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www.freedomandprosperity.org |
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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Cato Institute, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Monday, December 31, 2007 ~ 2: 45 p.m., Dan Mitchell Wrote: In 2005, the most recent year for which data are available, we spent more than $5 billion on the U.N. and related activities, ranging from food programs to peacekeeping.
That's a rise of 67% during George Bush's first term alone. ...Too bad we're not getting our money's worth. In fact, the U.N. has become such a massive, unwieldy, corrupt organization that, at this point, it
seems beyond repair. ...Part of the problem is the U.N., which was started after World War II with the best of humanitarian intentions, has been hijacked by a variety of left-wing and anti-Semitic agendas,
pushed by an aggressive pack of anti-U.S. and anti-democratic nations that tend to vote as a bloc in the U.N. ...The U.N., in short, has become a major way for nondemocratic, noncapitalist countries to siphon
wealth from the wealthy countries - without doing anything that remotely looks like democratic, pro-market reform in their own countries. ...We've had enough, thank you. The U.N. wastes billions each year, while
corruption flourishes. It's time for the U.S. to pull out.
Sunday, December 30, 2007 ~ 4: 12 p.m., Dan Mitchell Wrote: In the contest to be America's most spendthrift state, New York and California are typically ahead of the pack. ...Last week Governor Arnold
Schwarzenegger announced he will declare a "fiscal emergency" in January, which he said has become "a common thing in California." No
kidding. ...Let's start with the culture of overspending in Sacramento. State outlays have nearly tripled to $142 billion this year from $51 billion
in the early 1990s. ...California is...losing many of its most productive workers. Over the past decade nearly 1.5 million more Americans fled
California than arrived; 275,000 left last year alone, according to Census Bureau data. An influx of foreign immigrants has maintained the state's overall population, but those departing include upwardly mobile
middle-class families moving to lower-tax states... The Golden State applies a top marginal income tax rate of 10.3%, the highest rate on
earnings of any state (excluding some city levies, such as New York City), according to the Tax Foundation. A rising share of those who pay the
10.3% rate are now hit by the federal Alternative Minimum Tax, so about one-third of California's income tax is no longer deductible from federal
tax liability. This is one more reason for taxpayers to flee the state. ..."Our tax policies practically invite Californians to pack up their bags
and leave the state," says Assembly Minority Leader Mike Villines.
Saturday, December 29, 2007 ~ 1:05 p.m., Dan Mitchell Wrote: Officially known as the Central Artery/Third Harbor Tunnel Project, the Big Dig was to run $2.6 billion. But it came in at $14.8 billion, the most
expensive highway project in U.S. history. Along the way, the project was plagued by more than 1,700 leaks; a falling 3-ton ceiling panel that killed
a woman...the resignation of another Turnpike Authority chairman over undisclosed cost overruns; fraud indictments for six employees who allegedly supplied poor-quality concrete; and general political wrangling.
...For every large failure, government has made a hash of hundreds of smaller programs and projects. From the International Space Station to synfuel to mass transit projects that serve almost no one, government
plans bomb time and again. The litany of problems associated with government projects is a long one: from competing interests, political favoritism and bureaucratic turf-guarding to insularity, incompetence and
unaccountability, not to mention a disposition for trying to manipulate people's lives rather than respond to market signals.
Friday, December 28, 2007 ~ 3:45 p.m., Dan Mitchell Wrote: ...demographic changes have sparked many misunderstandings about the economic health of the middle class. For example, Americans today are
more likely to live in single-adult households than they were 30 years ago. Adjust incomes to take into account this shift, along with increasing
employer contributions to retirement savings and to health insurance premiums, and you find that the real middle-class median income has
risen 33 percent, or $18,000, since 1979. ...fewer people today live in households with incomes between $30,000 and $100,000 (a reasonable
definition of "middle class") than in 1979. But the number of people in households that bring in more than $100,000 also rose from 12 percent to
24 percent. There was no increase in the percentage of people in households making less than $30,000. So the entire "decline" of the middle class came from people moving up the income ladder. ...Every
week for the past several years, nearly 1 million workers either quit or lost their jobs. But a slightly higher number were also hired in a typical
week. At the national level, overall employment has grown slowly but steadily. And Commerce Department data show that even at the state
level, including in Midwestern "Rust Belt" states, employment is up at least 14 percent since 1993, the year the North American Free Trade Agreement was passed.
