brussels. This is all a threat to our prosperity. And the U.S. had
better wake up to it fast.
Monday, October 29, 2007 ~ 1:22 p.m., Dan Mitchell Wrote: The supply-side argument that, in the United States, tax-rate cuts pay for themselves-that, after cutting taxes, the government actually ends up with more revenue. As I've already explained, the Laffer Curve only implies more revenue in certain circumstances. Unfortunately, a lot of Republican politicians don't fully understand the issue, so they overstate the case and give fodder to those who want to prop up the existing revenue-estimating system (which is based on the even more absurd notion that changes in tax policy never have any impact on economic performance). Ironically, the author admits later in the article that the Laffer Curve does exist: ... the absurd idea that tax cuts pay for themselves is based on an idea that is not at all absurd, which is that tax rates can have an
impact on people's behavior. Increase taxes too much, and people may work less (since they get to keep less of the income they earn) and invest less (since their gains will be taxed more heavily), and so
the economy will grow more slowly. The opposite can happen if you cut taxes. (How much of an impact tax rates have-and how high taxes have to get before they have an impact-is a subject of much
debate in economics, but it's inarguable that they do matter.) What supply-siders have done is start with that reasonable idea and extrapolate it to unreasonable lengths.
Sunday, October 28, 2007 ~ 3:33 p.m., Dan Mitchell Wrote: …the taxes collected last year by federal, state and local governments in the United States amounted to 28.2 percent of gross
domestic product. That rate was one of the lowest among wealthy countries - about five percentage points of GDP lower than Canada's, and more than eight points lower than New Zealand's.
…the meager tax take leaves the United States ill prepared to compete. From universal health insurance to decent unemployment insurance, other rich nations provide their citizens benefits that the
U.S. government simply cannot afford. …revenue will prove too low to face the challenges ahead. The editorial conveniently forgets to explain, though, how America is less competitive because of supposedly inadequate taxation. Is it that our per capita
GDP is lower than our higher-taxed neighbors in Europe? No, America's per capita GDP (http://www.heritage.org/Research/Budget/images/chart3_large.gif)
is considerably higher. Is it that our disposable income is lower? It turns out that Americans enjoy a huge advantage in this measure (http://www.heritage.org/Research/Budget/images/chart7_large.gif). Is our
economy not keeping pace? Interesting thought, but America's been out-performing (http://www.heritage.org/Research/Budget/ But give the New York Times some credit. It is not easy to argue that higher taxes are good for growth. So if you're going to make a fool of yourself, you may as well cast evidence to the side and jump into the deep end of the pool.
Sunday, October 28, 2007 ~ 1:11 p.m., Dan Mitchell Wrote: The McClatchy article focused on what has happened to federal spending. And by this measure, Bush unambiguously has been fiscally irresponsible. This doesn't mean that spending as a share of GDP is not an important measure. Indeed, IBD is correct to explain that it is the most appropriate measure of the overall burden of government relative to activity in the productive sector of the economy. What does this say about the Bush years? Well, the good news is that the American economy has enjoyed strong growth since the supply-side 2003 tax rate reductions. The bad news is that a significant chunk of that new output has been diverted to unproductive government activity. The McClatchy piece says discretionary spending under Bush has risen an inflation-adjusted 5.3% in his first six years, outstripping the
4.6% under Johnson - and way above President Reagan's meager 1.9%. By "almost any yardstick," the article continues, Bush "generally exceeds the spending of his predecessors." ...Any
yardstick," that is, except the most important of all - spending as a share of GDP. On this, Bush is actually lower than most of his predecessors. Spending as a share of GDP is the most important
measure of the size of government, since it measures what government actually takes from the national economy.
Saturday, October 27, 2007 ~ 11:16 a.m., Dan Mitchell Wrote: Contrary to popular opinion, the trade balance (deficit or surplus) barely affects total U.S. employment over long periods. Domestic job
creation and destruction ultimately overwhelm trade's effects. From 1991 to 2006, the trade deficit rose from $31 billion to $759 billion. In the same period, payroll jobs increased by 28 million and the
unemployment rate fell from 6.8% to 4.6%.
Friday, October 26, 2007 ~ 3:59 p.m., Dan Mitchell Wrote: Internet consumers scored a victory in Washington last night, thanks to Senator John Sununu (R., N.H.), with big assists from Minority
Leader Mitch McConnell (R., Ky.) and Oregon Democrat Ron Wyden. The Senate passed a seven-year extension of the Internet tax moratorium, with robust language that should stiff-arm even the
most voracious state and local governments looking for loopholes to tax your email. ...If the House, as expected, passes the Senate bill early next week, President Bush can sign it into law before the
current ban expires November 1.
Friday, October 26, 2007 ~ 3:13 p.m., Dan Mitchell Wrote: Mr. Rangel does propose to cut the corporate tax rate, of all things, to 30.5% from 35% today. He'd "pay" for this by reducing business
credits and deductions. This is revealing because it is a tacit admission that tax rates really do matter to investment choices. Mr. Rangel has apparently been listening to the numerous American
CEOs and economists who've been saying that the high U.S. corporate tax rate has been driving ever more of their business and capital offshore. Corporate tax rates have been falling even in
Europe, and the U.S. now finds itself with nearly the highest rate in the developed world. So at least regarding corporate taxes, Mr. Rangel is an honorary supply-sider. ...But where Mr. Rangel really
gets busy is with his plan for a long-term "revenue neutral" AMT fix. He wants to abolish the AMT permanently and greatly expand
"refundable tax credits" for low income families, while adding a 4% income tax surcharge on anyone who makes more than $200,000 a year, or 4.6% if you make $500,000 ($250,000 for singles). Mr.
Rangel also wants to raise the capital gains tax rate to 19.6% from 15% today, and raise taxes on dividends, business partnerships, and companies with foreign subsidiaries. Add it all up and you get new
taxes of $1 trillion or more.
Friday, October 26, 2007 ~ 1:41 p.m., Eugene Slaven Wrote: Not only are foreign tribunals hostile to the United States, but their judges have no comprehension of U.S. law, due process, or trial by
jury. They often meet in secret, they arrogantly assert they can define their own jurisdiction, and their decisions may not be appealed. U.S.
sovereignty would be severely diminished if the Senate is so foolish as to ratify the pending Law of the Sea Treaty, officially called the United Nations Convention on the Law of the Sea. .Bush's legal
adviser in the State Department, John B. Bellinger III, made a revealing speech on June 6 in the Hague. He said that Bush accepts the International Court of Justice's decision about Medellin (as well
as about 51 other convicted Mexican murderers from various U.S. states), and is now trying to persuade the U.S. Supreme Court to accept it, too. Meanwhile, Frank J. Gaffney, Jr. points to noble efforts made by some policymakers to thwart this misguided treaty. He argues that several Congressional committees have a major stake in LOST's outcome: Proponents of the United Nation's Law of the Sea Treaty (LOST)...hoped to celebrate the 24th of October - also known as UN
Day - by having that panel rubber-stamp LOST. .the Finance Committee surely has an interest in the repercussions of LOST- established precedents for international taxation. The Intelligence
Committee - whose Democratic chairman Jay Rockefeller generally treats with extreme skepticism what Bush Administration officials tell him - should obtain a "second opinion" on the latters' assurances
that U.S. intelligence will not be impaired by LOST. Homeland Security and Governmental Affairs would have a two-fer, due 1) to the fact that LOST may require, among other things, the compromise
of sensitive information about domestic industries in the name of environmental regulation, and 2) the growing allegations of corruption and incompetence in LOST's utterly unaccountable
International Seabed Authority. The Commerce Committee should have its own concerns about the prospective compromise of U.S. technologies and the Treaty's other detrimental effects on our
competitiveness (such as its socialist, redistributionist agenda, its imposition of the Luddite "precautionary principle" - which precludes
innovation unless it can be proven harmless - and its adoption of European, rather than U.S., industrial standards).So far, among the major presidential candidates, only the GOP's former Arkansas
Governor Mike Huckabee has aligned himself squarely with Ronald Reagan in opposing the Law of the Sea Treaty. Unless the rest of the field promptly joins him, they will share responsibility for, and have
to live with the consequences of, a UN on steroids.