Thursday, December 27, 2007 ~ 2:08 p.m., Dan Mitchell Wrote: Congress is reviving a plan to increase tax collections on Internet consumers. Congressman William Delahunt's (D., Mass.) bill, subject of a
recent House Judiciary hearing, would give new powers to America's tax collectors. ...Mr. Delahunt's bill would make mandatory the inappropriately named "Streamlined Sales and Use Tax Agreement,"
forcing all but the tiniest businesses to answer to every one of America's 7,500 taxing jurisdictions. If making a small Web operator calculate,
collect and remit taxes to every locality where he has a customer doesn't sound like "streamlining," wait, there's more. Each merchant would also
have to submit to audits from governments coast to coast. And while "only" 7,500 state and local governments currently collect sales taxes in
the U.S., more than 22,000 other governments can choose to collect them in the future, and there's no limit on the creation of new taxing entities.
...Believe it or not, it gets worse. The board of state and local tax collectors that administers the "streamlined" plan recently amended the
agreement. Now the plan would allow some states to choose whether to tax online purchases at the seller's address or the buyer's, depending on
whether they're in the same state. The end result will be different tax rates for in-state and out-of-state vendors -- a clear Constitutional violation.
...Most states, the intended beneficiaries of this new tax bureaucracy, have not endorsed the agreement. Money-hungry revenue departments have largely failed to convince their home legislatures to sign off. So
they've gone to Congress to whine about revenue "lost" to e-commerce transactions. We like Presidential candidate Fred Thompson's view of
similar claims by federal bureaucrats: "It ain't lost. It's in my pocket." The fact is that our various levels of government have been doing just fine in
the era of electronic commerce. State and local tax collectors have enjoyed 18 consecutive quarters of increasing revenues. A Tax Foundation analysis shows that, even after adjusting for inflation, state
and local tax revenues have increased almost 48% since 1992.
Thursday, December 27, 2007 ~ 11:38 a.m., Dan Mitchell Wrote: President-elect of Korea Lee Myung-bak, who will be inaugurated in February, has proposed swingeing tax cuts and other market-friendly
policies for his new administration. ...Lee has pledged 12.6 trillion won in tax cuts, lowering the maximum corporate tax rate by stages to 20% from
the current 25% and lowering oil-related taxes by 10%, paying for it by reducing government expenditures by as much as 20 trillion won. He also
promises reductions in real-estate taxes. Lee says he will ease rules that restrict industrial groups from controlling banks. The current law bans
industrial firms from owning more than 5% of a bank. He will also privatize major swathes of state-owned economic sectors, he said.
Wednesday, December 26, 2007 ~ 8:26 p.m., Dan Mitchell Wrote: Moral victories at the United Nations are few and far between, but the U.S. won a small one over the weekend when it stood alone in refusing to
approve the global organization's budget. The vote, after an all-night session, was 142-1. The U.S. objection centered on the inclusion of financing for a reprise of the World Conference Against Racism.
Remember that U.N. classic, held in Durban, South Africa? In one of his finer moments, Secretary of State Colin Powell pulled the U.S. delegation
out of the confab after it degenerated into an anti-Semitic hate fest. ...The entire U.N. budget process is also something of a sham. The two-year budget was presented as $4.17 billion, representing a 15%
increase over the last biennium. But the U.N. budget is released piece by piece, and the final figure -- after add-ons that everyone knows are
coming -- will end up being closer to $5.2 billion, a 25% increase. The U.S. is the U.N.'s largest donor, and the American taxpayer is on the hook for about one-quarter of all this.
Tuesday, December 25, 2007 ~ 11:43 a.m., Dan Mitchell Wrote: ...local protectionist legislation is becoming less and less effective in preventing a company currently headquartered and incorporated in one
EU member state from re-incorporating elsewhere in the union. ...companies have already begun to seek out more favorable corporate-law regimes than those available in their home countries.
...Taking advantage of the new legal environment, tens of thousands of small and medium-size German companies, such as Air Berlin, have been formed in the U.K. to avoid minimum capital requirements and certain
worker-representation provisions imposed by German corporate law. The Bundestag is now debating significant reforms to German corporate law in an effort to stanch the flow of German businesses to more favorable
jurisdictions. ...Besides securities regulation and corporate charters, other areas of increased regulatory competition in the EU abound. Chief among
them are tax rates: The last six years have seen a steady decline in the average corporate tax rates across Europe, from 33.9% in 2000 to 25.8%
today. European law also increasingly provides that certain regulated industries, such as insurance and banking, are now subject to controls
only in their home states. This may create additional incentives for firms to shop around for a more favorable regulatory climate in another EU
nation. The stakes are high: Delaware's earnings attributable to its dominant position in American corporate law amounted to $650 million in incorporation and franchise fees in 2006 alone. Moreover, servicing
corporate clients has translated into tens of thousands of well-paying jobs in the state. Considering the potential prizes in a winner-takes-all battle in
other areas of regulation in Europe, the competition here in the coming years is likely to be fierce.
Monday, December 24, 2007 ~ 2:27 p.m., Dan Mitchell Wrote: Amid the goods found in the stores, there is one thing that many owners and employees say they cannot do without: their cats. And it goes beyond cuddly companionship. These cats are workers, tireless and enthusiastic hunters of unwanted vermin, and they typically do a far better job than exterminators and poisons. When a bodega cat is on the prowl, workers say, rats and mice vanish. ...But as efficient as the cats may be, their presence in stores can lead to legal trouble. The city's health code and state law forbid animals in places where food or beverages are sold for human consumption. Fines range from $300 for a first offense to $2,000 or higher for subsequent offenses. ...Still, many store owners keep cats despite the law, mainly because other options have failed and the fine for rodent feces is also $300. "It's hard for bodega owners because they're not supposed to have a cat, but they're also not supposed to have rats," said José Fernández, the president of the Bodega Association of the United States. To understand what this really means, the article tells the story of Mr. Martinez, who is trying to earn a living while dealing with the mindless bureaucracy: ...last winter, a friend brought Mr. Martinez a marmalade kitten in need of a home. Mr. Martinez, who was skeptical of how one slinky kitten could fend off an army of hungry rats, set up a litter box in the back of the store, put down an old fleece jacket and named the kitten Junior. Within two weeks, Mr. Martinez said, "a miracle." "Before you'd see giant rats running in off the streets into the store, but since Junior, no more," he said. Junior sometimes brings Mr. Martinez mouse carcasses as gifts, which he said bothers him less than the smell that permeates his store when the exterminator's victims die and rot under a freezer. In October, a health inspector fined Mr. Martinez $300 and warned him that if Junior was still there by the time of the next inspection he would be fined $2,000. "He wants me to get rid of the cat, but the rats will take over if I do," Mr. Martinez said. "I need the cat, and the cat needs a home." Because stores do not get advance notification of an inspection, Mr. Martinez is trying to keep Junior in his office as much as possible. Many bodega owners reason that a cat is less of a health threat than an army of nibbling rats. "If cats live in homes and apartments where people have food, a cat shouldn't be a threat in a store if it's well maintained," Mr. Fernández said. I don't have much opportunity to patronize New York City bodegas, but I prefer cats over rats. Too bad the city's bureaucracy doesn't let the market decide which animal
should take precedence.
Sunday, December 23, 2007 ~ 3:51 p.m., Dan Mitchell Wrote: A common claim is that executions - down to about 53 in 2006 from 90 in 1999 - are too rare even in other parts of the country to deter criminals.