Friday, October 26, 2007 ~ 10:36 a.m., Dan Mitchell Wrote: George W. Bush, despite all his recent bravado about being an apostle of small government and budget-slashing, is the biggest
spending president since Lyndon B. Johnson. In fact, he's arguably an even bigger spender than LBJ. …Take almost any yardstick and Bush generally exceeds the spending of his predecessors. When adjusted
for inflation, discretionary spending — or budget items that Congress and the president can control, including defense and domestic programs, but not entitlements such as Social Security and Medicare
— shot up at an average annual rate of 5.3 percent during Bush's first six years, Slivinski calculates. That tops the 4.6 percent annual rate Johnson logged during his 1963-69 presidency. By these
standards, Ronald Reagan was a tightwad; discretionary spending grew by only 1.9 percent a year on his watch. Discretionary spending went up in Bush's first term by 48.5 percent, not adjusted for
inflation, more than twice as much as Bill Clinton did (21.6 percent) in two full terms.
Thursday, October 25, 2007 ~ 6:00 p.m., Dan Mitchell Wrote: In 1931, in some of the darkest days of the great depression and the middle of the Hoover administration, the national unemployment rate
stood at 17.4%. Seven years later, after more than five years of FDR and literally hundreds of wildly ambitious new government programs, after more than doubling federal spending, the national
unemployment rate stood at --- 17.4%! ...Other measures of recovery show similarly dismal results. After the stock market crash and the beginning of the Great Depression, the Dow Jones Industrial Average
hit 250 in 1930 under Hoover (it had been 343 just before the crash). By January, 1940 the market had collapsed to 151 (remaining in the low 100's through most of Roosevelt's terms) and didn't return to its
1929 levels until the 1950's. At the same time, federal spending as a percentage of the Gross Domestic Product soared at an unprecedented rate: from 2.5% in 1929, to 9% in 1936 (long before
the wartime spending began). In other words, the portion of the total economy controlled by Washington increased by a staggering 360% in the course of just seven years - without providing discernable
benefit to the economy. ...A growing majority of economic historians now concede that the programs of the New Deal prolonged, rather than terminated, the Depression. ...The nation endured major
reverses and sharply increased unemployment in 1815, 1837, 1873, 1893, 1920, 1958, 1979 and many other occasions. The record shows consistently that leaders who cut government to revive the economy
succeeded far more quickly and painlessly than the New Deal. ...
Thursday, October 25, 2007 ~ 5:32 p.m., Dan Mitchell Wrote: Among the bailout ideas is a plan that would ask lenders to take a small, 10%-15%, haircut on these subprime loans but then bring in
the Federal Housing Administration to insure the rest. This idea has backers on Capitol Hill, and we're told it even has takers at Hank Paulson's Treasury. But if Mr. Paulson embraces it, he'll be putting
taxpayers at risk if housing values decline further. He'll also be sending a terrible signal to lenders, borrowers and investors -- to wit, that Congress will save them from bad decisions. Treasury has spent
years warning about the risk to taxpayers from expanding Freddie Mac and Fannie Mae. If it now embraces a larger role for their federal housing cousin, the FHA, Treasury's credibility on Fan and
Fred will be zero. ...you can't bail out borrowers without also bailing out lenders and investors -- and down that route lies endless taxpayer
liability. Before embracing a radical restructuring of the relationships between American homeowners and mortgage companies, it's worth reviewing the facts: Roughly 35% of homeowners have no mortgage
debt remaining on their homes. Of those homeowners still paying a mortgage, 95% are paying on time. And even in the risky category of subprime adjustable-rate loans, more than 83% are still paying on time.
Thursday, October 25, 2007 ~ 4:14 p.m., Dan Mitchell Wrote: Perhaps you've heard that this is the Congress for "the little guy," the "forgotten" middle class, the working stiff. If that was the plan, it
isn't working. On present trends, the 110th Congress will go down as one of the biggest blowouts in corporate welfare history. That's saying something, considering that the last GOP Congress gave big
business some $92 billion a year in subsidies, according to the Cato Institute. Cato's latest analysis indicates that if all the pending spending bills pass, corporate welfare will exceed $100 billion in
direct outlays in 2008. The handouts for the rich that have a good chance of passing include the most expensive farm bill ever; a rise in the mortgage limits on loans that can be securitized by Fannie Mae
and Freddie Mac; some $2 billion in loan guarantees to ethanol producers; and expansions in flood and terrorism insurance to benefit home builders, mortgage banks, and real estate developers.
…Roll Call newspaper, which covers Congress, reports that in the first half of 2007 business lobbyists gave "all or most of their cash to
Democratic candidates and party committees." They're getting their money's worth.
Wednesday, October 24, 2007 ~ 12:52 p.m., Dan Mitchell Wrote: Foreign leaders and Poland's business community on Monday welcomed the victory of the liberal Civic Platform party in Sunday's
parliamentary elections, predicting the revival of contacts iced up under the previous government and the restart of much-delayed economic reforms. ...With more than 99 per cent of ballots counted,
Civic Platform had 41.4 per cent of the vote, translating into 209 seats in the 460-member parliament. ...Civic Platform is likely to form a coalition with the smaller Peasants party, which will have 31
seats. ...Some of the most specific comments, concerning the party's economic policies, were made by Zbigniew Chlebowski, a potential economy minister. He talked of introducing a flat 15 per cent tax by
2009 and said the government would privatise more energetically than its predecessor.
Wednesday, October 24, 2007 ~ 12:20 p.m., Dan Mitchell Wrote: According to the European Commission, the EU should..."shape" globalisation. ...Speaking at the EU summit Friday (19 October),
French president Nicolas Sarkozy proved to be the strongest advocate of such a principle. "Let's not be naive, we must demand a reciprocity", he said, complaining about the severe environmental
and social requirements placed upon EU businesses, but not followed by their non-European competitors.
Wednesday, October 24, 2007 ~ 10:27 a.m., Dan Mitchell Wrote: His government is at pains to say this is an emasculated text, a pale imitation, if that, of the constitution the EU produced and then saw
fail in 2005. ...Well, not quite. More accurately, after French and Dutch voters rejected that text two years ago, the constitution was put in a sort of witness-protection program to reemerge under a new
alias. Even the Labour-dominated parliamentary committee set up to examine the treaty warned it is practically identical to the old text. ...even if Mr. Brown's attempt at damage control proves successful, it
doesn't answer why Britain or the rest of Europe needs the treaty. On this question the prime minister repeats the same mantra that all other leaders offer when asked what these 250 pages of legalese are
good for: The document supposedly paves the way for the functioning of the EU, which has grown to 27 members from the original six. Apart from the fact that the EU seems to have
functioned just fine since enlargement without new rules, the treaty does much more than just streamline voting procedures. ...If none of the changes is of any significance, as Mr. Brown likes to claim, why
bother pushing them at all?
Tuesday, October 23, 2007 ~ 9:02 p.m., Dan Mitchell Wrote: The second round of consultation on the revamp of New Zealand's international tax rules has begun today with the release of an issues
paper detailing the proposed tax exemption for active income from the offshore operations of New Zealand businesses. "We are looking at a fundamental reform that will remove tax impediments to New
Zealand businesses expanding overseas and help them to compete internationally," Finance Minister Michael Cullen and Revenue Minister Peter Dunne jointly announced last week. The ministers
explained that the central change in the reform, announced in Budget 2007, is to exempt the active income of New Zealand's controlled foreign companies from domestic income tax, which will bring New
Zealand into line with the practice of other countries. Cullen and Dunne continued: "That change will put New Zealand businesses on a better footing internationally by freeing them from a tax cost that
the controlled foreign companies of other countries do not face."