To see the spuriousness of this complaint, consider that "only" about 55 police officers are killed each year - yet we (academics and the public
alike) still see it as a dangerous job, the stresses of which help account for higher divorce and suicide rates. Yet those killings are spread across
about 700,000 U.S. police officers. By contrast, 53 executions resulted from 16,700 murders. In other words, we executed murderers at 40 times
the rate at which criminals killed police officers. Given the impact on police, how can we believe that murderers would be unaffected by the
much larger risk they face? Critics also point to mistaken convictions, but they still can't point to a single case in which an innocent person was executed.
Saturday, December 22, 2007 ~ 2:27 p.m., Dan Mitchell Wrote: ...state spending has soared under Schwarzenegger even faster than it did under his predecessor, Democrat Gray Davis, who was ousted for his
perceived fiscal irresponsibility. ...It's hard to believe that just four months ago, Schwarzenegger campaign heavily for his bloated budget, which spends 34% more than when he took office just four years ago.
...Some recent Schwarzenegger proposals would only make things worse, like his aggressive new global warming caps on California's economy and
proposed 4% tax on small businesses to fund universal care for the state's 6.5 million uninsured. Meanwhile, the minimum wage in California is set
to hit $8 an hour on Jan. 1 - highest in the nation. Thousands of low-wage jobs will be lost as a result, leaving many young Californians without a
ladder of opportunity to climb. The American Legislative Council recently ranked California 41st of 50 states for economic performance and noted
that the state's tax system, in particular, is a mess. In a 2005 survey of 458 CEOs by Chief Executive Magazine, 182 called California the worst
state in which to do business based on "tax rates, regulations, work force attitudes and quality of life issues." Companies such as Intel already have
said they no longer will build in California. Over the past five years, the state has lost some 155,000 factory jobs. Some went overseas, but others
went to booming neighboring low-tax states - like Nevada, Oregon and Arizona.
Friday, December 21, 2007 ~ 3:51 p.m., Dan Mitchell Wrote: Secretary General Ban Ki-moon's proposed "initial" budget for 2008-09 is $4.2 billion, a mere 15% increase over the Secretariat's current budget.
Oops, make that $4.8 billion, which includes the "add ons" the Secretary General has already identified. But even that's not the final final figure.
The U.N. budget is released piece by piece -- how convenient -- and the U.S. estimates that the full budget will end up being in excess of $5.2
billion, a 25% increase over the last two-year budget cycle of 2006-07. ...Roughly 75% is for salaries and other staff costs -- in other words,
toward boosting the size of the U.N. bureaucracy. ...The U.S. is the largest donor to the U.N., paying roughly one-quarter of its budget.
Friday, December 21, 2007 ~ 2:32 p.m., Dan Mitchell Wrote: America continues to be a society of upward income mobility. Over the past decade, millions of Americans have joined the once highly exclusive
club of six- and seven-figure earners. Some 304,000 Americans earned $1 million or more in annual income in 2005, compared to 110,000 in 1996 and 176,000 in 2000. Because there is no cap on the top income share,
this increase in millionaires pushes the top income (and taxes paid) share higher. The number of millionaire households in net worth also increased
to nine million in 2006, up from six million in 2001, according to TNS, a global market research firm. Liberals decry this as proof of a new "gilded
age." But we'd say these gains are a sign that more Americans are joining the ranks of the truly affluent. More than 13 million American households,
or about one in 10, had an income of more than $100,000 a year in 2005. This is the kind of upward mobility that a dynamic society should want
because it means that incomes aren't stagnant and opportunity continues to exist.
Thursday, December 20, 2007 ~ 1:16 p.m., Dan Mitchell Wrote: We begin this progress report on the global flat tax revolution with the curious case of the Pridnestrovie Moldavian Republic, a secessionist
enclave (population: 537,000) that acquired de facto independence from Moldova 15 years ago in the four-month War of Transnistria. ...the emergent state now seeks to build a free-market economy. To speed the
process, it has adopted a flat tax - at a rate of 10 per cent - on all personal and corporate income. In doing so, it becomes the eighth jurisdiction from the old USSR to opt for a flat-tax regime. (The others:
Georgia, Estonia, Latvia, Lithuania, Ukraine, Romania and Russia itself.) More importantly, Poland will be the next European country to adopt flat
taxes. The centre-right coalition that decisively won Poland's national election in October has promised to implement a flat tax (rate: 15 per
cent) by 2009. As the biggest of the new member states of the European Union, Poland's decision will have consequences - especially for next-door
Germany, which clings to a progressive top income tax rate of 47.4 per cent. Germany's tax code is one of the most bureaucratic in the world -
with 28,000 pages of regulations that administer 118 laws that require the filling of 185 forms. ...Hong Kong, where citizens can choose to file either
a progressive tax return or a flat tax return, has reduced its flat tax personal rate to 15 per cent from 16 per cent and its corporate rate to 16
per cent from 17 per cent. In response, Taiwan has announced that it will cut its corporate rate to 16.5 per cent from 25 per cent.
Thursday, December 20, 2007 ~ 12:41 p.m., Dan Mitchell Wrote: Obwalden has become the first Swiss canton to adopt a flat income tax rate, with more than 90 per cent of the electorate voting in favour of the
move. The decision, announced by the authorities after a vote on Sunday, comes after a court ruled the canton's previous degressive tax model
unfair. From next January Obwalden will impose a rate of 1.8 per cent on all categories. The new model also exempts the first SFr10,000 ($8,700)
of income from taxation, a measure designed to benefit those on lower incomes the most. …In Switzerland there is high competition among the cantons to set the lowest tax rates to attract wealthy individuals and
companies. …European neighbours have frequently expressed outrage that their rich citizens are opting to empty their pockets into Swiss coffers rather than their own. But Switzerland has defended its position as
providing healthy competition.
Thursday, December 20, 2007 ~ 10:23 a.m., Dan Mitchell Wrote: Bulgaria's parliament passed on second reading on Monday the amendments introducing a flat tax rate in the country. …The amendments
are final and only a veto from president Georgi Parvanov can stop them from becoming law, although he has given no indication he plans to do so.
…The leaders of the three parties in Bulgaria's ruling coalition have agreed in summer on the tax reform, with a flat rate of 10%, the lowest in
Europe, replacing the progressive taxation system with three brackets. Since Estonia introduced a flat tax system in 1994, enjoying stable GDP
growth, eastern European countries have been attracted to the flat tax that promises to attract foreign investments and increase transparency.
Wednesday, December 19, 2007 ~ 5:45 p.m., Dan Mitchell Wrote: The 'European Radio Project' (ERP) - a consortium of 16 radio stations from 13 member states - will from April 2008 onwards bring programmes
"from a European point of view," according to plans seen by EUobserver. ...The euro-radio project will be primarily financed by the EU Commission... The ERP consortium won the tender and will now
pocket EUR5.8 million per year of subsidies for its pan-European shows... The commission tender cites as aim of the radio project to "encourage the
development of a European public area," with Brussels already subsidising the European TV news channel EuroNews to the tune of EUR5 million euro a year (increasing to EUR 10 million from next year onwards).
Wednesday, December 19, 2007 ~ 2:00 p.m., Dan Mitchell Wrote: The Health Care Choice Act would allow residents in one state to buy health insurance that is available in and regulated by another state. If
enacted, the law would create a competitive, 50-state market for health insurance, likely making it cheaper. It would do this without imposing a large cost on taxpayers and without creating a new government
bureaucracy. This should be a no-brainer for Congress. ...Some states...New Jersey, New York, Massachusetts, for instance -- have all but destroyed their individual health-insurance markets with over-regulation.