Tuesday, October 23, 2007 ~ 8:39 p.m., Dan Mitchell Wrote: State Sen. Mike Frerichs, D-Champaign, wants Illinois to switch to a graduated income tax, meaning high earners owe a larger
percentage than those with lower incomes. ...It won't be an easy task. The Illinois Constitution specifies that "a tax on or measured by
income shall be at a nongraduated rate." ...Getting a constitutional amendment on the ballot requires a three-fifths majority vote in both the House and the Senate or a petition with nearly 280,000
signatures - enough to equal at least 8 percent of the total votes cast in the last election for governor. Once it gets on the ballot, it needs approval from 60 percent of those voting on the question or a
majority of the people who voted in that election. ...Ralph Martire, executive director for the Center for Tax and Budget Accountability, said he strongly supported the idea of graduated income tax.
...Martire said. "We have a flat tax, which means we leave too much of the economic growth out of our tax structure."
Monday, October 22, 2007 ~ 3:17 p.m., Dan Mitchell Wrote: The Bush tax program, particularly the 2003 Tax Act, boosted productivity by encouraging the investment to make a larger capital
stock possible. ...The 15% cap of tax rates on dividends and capital gains was a very large reduction in the double taxation of corporate income. It was equivalent to a big cut in the corporate tax rate and
the biggest boost to investment of the Bush tax packages. Lowering the marginal income tax rates in the top four tax brackets cut the service price for noncorporate businesses and rewarded work and
risk-taking. The projected end of the estate tax would give a further boost to investment. ...Killing the 15% tax rate caps on capital gains and dividends, the marginal rate cuts, the bracket widening for joint
returns (marriage penalty relief), and the partial estate tax relief currently in place, would jump the service price of capital by more than 10%... the stock of business plant, equipment, and inventories
would ultimately be about 16% less compared to what it would be under current tax rates. Hours worked would fall 2%. Private-sector output and wage and capital income would drop 7%. That would
mean an eventual 5%-6% reduction in GDP. The present Congress thinks it can raise $200 billion a year (at 2006 income levels) by letting the growth provisions of the present tax system die, but with
no damage to GDP. Wishful thinking. ...Consider precedent. Lyndon Johnson pushed a 10% war surtax on income through Congress in April 1968. It was the primary trigger for the 1969-1970 recession.
...Consider Japan as well. In 1988-1990...Japan instituted a capital-gains tax where there had been none, and ended near universal tax-favored saving incentives for everyone below
retirement age. It raised land taxes twice. These hits to capital crashed stock and land prices, made banks insolvent, and crushed investment. It took Japan 15 years to recover.
Monday, October 22, 2007 ~ 12:12 p.m., Dan Mitchell Wrote: Switzerland has long feared that it is losing ground in the battle between the financial marketplaces, relying too heavily on the
passive management of money for the very wealthy. [British Chancellor of the Exchequer] Mr Darling's measure, introduced in response to an outcry about low taxes for bloated capitalists,
effectively raised the tax paid by a private equity or hedge fund manager on his investments from 10 to 18 per cent. In contrast, Switzerland is "paradise for capital gains", said Michel Dérobert of
the Geneva Private Bankers Association and he hopes more hedge funds will move to Switzerland to be near their clients. ...The way to attract more asset managers to Switzerland, says Mr Dérobert, is to
get the tax authorities to treat the carried interest as private capital and he is optimistic that agreement will be reached. Contrary to popular belief, income tax can be high in Switzerland, notably in
Geneva, where the top rate, including federal tax, Mr Dérobert says, is 47 per cent, higher than in Britain, where the marginal rate is 40 per cent. Rates vary from canton to canton and can fall to less than
25 per cent in mountain cantons such as Zug. Mr Darling's decision to take a £30,000 scalp off the nondomiciled and wealthy causes wry amusement in Switzerland. The Swiss frequently pointed to the
eccentric rule, which enables wealthy foreigners to reside and work in Britain but pay no tax on foreign-earned income which remains offshore, whenever Switzerland was accused of unfair tax competition.
Monday, October 22, 2007 ~ 10:46 a.m., Dan Mitchell Wrote: Some Europeans, particularly European Union officials in Brussels, praise significant EU structural subsidies-in the tens of billions-for
planting the seeds of Irish prosperity. ...But EU structural funds alone would not have helped Ireland escape its economic predicament. Many nations receive outside financial aid without any appreciable
increase in their economic prosperity. The real credit belongs to Irish fiscal policy. Beginning in the late 1980s, successive Irish governments pursued vital spending cuts and tax relief. ...Ireland has
a 12.5 percent corporate tax rate, which has made it a magnet for powerhouse firms.
Sunday, October 21, 2007 ~ 7:31 p.m., Dan Mitchell Wrote: Over the past two years, European Union apparatchiks have worked feverishly to resurrect the Constitution, and EU leaders met this
week to finalize details of the new European Reform Treaty, a massive document that looks almost exactly the same as the old Constitution. ...The Constitution and its successor treaty are all
about the centralization of political power in the hands of a gilded ruling elite in Brussels, and not the protection of individual liberty. ...The prime minister should heed the words of Lady Thatcher, who
wrote in her seminal book Statecraft: "That such an unnecessary and irrational project as building a European superstate was ever embarked upon will seem in future years to be perhaps the greatest
folly of the modern era." The Iron Lady's instincts are right - common sense must prevail and the British people should reject an Orwellian vision of Europe's future in favor of the principle of
sovereignty and freedom.
Saturday, October 20, 2007 ~ 6:12 p.m., Eugene Slaven Wrote: According the OECD Economic Survey of the European Union (www.oecd.org/eco/surveys/eu), the EU and other European
countries are falling further and further behind the United States in standard of living as the U.S. economy continues to outgrow those of Europe. ..."Globalization brings great opportunities for vibrant
economies but punishes less flexible ones," said OECD Secretary-General Angel Gurria. "There is a sizable gap in GDP per capita compared with the OECD's best performers, and the gap has
widened over the past decade." Specifically, he was referring to the gap between the United States and Europe…For instance, some of the wealthiest countries of Europe — like Germany, France
Switzerland, Sweden or Denmark — now register only 75 percent of the standard of living of the United States, measured in purchasing power parity. …The study's authors are blunt about the reasons. For
one thing, European levels of employment continue to lag behind those of the United States and Japan. More than one-third of Europe's working-age population (15- to 64-year-olds) — remains
inactive. Europeans tend to enter the workforce later and retire earlier. In the United States, 72 percent are employed, and in Japan 70 percent. In the EU the figure is below 65 percent…Another issue
is European "economic nationalism," a favorite of the French, German and Spanish governments. Protectionism favoring national companies, particularly in the energy sector, is a problem. So is the
continued drag of the European common agriculture policy, the CAP, which provides subsidies "above the OECD average and well above most free-trading nations," notes the OECD report…The fact
is that the American model, which could also be called the Anglo-Saxon model, with its free-market foundation, labor mobility and limited labor-market regulations, remains the most powerful
generator of wealth and jobs for its citizens.
Friday, October 19, 2007 ~ 11:56 a.m., Dan Mitchell Wrote: It is now bipartisan policy to turn Australia into a funds management tax haven. …the fact that Australia will engage in tax competition to
attract funds management business will qualify us as being a tax haven. A tax haven can be defined as any jurisdiction that has preferential rules for foreign investors. Many Australians are likely to
associate tax competition and tax havens only with illegal behaviour. But nothing could be further from the truth. Some people do evade their legal obligations to pay tax, but even the Tax Office concedes:
"Most transactions between Australia and (other) tax havens are lawful." Despite this bipartisan policy, political elites tend to disapprove of tax competition and tax havens. …Peter Sorensen, of
the University of Copenhagen, has done extensive modelling and found that tax co-ordination would lead to higher capital taxes, and higher income and wealth redistribution — but lower infrastructure
spending, lower capital stocks, lower profits, lower real wages, lower GDP, and higher real interest rates. It is hard to see Australian voters agreeing to any of that. It seems that tax competition does not
have any downside, while tax co-ordination has no upside. US economists Mihir Desai, Fritz Foley and James Hines have reported that tax haven activity increases economic activity in nearby non-tax
haven economies. Because of the higher after-tax returns that multinational firms can enjoy because of tax havens, they can maintain higher levels of foreign investment than otherwise. Far
from having a negative impact on their neighbours, it seems tax havens have a positive impact on economic activity.