...In New Jersey..., residents who buy their own insurance have to pay at least $20,000 a year for the cheapest family policy. Meanwhile, in
neighboring Pennsylvania similar health-insurance policies cost a third of what they cost in New Jersey. What Mr. Shadegg wants to do is to let New
Jersey residents buy what's now for sale in Pennsylvania. ...If states are worried about losing regulatory control over health insurance, they might
try making their regulations competitive with other states. ...The Health Care Choice Act won't solve every problem. But it would increase competition and consumer choices currently denied to residents in many
states.
Tuesday, December 18, 2007 ~ 9:27 p.m., Dan Mitchell Wrote: On November 15, the SEC voted unanimously to stop requiring foreign companies that use IFRS to re-issue their financials in GAAP for
American investors. Until Sarbanes-Oxley came along, this was the number one obstacle to foreign companies considering a listing on a U.S. stock exchange. Furthermore, the costly rule was unblemished by
evidence that it provided any net benefit to investors. Institutional investors, buying record numbers of shares through Rule 144A offerings
that require no conversion, have made it abundantly clear that they have no need for GAAP in valuing companies. The next item in this investor-friendly agenda is to give U.S. companies the option of choosing
to report with IFRS, instead of GAAP. The SEC has issued a proposed rule to do just that and this week will host the first of two roundtables to explore the possibilities. Some participants will no doubt urge
"convergence" of the international and U.S. accounting standards, but creating one "super-monopoly" for the entire world might compound the
problems created by the FASB bureaucracy, notes an influential 2003 Harvard Law School paper by Rachel Carnachan. Ms. Carnachan urges a competition that will likely improve both sets of standards. Knees start
jerking about a possible "race to the bottom" whenever the idea of regulatory competition is raised.
Monday, December 17, 2007 ~ 11:52 a.m., Dan Mitchell Wrote: Spain's Socialist prime minister, José Luis Rodríguez Zapatero, recently vowed to eliminate the wealth tax if reelected. ...Spain is already
benefiting from substantial corporate tax relief. The Spanish finance minister, Pedro Solbes, is gradually reducing the corporate tax rate for
large corporations from 35 percent to 30 percent, with the 30 percent rate becoming effective in 2008. Solbes has also slashed the rate for small
businesses from 30 percent to 25 percent. There has been income tax relief as well: this year the top rate was trimmed from 45 percent to 43
percent. ...In its drive for corporate tax relief, Spain is part of a broader European trend. "A tax-cut war is spreading across Europe," Bloomberg
News reported this past May, "as leaders of the Continent's biggest economies give up criticizing smaller neighbors for cutting business-tax
rates and decide to join them instead." In recent years, the Netherlands has cut its corporate tax rate from 34 percent to 25 percent. Effective
January 1st, Germany will slash its corporate rate from 38.7 percent to 29.8 percent... In Denmark, the center-right government of Anders Fogh
Rasmussen this year cut the corporate tax rate from 28 percent to 25 percent. ...British Prime Minister Gordon Brown has announced that the
corporate tax rate will be reduced from 30 percent to 28 percent in April. ...Most governments assume that cutting tax rates will leave them with
less money to spend. Yet recent history shows that quite often the opposite is true. Lower tax rates don't necessarily mean less tax revenue.
Monday, December 17, 2007 ~ 10:40 a.m., Dan Mitchell Wrote: ...he says. "Many of the worst blows to family fortunes have been struck by external events that no single family, however wealthy or powerful,
could have prevented." Blows could come in the form of wars, asset bubbles, confiscatory tax regimes, ethnic persecution, nationalisation and
so on. Socialist-inspired confiscatory regimes in Europe and elsewhere caused the economic demise of many families, during the second half of
the twentieth century, recounts Daniell. Rates were exceptionally high: "Income tax (up to 83 per cent), capital gains tax (up to 98 per cent), and
inheritance tax (at rates up to 77 per cent)." Many countries have realised that exorbitant tax rates can lead to flight of capital, both human and
financial. However, "with Western European countries and Japan facing dramatic reductions in population, ageing populations, rising state
welfare costs, increasing healthcare burdens, and, in the case of the UK, declining long-term oil revenues, a return to higher rates of tax across the
board is not impossible to contemplate in a less advantaged and poorly managed future," foresees Daniell.