Friday, October 19, 2007 ~ 11:22 a.m., Dan Mitchell Wrote: Under a new system launched last month, more than 3 million Romanian workers under 35-years-old must opt for one of 14
competing private pension funds before January 17th, 2008. Those ages 35 to 45 can also decide to join one of the private funds. Starting in 2008, 2% of every worker's general income will be
redirected from the state budget to the chosen private fund. This contribution will gradually increase to 6% by 2015, and the current 9.5% social security contribution to the state system will diminish
accordingly. "Several million Romanians will become investors, and the private pension system will educate them in the spirit of a free market economy," says Romanian President Traian Basescu.
…Romania cautiously now joins a club formed by 31 countries -- Bulgaria, Macedonia and Croatia among them – that have decided to address the demographic pressure on state budgets through privatisation.
Thursday, October 18, 2007 ~ 5:00 p.m., Andrew Quinlan Wrote: Links to previous CF&P blogs on the UN's Law of the Sea Treaty: Monday, October 8, 2007, The Market Center Blog, Law-of-the-Sea Treaty Contrary to Reagan's Vision. Tuesday, July 3, 2007, The Market Center Blog, More Reasons to Reject Law-of-the-Sea Treaty. Tuesday, June 5, 2007, The Market Center Blog, Wall Street Journal Denounces Law-of-the-Sea Treaty. Thursday, May 24, 2007, The Market Center Blog, More Arguments Against the Law of the Sea Treaty. http://www.freedomandprosperity.org/blog/2007-05/2007-05.shtml#242
Thursday, October 18, 2007 ~ 3:35 p.m., Eugene Slaven Wrote: In any event, says Reich, assessing the balance between the private and the social good, and redressing it if need be, is the job of politics
- but politics is broken as well, in his view, and supercapitalism is again to blame. He devotes a chapter to Washington's lobbying industry and its explosive growth in staff and spending since the
1970s. ...Companies lobby for competitive advantage, he says, because supercapitalism forces them to. Competition is so ferocious these days, they have no choice. If this is right, what are the
remedies? The book devotes another chapter to arguing that it is wrong on its merits and pointless to ask companies to be good citizens. They will not, and in any case should not: their job, as
Milton Friedman argued, is to make money. Firms are not citizens. The book is refreshingly blunt about the limits of "corporate social
responsibility", and he even calls for the corporate income tax to be abolished - arguing that this is consistent with the demand for stricter
controls on political spending and the separation of business and politics. This case is novel, coming from a liberal, and well made.
Wednesday, October 17, 2007 ~ 5:30 p.m., Dan Mitchell Wrote: ...a big property-tax bill really hurts. And nowhere is it felt more than in New York and New Jersey, where residents pay more in these taxes
than anywhere else in the country. ...In fact, New York and New Jersey residents can expect to pay up to $6,500 more in yearly property taxes than the national average. ...California properties are
among the country's most expensive, but property-tax rates there are a third what they are in the Northeast. ...California's Proposition 13, passed in 1978, caps property-tax rates for residents in the Golden
State. Other states, including Arizona, which doesn't have property values as high as California's, have slightly higher property-tax rates but lower income taxes.
Wednesday, October 17, 2007 ~ 4:42 p.m., Dan Mitchell Wrote: In a June 2007 study on the effects of U.S. subsidies on West African cotton producers, University of California Davis economists Daniel
Sumner and Julian Alston, and Henrich Brunke, formerly a research specialist at UC Davis, estimated that some 10 million Africans could see their incomes from cotton increase 8% to 20% if the U.S.
reformed its subsidies and world supplies of cotton returned to market levels. "For farmers living on less than $1 a day, this means
more money for food, medicines, school fees and fertilizer," write the authors. The paper's research was supported by Oxfam America, the left-wing NGO. ...In 2005 cotton subsidies totaled $3.3 billion, up
from $30 million in 1995, according to the Environmental Working Group, which tracks U.S. subsidies. This industrial policy primarily benefits large corporate farms and their wealthy owners. Of the
$19.1 billion that EWG says was paid out over that decade, the top 10% of cotton-subsidy recipients got more than 80%, or almost $15.5 billion. The bottom 80% of recipients had to make do with $1.4
billion. This is a brazen wealth transfer to fat cats from the tax-paying middle class.
Tuesday, October 16, 2007 ~ 12:15 p.m., Andrew Quinlan Wrote: In the recent Democratic presidential debate, former Sen. John Edwards said he would impose taxes on the wealthy to address Social
Security's long-term funding problems... The Associated Press reports that Sen. Hillary Rodham Clinton said privately that she also would consider levying the Social Security tax for people making
over $200,000…The federal government currently imposes Social Security payroll taxes on the annual earnings of workers up to a cap of $97,500. ...levying Social Security payroll taxes again on earnings
above $171,000 would solve about 14 percent of the problem (24 percent minus 10 percent). Or, if we didn't pay benefits on the extra payroll-tax contributions, we would solve about 30 percent (40
percent minus 10 percent) of Social Security's funding problem… As noted, the Democrats pretend that these proposals accomplish more than they would in actuality. They do so by relying on the
seventy-five-year actuarial balance. Basically, this pretends that the government saves Social Security money and that it earns interest. It doesn't. But by pretending that it does, the Democrats make the
long-term deficit appear much smaller since they subtract the interest-compounded value of money the government would be given now to spend…Of course, none of this touches upon the economic
downsides of raising taxes of this magnitude. Increasing taxes by this amount would expand the payroll-tax base by nearly 10 percent — a huge additional drag on employment. Moreover, raising the top tax
rate to pre-Bush levels, as most of the leading Democratic candidates have proposed, and lifting the payroll-tax wage-cap would hurt the economy and ultimately raise far less tax revenue than static-revenue
estimating models would predict…Raising Social Security taxes is the exact wrong medicine for Social Security's financial problems. Without action to fix Social Security, today's thirty-year-old workers
can expect a 27 percent benefit cut when they retire. Instead of raising taxes, the best way to save Social Security is to create voluntary personal accounts so that younger workers can achieve
higher rates of return on their retirement dollars.
Tuesday, October 16, 2007 ~ 10:43 a.m., Dan Mitchell Wrote: Liberal Leader Stephane Dion has pledged to further reduce the Canadian federal corporate tax rate to better compete with other
countries and strengthen Canada's economic sovereignty. ...Dion told the Economic Club of Toronto..."A lower corporate tax rate is a powerful weapon in the federal government's arsenal to generate
more investment, higher living standards and better jobs." ...The previous Liberal government reduced the federal corporate tax rate to 19% from 28%. Dion said he would go deeper than the
Conservatives have done with their reduction to 18.5% in 2011. ..."If you lower the corporate tax rate, you lower the cost of capital for Canadian companies. Therefore, these companies are induced to
spend more on capital equipment. As for foreign investment, we need a big hook to snare investment, including Canadian investment, that might otherwise go south of the border. Finally, it would strengthen
Canadian companies against foreign takeover," Dion concluded
Tuesday, October 16, 2007 ~ 10:21 a.m., Dan Mitchell Wrote: Both Mr. Frank and President Bush support major increases in the limits on the value of loans the agency can make, which are
contained in a bill that passed the House of Representatives last month. Only 72 Republicans, mostly members of the conservative Republican Study Committee, voted against the bill. A similar bill
cleared the Senate Banking Committee 20-1. But before the FHA's loan spigots are opened up, a little due diligence by the political sector is in order. The FHA's recent credit history shows it is far from
the prudent institution it is said to be. By its own estimate, next year the agency expects to be in the red, paying out more for defaulted loans than borrowers pay to it in insurance premiums. ...The agency
poses more than just a threat to taxpayers. The collapse of whole segments of the housing market can be traced to FHA-subsidized mortgage products. Despite its decreasing market share, the FHA
appears to have played a significant role in the current mortgage "meltdown" attributed to subprime loans. For the past three years, delinquency rates on the oh-so-safe mortgages insured by the FHA
have consistently been higher than even those of the dreaded subprime mortgages. ...FHA-insured loans have also been at the center of some of the worst excesses of the housing boom, including
mortgage fraud, loans made without income verification, and property "flipping" with inflated appraisals. ...In both the Clinton and Bush administrations, the FHA's response to private alternatives
for low-income borrowers was to aggressively compete with them -- by making the agency's own lending standards even more "subprime" than those of the private sector. Since its inception in
1934, the FHA has required a down payment -- originally 20%, but gradually whittled down to 3% -- for a home loan. ...Despite these trends, HUD Secretary Jackson's biggest concern has appeared to be
not the FHA's solvency, but the government agency's loss of business to the private sector. "I am absolutely emphatic about winning back our share of the market," he told the Washington Post in 2005.
Looking at the agency's dismal performance over the past few years, we can predict that, if the FHA racks up more "wins," taxpayers and low-income home buyers will likely be suffering the losses.
Monday, October 15, 2007 ~ 11:50 a.m., Dan Mitchell Wrote: A new econometric study by A.J. de Bruin of Erasmus University in the Netherlands, looking at the effect of changes in tax rates on labor
over the last two decades in Belgium, France, Italy, the Netherlands, the United Kingdom and the United States, has just been published. It is an extension of some recent work by Nobel laureate Edward
Prescott of Columbia University, which not only verifies the damaging effect of income taxes on labor, but also estimates the magnitude of the effect for several countries and the time it takes for
changes in tax rates to affect labor markets. ...The conclusion...is that a decrease in marginal tax rates on productive activity in high-tax societies causes a rise in economic activity (more growth).
This increase in economic activity generates additional government revenues that, in part, compensate for the revenue loss due to the lower tax rate. The reverse is of course also true: An increase in tax
rates will lower economic activity and provide the government with less additional revenue (and higher unemployment) than would be expected without any behavioral changes.
Monday, October 15, 2007 ~ 11:00 a.m., Dan Mitchell Wrote: When it comes to taxes, Barack Obama is no Jack Kennedy. The Illinois Senator recently announced that he wants to raise the capital
gains tax to restore "fairness" to the tax code. That makes it a three-peat: All of the leading Democratic contenders for President have endorsed higher taxes on stock ownership. Hillary Clinton is the
"moderate" in that so far she'd merely raise the tax to 20% from the current 15% -- a 33% increase. John Edwards and Mr. Obama want to nearly double it, to 28%. ...roughly 52% of American adults own
stock in some form, and last year 8.5 million of these investors paid a capital gains tax. The value of those assets will decline if capital gains taxes go up because financial markets instantly capitalize
higher taxes on stock profits into lower stock prices. ...Since we already tax corporate earnings at 35% through the corporate income tax, taxing those profits again when the stock is sold imposes a
double tax on risk capital. That's why 12 industrialized nations, including Hong Kong and Korea, impose a zero capital gains rate. ...A study by former Treasury Department economist Gary Robbins
has found that from 1946-1998, about 90% of the returns to capital investment accrued to workers in the form of higher wages, because when workers have more tools like computers, forklifts and robotic
equipment, they produce more.
Monday, October 15, 2007 ~ 9:28 a.m., Dan Mitchell Wrote: Hong Kong has said it will cut taxes, in a move to promote further growth and lure foreign investment. Leader Donald Tsang said taxes
would be cut by 1 percentage point, to 16.5% for firms and 15% for individuals, in the first policy speech of his new term. ...In announcing the tax cuts, Mr Tsang said: "We will consider further
profits tax relief if our economy remains robust and our public finances stay sound."
Sunday, October 14, 2007 ~ 7:53 p.m., Dan Mitchell Wrote: Recent stories in the Los Angeles Times and elsewhere note that outgoing traffic at the Los Angeles-Long Beach port complex - the
nation's busiest - is booming. But inbound traffic is off sharply. So that means our long, national trade-deficit nightmare is finally coming to an end - right? It's amazing that so many people seem to
buy into that logic, thinking a shrinking deficit is, automatically, a good thing. They accept the mercantilist view that exports are a source of wealth, while imports somehow impoverish us. The problem
is, as we've noted before, that that's exactly backward. ...Rather than being happy about the shrinking trade deficit, we should beware. When the trade gap shrinks, the economy usually tanks - and when
that big, bad trade deficit gets even bigger, the economy grows strongly.
Sunday, October 14, 2007 ~ 9:30 a.m., Dan Mitchell Wrote: The Tax Foundation's 2008 State Business Tax Climate Index has found that Wyoming has the most business friendly tax regime in the
United States, while the business powerhouses of California and New York continue to fare particularly badly in terms of state tax competitiveness. ...According to the index, the top ten states with the
best business tax climate in 2008 are: Wyoming, South Dakota, Nevada, Alaska, Florida, Montana, New Hampshire, Texas, Delaware and Oregon. Propping up the table was Rhode Island in
50th place. California, New York and New Jersey occupy 47th, 48th and 49th place on the index respectively. The remaining states in the bottom ten include (descending): Maine, Minnesota, Nebraska,
Vermont, Iowa and Ohio. "There's no question that states are competing with one another for companies, jobs, and people," announced study co-author Curtis Dubay. "Taxes matter to
businesses, and the states with better business tax climates will reap the rewards."
Saturday, October 13, 2007 ~ 5:41 p.m., Dan Mitchell Wrote: In 2005, the latest full year for data, the top 1% of earners accounted for 21.2% of all income, but paid 39.4% of all federal taxes. The top
5% earned 35.8% of all income and paid 60% of the taxes. That's right: The top 5% paid more in income taxes than the remaining 95% combined. Go back to 1980 - the dawn of the Reagan era - and the
top 1% paid just 19% of all taxes and the top 5% just 37%. It is an irrefutable fact, therefore, that taxes are more progressive (rich pay more, in Democrat-speak) than ever. And it happened with
Republican presidents holding office in 19 of 27 years, during a period when, paradoxically, tax rates on the highest incomes fell.
Friday, October 12, 2007 ~ 4:44 p.m., Dan Mitchell Wrote: LOST establishes the International Seabed Authority - governed by a Council, Assembly, and various committees and commissions - to
regulate the oceans. It also establishes an agency called the Enterprise that would both mine the seabed and collect fees from its own competitors, Western mining companies. And mining won't be
the only industry affected. Energy companies, for instance, will owe the ISA royalties on any oil produced from the Outer Continental Shelf beyond 200 miles. Those may be the first global taxes imposed
on Americans without congressional approval. And for what? To be handed out to corrupt Third World governments and whomever else the majority decides to shower with benefits. ...Treaty supporters
acknowledge the original accord was flawed, and now claim that LOST has been "fixed." But the Clinton administration merely made a horrible treaty slightly less horrid. The governing philosophy,
regulatory structure and most of the rules remain the same. Where explicit redistributionist provisions, such as technology transfer mandates, were dropped, other, more ambiguous, language was left
in place that could have the same effect.
Friday, October 12, 2007 ~ 2:13 p.m., Dan Mitchell Wrote: Dr. Brian Bonanni has an unusual medical practice. His office is open Saturdays. He e-mails his patients and gives them his cell-phone
number. ...Bonanni knows he has to please his patients, not some insurance company or the government, because he's paid by his patients. He's a laser eye surgeon. Insurance rarely covers what he
does: reshaping eyes so people can see without glasses. His patients shop around before coming to him. They ask a question that people
relying on insurance don't ask: "How much will that cost?" ...He has to compete for his patients' business. One result of that is lower prices. And while the procedure got cheaper, it also got better.
Today's lasers are faster and more precise. Prices have fallen and quality has risen in other medical fields where most people pay for care themselves, like cosmetic surgery. Consumer power works --
even in medicine. ...When consumers pay for medicine themselves, saving insurance for the big things, and doctors deal directly with consumers, doctors begin to compete. They start posting prices and
work to keep them low. And consumers gain more control of their health care. Instead of governments and insurance companies deciding for patients, patients decide. Competition gives consumers
more choices. And choice gives them power. Remember that when you hear a politician promise to make health case accessible and affordable through the force of government.
Thursday, October 11, 2007 ~ 3:28 p.m., Dan Mitchell Wrote: Free traders celebrated a victory Sunday when Costa Rica approved the Central American Free Trade Agreement in a national
referendum, with 51.6% of the vote. The decision to expand commercial relations both regionally and with the large U.S. market is a triumph of Costa Rican hope and confidence over the fear
peddled by opponents. Cafta succeeded despite the extraordinary last-minute intervention against the deal by House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and other Congressional
Democrats. Vermont Senator Bernie Sanders and Representative Mike Michaud of Maine even traveled to San José to help anti-Cafta leader Ottón Solís in his bid to defeat the trade pact. ...Voters seem to
have trusted their own president, Oscar Arias, who warned that a "no" vote would transform the country from the Switzerland of Central America to "the Central American Albania, isolated by our
own accord."
Wednesday, October 10, 2007 ~ 1:00 p.m., Dan Mitchell Wrote: Mr. Thompson's aides outline a change to the tax code that would move away from taxing income or profits and shift toward a system
that would reduce taxes on exports when they cross the border and impose them on imports when they enter the country. Under international rules, the European value-added tax, a kind of sales
tax, is waived for exports, but those rules block the U.S. from reducing corporate-profit taxes for exporters. "The best thing to do would be to have the [World Trade Organization] change its rules to
level the playing field, and that should be the first step. If that fails then we should play by the same game that everyone else plays," said Lawrence Lindsey, Mr. Thompson's economic adviser and former
director of the National Economic Council for President Bush. The key question, of course, is whether focusing on the unimportant issue of border adjustability leads to good policy or bad policy. Senator Thompson has made some positive noises about a wholesale replacement of our current anti-growth tax system with a consumption-base tax system like a flat tax or national sales tax. That would be great news, and it would be great news even if border adjustability led the candidate to choose a sales tax over the flat tax. What matters is not border adjustability, but that we would be getting rid of the many warts in the current tax system. But if a myopic fixation on border adjustability led a candidate to propose a VAT or other form of national sales tax without fully (and permanently) eliminating the income tax, then politicians would have an additional source of money to waste and American would be at grave risk of becoming an uncompetitive, European-style welfare state.
Wednesday, October 10, 2007 ~ 10:51 a.m., Dan Mitchell Wrote: The French government yesterday unveiled its plans to boost Paris as a financial centre, proposing a more lightly regulated market for
companies and funds on the Euronext exchange. Several of the measures are closely modelled on UK structures, as the French capital seeks to make up ground lost to London. The new market
segment would operate according to European Union minimum standards in terms of listing and disclosure. ...Switzerland's leading financial services companies launched their own campaign last
month for tax cuts, a relaxation of immigration rules and other measures to turn their country into the world's third largest financial centre after London and New York. Frankfurt launched its own more
lightly regulated market segment two years ago... Ms Lagarde said the government had already shown serious commitment to financial services by cutting taxes, particularly for higher earners. France's
high taxation is one reason why so many young French bankers flock to London.
Tuesday, October 9, 2007 ~ 3:45 p.m., Eugene Slave Wrote: Consumers could face an increase in value added tax if globalisation undermines Britain's ability to tax companies, the Organisation for
Economic Co-operation and Development said yesterday. The UK faces continuing pressure to cut corporate tax rates, the Paris-based organisation said. "The United Kingdom was early in this game, but
has lost in tax competitiveness as others have moved ahead." Raising more money from VAT was a possible response to intensifying pressure on corporate taxes, it said. The yield from VAT
is lower than the OECD average, and less than half that of New Zealand. It said the UK's corporate tax rate was "no longer particularly low, neither in the OECD, nor in the European Union,
where it is now the eighth-highest". It added, however, that the UK had the lowest rate of the G7 economies. Tax competition also affected personal tax policies, it said. "While the low taxation of
partners in private equity funds has recently hit the headlines and is seen as inequitable, there may still be a case for taxing highly mobile professionals at a lower rate so as to prevent them from moving on
to greener tax pastures.". It said there might be merit in an idea currently being considered by the Treasury to exempt foreign dividends from tax, "given the detrimental effect of worldwide
taxation on the location of headquarters".
Tuesday, October 9, 2007 ~ 3:00 p.m., Dan Mitchell Wrote: What has party tacticians especially spooked is that these independents are apparently not much attracted to what the
Republicans are saying about taxes. ...Unlike in the 1980s and '90s, voters are today less attracted to talk of new tax cuts, which they think are pie-in-the-sky, given the current war costs and
budget-deficit. Nor are they averse to raising taxes on "the wealthy," a group they are persuaded is taking advantage of tax loopholes to avoid paying their fair share. That the richest 10% already pay
two-thirds of the income taxes isn't well understood. ...There is another GOP imperative: The anti-tax message must be linked to wasteful government spending. "There's no question that for seven
out of 10 American voters, wasteful government spending is one of the largest problems in Washington," says pollster Tony Fabrizio.
"For many of these voters it's a bigger issue than taxes." All of the polling consistently finds that voters believe about 40 cents of every
dollar spent by Washington is wasted. So this widespread aversion to the way government mishandles money may be the best shield against tax hikes--at all levels of government. ...75% of respondents
agreed that, "Taxes should not be increased as long as Congress continues to waste the tax money it already receives." Only 23% did
not. ...This is a nation that instinctively gets the supply-side message that putting people to work yields more tax revenues than a strategy of weighing down businesses and workers with tax hikes, which
explains this stunning finding: When Mr. Winston's poll asked, "Which approach is more likely to increase federal revenues?" 81%
said "increasing economic growth" while only 13% said "increasing taxes."
Monday, October 8, 2007 ~ 12:33 p.m., Dan Mitchell Wrote: Singapore's refusal to soften its strict bank secrecy laws could scupper talks with Europe about a trade agreement, a European
politician said on Tuesday. ..."Is this a dealbreaker? Potentially yes," Glyn Ford, a Member of the European Parliament, told journalists...
The EU adopted the savings directive in 2005 but efforts to force Hong Kong and Singapore to join have been unsuccessful. ..."We say that we don't think there's money laundering going on here, but
clearly people engaged in money laundering are looking for places like Singapore with low levels of transparency to actually engage in
money laundering," Ford said. "If I was looking for somewhere to do my money laundering, Singapore would be getting towards the top of my list these days," he added.
Monday, October 8, 2007 ~ 11:42 a.m., Dan Mitchell Wrote: Chief Executive Donald Tsang delivers the first policy speech of his new term on Wednesday and it promises to make instructive reading
for lawmakers elsewhere in the world who want to make their economies competitive. Mr. Tsang's move was mooted earlier this year, when he promised to cut taxes on both salaries and corporate
profits to 15% during his next term. The salaries tax currently stands at 16% and the profits tax at 17.5%. On Friday, the South China Morning Post reported he'll start the ball rolling this week, sooner in
his term rather than later. Singapore, Hong Kong's big competitor in the region, has been steadily cutting corporate taxes over the past few years. Its rate now stands at 18%. ...In the race to attract new
business, New York and London are competing against a territory that thinks a 17.5% corporate tax is too high.
Monday, October 8, 2007 ~ 11:00 a.m., Dan Mitchell Wrote: The so-called seabed mining provisions were simply one manifestation of the problems Ronald Reagan had with LOST. That
was made clear by an entry in his diary dated June 29, 1982, after months of efforts to negotiate extensive changes in the draft treaty text came to naught. On that evening, President Reagan wrote:
"Decided in [National Security Council] meeting--will not sign 'Law of the Sea' treaty even without seabed mining provisions." The man selected by President Reagan to undertake those renegotiations was
the remarkable James Malone. In 1984, Ambassador Malone explained why the Law of the Sea Treaty was unacceptable: "The Treaty's provisions were intentionally designed to promote a new
world order--a form of global collectivism known as the New International Economic Order (NIEO)--that seeks ultimately the redistribution of the world's wealth through a complex system of
manipulative central economic planning and bureaucratic coercion. The Treaty's provisions are predicated on a distorted interpretation of the noble concept of the Earth's vast oceans as the 'common
heritage of mankind.'" Interestingly, Ambassador Malone declared in 1995, "This remains the case today." That statement is particularly relevant insofar as LOST's supporters, including some of our
colleagues from the Reagan administration, insist that the 1994 Agreement "fixed" the previously unacceptable Part XI provisions. As James Malone explained to a conference on the Law of the Sea
Treaty before his untimely death more than a decade ago: "All the provisions from the past that make such a [new world order] outcome possible, indeed likely, still stand. It is not true, as argued by
some, and frequently mentioned, that the U.S. rejected the Convention in 1982 solely because of technical difficulties with Part XI. The collectivist and redistributionist provisions of the treaty were
at the core of the U.S. refusal to sign."
Sunday, October 7, 2007 ~ 5:15 p.m., Eugene Slave Wrote: Piece by piece, and with the choice bits pushed into the floodlights, Gov. Martin O'Malley (D) has presented what is likely to be the most
important initiative of his term in office: a $2 billion tax-overhaul and deficit-reduction plan. The good. Start with personal income tax. Marylanders pay 4.75 percent on income above $3,000, an amount
unchanged since 1967. By sticking with what amounts to a flat tax, the state has given a pass to the top brackets, where much of the income growth has occurred. The O'Malley plan would address that,
mainly by adding two new brackets for higher earners -- 6 percent for couples with taxable income exceeding $200,000, and 6.5 percent for those with taxable income above $500,000. It's easy to argue that
Mr. O'Malley could have gone further in making income taxes still more progressive. After all, just 3.7 percent of earners would pay more income tax under his program; even couples with two children
and gross incomes of $250,000 would pay less. Raising the corporate income tax by a percentage point, to 8 percent, combined with legislation to close corporate tax loopholes, would yield revenue and,
we hope, tighten a porous system that allows half of the largest firms in the state to pay no corporate income tax at alt. bad. Mr. O'Malley
shied away from a few political battles worth fighting. Apart from singling out massage parlors, tanning salons, fitness centers and property management firms, he chose to maintain the state's
anachronistic policy of taxing the sale of goods but not most services. Since the national economy continues to shift to services, that means
the state's sales tax revenue will not grow as fast as overall economic activity. Ignoring such a vast potential tax base makes no sense and reflects a kowtow to special interests.
Saturday, October 6, 2007 ~ 12:34 p.m., Dan Mitchell Wrote: Floridians have a right to be concerned about high property taxes, and the vast and rapid expansion of local government spending that
has come with them. Because of the parabolic rise in the price of real estate in recent years, taxes have increased up to three times in parts of Florida for those without Save Our Homes protection. ...Where's a
person to find a safe tax haven? Not in California... Property tax bills might be lower in the Golden State, but California has a personal income tax, while Florida does not. According to the
non-profit Tax Foundation, Californians on average pay 11.5 percent of their income in state and local taxes. This places California 12th from the top in the national taxation rankings.
Floridians, on the other hand, pay only 10 percent. That puts Florida in 38th place, well down on the list.
Saturday, October 6, 2007 ~ 11:39 a.m., Dan Mitchell Wrote: It's almost unheard of, though, for a rich, enlightened nation like Norway to deliberately undermine one of its most important
industries. That's exactly what's expected to happen tomorrow, when Norway's left-leaning government presents its budget to parliament. Included will be a proposal to retroactively tax shipping companies
to the tune of nearly EUR3 billion, a move that could threaten the status of Scandinavia's maritime superpower. ...Over the past seven years, as the regime took effect, maritime employment in Norway has
climbed almost 20% to about 100,000 and the number of ships on order by Norwegian fleets has risen more than threefold -- keeping pace with rapid international shipping growth since the turn of the
century. That boom has attracted the attention of Norway's finance minister, Kristin Halvorsen, a member of the country's Socialist-Left Party. Under her budget plan, all profits reinvested by the industry
since 1996 would be subject to a retroactive tax. ...Many ship owners are considering reflagging their vessels in nearby countries, such as the U.K. and Denmark. Moving could mitigate their future liabilities,
but that will be little consolation to firms that remained in Norway over the past decade and invested in their fleets, only to be betrayed by politicians.
Friday, October 5, 2007 ~ 5:54 p.m., Dan Mitchell Wrote: Democrats scored a victory Wednesday in their effort to bolster oversight of the executive branch with House passage of a bill that
would give inspectors general more autonomy with the agencies they oversee. Despite a White House veto threat, the bill passed with considerable Republican support, 404-11, more than the two-thirds
majority needed to override a veto. ...Majority Leader Steny H. Hoyer, D-Md., speculated that Republicans were "hard-pressed to vote against an effort to prevent waste, fraud and abuse."
...Lawmakers also agreed, 274-144, to a Davis-sponsored motion to recommit the bill and amend it to require annual inspector general reports on program redundancy within federal agencies. ...The idea
that future administrations would be subjected to the bill's limits was not lost on Republicans. "This is an even better bill under a Hillary
Rodham Clinton presidency," said Patrick T. McHenry, R-N.C., referring to the Democratic senator from New York.
Friday, October 5, 2007 ~ 4:19 p.m., Dan Mitchell Wrote: Federal employees are routinely abusing rules on business-class travel, taking trips that cost taxpayers an estimated extra $146
million annually, Congressional investigators have found. ...An Agriculture Department official, for example, spent $62,000 on 10 business-class flights to Europe to attend trade negotiations. The
coach fare would have been less than $9,000. ...a business-class ticket costs on average five times that of a coach ticket. The investigators found very few first-class flights, which have even
stricter rules. But the study found that 65 percent of the overall premium flights, $146 million worth, broke the rules or were not appropriately authorized. ...The foreign affairs agency in the State
Department had one of the highest shares of questionable premium-class travel, the investigators said. Cases highlighted included a family of eight that flew business class to Eastern Europe
from Washington at a cost of $46,000, as part of permanent change of assignment, a trip that auditors said should have cost $12,000. The Agriculture Department at times sent large employee groups by
business class, including eight officials who went to a trade conference in Geneva on flights that cost $50,000.
Friday, October 5, 2007 ~ 3:17 p.m., Dan Mitchell Wrote: Just two weeks after its decision to levy some $631 million in fines on Microsoft, the EU's antitrust bureaucracy has now decided to go
after telecommunications giant Qualcomm, too. ...Nor will Qualcomm be the last American champion that the EU's aggressive bureaucrats try to take down. Reportedly, there's a long list of
companies now in the EU's sights, including Apple, Intel, Rambus and a handful of energy companies. It seems Europe's rather weak tech sector needs the bureaucrats to do what they can't - beat Microsoft.
The EU's recent antitrust binge is a form of trade protection and, in all frankness, amounts to property theft. Trade economists note such actions will lead to higher costs, less innovation and lower standards
of living for all - not exactly a strong selling point for EU antitrust theory. ...As we noted not even a month ago, the EU is lagging seriously behind the U.S. in average GDP per employed person - the
broadest, and most meaningful, measure of productivity. ...And that, in a nutshell, is why Europe has declared war on U.S. innovators and
tech champions. It has nothing to do with "fairness" or "consumers" or even "antitrust." It's really a fear of the future. The EU has stuck
itself in a competitive mire with its stiff labor rules, extensive welfare state, high taxes and refusal to innovate. Its bureaucrats clearly fear
the EU's statist ways will consign the continent to also-ran status for the remainder of this century. Having no easy answer for Europe's ills, they attack America's best. But they do so in the courtroom, not
in the marketplace.
Thursday, October 4, 2007 ~ 4:39 p.m., Dan Mitchell Wrote: Governor Martin O'Malley has been undertaking something close to a tax-increase-a-day tour. In Ellicott City he proposed raising the
sales tax to a rate of 6% from a nickel. The next day in suburban Baltimore he unveiled his plan to raise the top income tax rate to 6.5% from 4.75%. Last Wednesday in Landover he called for a
doubling of the cigarette tax to $2 a pack. He has also endorsed a one percentage point hike in the state corporate income tax to 8%, new commercial real estate taxes, and a 12 cent hike in the gasoline
tax to 35.5 cents a gallon. ...In all, Mr. O'Malley hopes to wrench $2 billion a year from Maryland workers -- in the name of filling a $1.5 billion gap in the state's $30 billion budget. The extra $500 million
will finance new spending. ...Mr. O'Malley's income tax plan is consistent with the Democratic Party's nationwide revival of its New Deal theme of the tax code as a tool for income redistribution. While
nations over the globe move to flatter, simpler, pro-growth tax systems, the Governor is selling his proposal as a pain-free whack at the rich. Trouble is, there aren't enough truly rich to finance his
spending goals, so his real target is the not-so-upper middle class. His two new tax brackets of 6% and 6.5% will kick in at incomes of $200,000 and $500,000, respectively, for couples. ...The Governor
also fails to mention that about two-thirds of the people he wants to hammer are small business owners -- the major employers in the state. He might acquaint himself with a new study by Barry Poulson
of the University of Colorado which finds that states with either no income tax, or low flat-rate structures, have significantly higher income growth rates than states with steeply progressive tax rates.
...The losers will be Maryland citizens, unless they move to another state, which we'd guess some of them will. The WSJ also explains that Michigan's tax increase is going to undermine a state that already suffers from a weak economy and a punitive tax regime: At about 2 a.m. Monday, a handful of Republicans in the Legislature broke days of gridlock and handed Democratic Governor Jennifer
Granholm the $1.48 billion tax increase she has been demanding. The state's personal income tax will rise to 4.35% from 3.9%, and the rest of the revenue grab will come from a new 6% sales tax on
business services. Already 14th in tax burden among the 50 states, according to the Tax Foundation, Michigan is now headed up in the rankings. Congratulations. ...By the way, last year Michigan
introduced a new 4.95% business income tax, which will be applied on top of the sales tax. Last year, amid the national expansion, Michigan was the only state outside the Gulf Coast to lose jobs and
see a decline in economic output. Comerica Bank recently moved its headquarters to Texas, in part because of Michigan's hostile business climate. Michigan's 7.4% jobless rate is the highest of all states and
far above the 4.6% national rate. ...In the past 25 years, the only period when Michigan's growth has exceeded that of the national economy was in the mid-1990s after then-Governor John Engler's
tax cutting and welfare reform. For a time, Michigan became the unlikely national leader in job creation. Now the total tax burden is returning to where it was before the Engler years. Michigan last went
on a taxing binge in 1983, and voters were outraged enough to mount a successful recall campaign against two state Senate ringleaders. This time, two of three Michigan voters have told
pollsters they want budget cuts, not new taxes. It may be that the only way to get jobs back into Michigan is to make sure the taxing politicians in Lansing lose theirs. The only good news from Maryland and Michigan is that these states will serve as laboratories for economic failure. In upcoming years, public policy experts will compare their economic performance to the results in states - like Rhode Island and New Mexico - that have lowered tax rates. Needless to say, it is easy to predict that the states lowering tax rates will prosper relative to the states that are increasing the burden of government.
Thursday, October 4, 2007 ~ 4:00 p.m., Dan Mitchell Wrote: ...contrary to conventional wisdom, it's not those without health insurance who are the problem, but rather those with it. ...We'd each
be better off if we paid all but the biggest medical bills out of pocket and saved insurance for catastrophic events. ...Five years ago, the Whole Foods grocery chain switched to a high-deductible plan [with
health savings accounts]. If an employee has a sore throat or a sprained ankle, he pays. But if he gets cancer or heart disease, his insurance covers it. ...CEO John Mackey told me that when he went
to the new system, "Our costs went way down." Yet today, some workers have $8,000 in their accounts. ...Harvard Business School professor Regina Herzlinger says studies show that "people who have
these high-deductible health-insurance policies take a lot better care of themselves. They have more yearly physicals. Because they're saying, 'If I keep myself healthy, in the long run, I'm going to be
spending less money.'"
Wednesday, October 3, 2007 ~ 5:41 p.m., Dan Mitchell Wrote: The College Cost Reduction and Access Act expands financial aid by $20 billion, including federal grant increases. It eventually will cut
the 6.8% interest rate on federally subsidized loans to 3.4% by July 1, 2011; set annual loan payments at 15% of what Washington considers the discretionary income of students who go into
low-paying jobs; and forgive the debts of those workers who have made consistent payments but have not fully paid down the loan after 25 years. Under the law, students who choose some government and
public-service jobs are allowed a special privilege. ...With more money available for loans, colleges feel a degree of freedom to increase tuition. In 1987, when he was secretary of education,
William Bennett noted that rising federal aid had "enabled colleges and universities to blithely raise their tuitions, confident that federal
loan subsidies would help cushion the increase." ...In addition to raising tuition, the bill also will have a negative effect on the private
sector. With interest rates being forced down by half, many lenders will simply get out of the business.
Tuesday, October 2, 2007 ~ 7:52 p.m., Dan Mitchell Wrote: A new Gallup poll reveals that, as the organization puts it, Americans now "express less trust in the federal government than at any point
in the past decade, and trust in many federal government institutions is now lower than it was during the Watergate era, generally recognized as the low point in American history for trust in
government." Among the findings: Barely half trust the government to handle international problems, the lowest number ever. And less than half express faith in the government handling domestic issues,
the lowest findings since 1976. ..."The poll indicates that the lack of trust seems to be directed primarily at the federal government,"
Gallup concludes. "There has been no observable decline of public trust in state and local governments. Sixty-seven percent of Americans now express trust in their state government, matching the
levels of 2004 and 2005. Sixty-nine percent also trust their local government, similar to what Gallup has found since 2001."
Tuesday, October 2, 2007 ~ 6:22 p.m., Dan Mitchell Wrote: If any state has taken to heart the claim that more money is the key to improving public education for low-income students, it's
Connecticut. The Nutmeg State, which ranks first in per capita income ($47,800), also leads the way in average teacher salary ($58,700) and is third in per-pupil spending ($11,000). Yet according
to the latest National Assessment of Educational Progress released this week, Connecticut has the nation's largest achievement gap between poor and non-poor students. ...Not only are low-income
students falling further behind in Connecticut than anywhere else, but the state's overall ranking is also down. Since 2005, Connecticut has lost ground to other states in three of the four NAEP categories.
In fourth-grade math, it's fallen to 16th from 9th. In eighth-grade math, it's fallen to 29th from 20th. As usual, the supposed beneficiaries of Connecticut's education lucre are faring worst. Poor
and minority students typically attend schools in urban districts that spend thousands of dollars more than the per-pupil state average. Yet the state ranking for Hispanic students declined in all four
categories; for blacks, it fell in all but one category. Eighth-graders in Connecticut who qualify for free or reduced price lunches had the second-lowest math scores for poor students in the U.S.
Monday, October 1, 2007 ~ 3:20 p.m., Dan Mitchell Wrote: The Internet Tax Freedom Act, enacted in 1998 and since extended twice, prevents multiple and discriminatory taxes on the Internet. In
other words, different states can't tax the same e-commerce transaction, and states and cities can't create Internet-only taxes that don't exist offline. So, except for a few grandfathered states, Internet
access taxes are banned. But a Congressional failure to extend the moratorium would quickly show up on monthly bills, and not quietly. Taxes on telephone service can run above 20%, more than triple the
average general sales tax rate. Absent the moratorium, state revenue departments will begin to issue letters ruling that Internet access services are subject to these same sky-high telephone tax rates. The
revenuers will do this because they can (until state courts judge their merit), not because they need the money. State and local governments have enjoyed 17 straight quarters of increasing revenues.
Monday, October 1, 2007 ~ 12:12 p.m., Dan Mitchell Wrote: Former Federal Reserve Chairman Alan Greenspan has just come out with the predictable book by a former government official, where
he claims others made the mistakes. He now skewers the Bush administration and Congress for their irresponsible and excessive spending. However, while many of us were fighting the battle, he was
silent when his words might have caused the Washington body politic to act a bit more responsibly. One can only conclude Mr. Greenspan put a higher value on his own reappointment and good press from
the liberal media than on the fiscal health of the nation he had pledged to serve. |
||||||||||
 |
||||||||||