Sunday, December 16, 2007 ~ 5:24 p.m., Dan Mitchell Wrote: ...a panel at the IPCC conference titled "A Global CO2 Tax" took a step that will have a more lasting impact than an empty agreement. It urged
the U.N. to adopt taxes on carbon dioxide emissions that would be "legally binding to all nations." And guess who would be hit the hardest?
That's right, the tax, if levied, would put an especially high burden on the U.S. ...The driving force of the environmental movement is not a cleaner
planet - or a world that doesn't get too hot, in the case of the global warming issue - but a leftist, egalitarian urge to redistribute wealth. A
CO2 tax does this and more, choking economic growth in the U.S. and punishing Americans for being the voracious consumers that we are. Eco-activists have been so successful in distracting the public from their
real intentions that they're becoming less guarded in discussing their ultimate goal. "A climate change response must have at its heart a
redistribution of wealth and resources," Emma Brindal, a "climate justice campaign coordinator" for Friends of the Earth Australia, wrote Wednesday on the Climate Action Network's blog.
Sunday, December 16, 2007 ~ 4:51 p.m., Dan Mitchell Wrote: The cause of health spending's steep trajectory is government's flawed role in it - a flaw that has distorted the market but one that also can be
rectified. ...the health-care recipient is rarely the direct primary payer for health care (CBO's 1975-2005 analysis shows out-of-pocket payments fell
to 13%, down from 31%, and private insurer payments rose to 37%, up from 25%). This combined insulation creates a perverse situation where
neither consumer nor provider has an incentive to control costs. In fact, the opposite prevails; by using more health care, both get a greater return. And in the case of Medicare and Medicaid, not even the payer
(unlike private insurers) is directly influenced by economics. Such a dynamic ensured health-care cost explosion.
Saturday, December 15, 2007 ~ 5:41 p.m., Dan Mitchell Wrote: Just two years ago, the EU submitted its Constitutional Treaty to its members for a vote. Two key countries - France and the Netherlands -
stunned the union's unelected bureaucrats and political appointees by rejecting it outright. Without their support, the treaty as negotiated was
null and void. Fearing further rejection, the EU went back to work - coming up with a "reform" treaty... Bye-bye democracy, hello Eutopia.
What has emerged is a nightmare of a deal that creates a powerful - and unelected - European Commission president, a foreign policy czar, dozens
of new bureaucracies and 250 pages of rules, regulations and laws. ...it will more resemble the dystopic totalitarian state, Oceania, from George
Orwell's "1984" than the United States of America - on which the EU was explicitly modeled. ...The "new" treaty is 96% identical to the "old" one.
As ex-French President Valery Giscard d'Estaing admitted: "All the earlier proposals will be in the new text, but will be hidden and disguised
in some way." In other words, it's not "reform" but a sham, a lie, a fraud. There is hope, however, that it might fail. Anger and public resistance is
large and growing in Britain, Denmark and the Netherlands. We hope so. Europe deserves better than to let dozens of its once-unique countries lose
their identities and cultures to an overweening, all-powerful welfare Eurostate.
Saturday, December 15, 2007 ~ 4:18 p.m., Dan Mitchell Wrote: The 'European Radio Project' (ERP) - a consortium of 16 radio stations from 13 member states - will from April 2008 onwards bring programmes
"from a European point of view," according to plans seen by EUobserver. ...The euro-radio project will be primarily financed by the EU Commission... The ERP consortium won the tender and will now
pocket EUR5.8 million per year of subsidies for its pan-European shows... The commission tender cites as aim of the radio project to "encourage the
development of a European public area," with Brussels already subsidising the European TV news channel EuroNews to the tune of EUR5 million euro a year (increasing to EUR 10 million from next year onwards).
Friday, December 14, 2007 ~ 2:36 p.m., Dan Mitchell Wrote: The Environmental Working Group has a map of New York City making the rounds on the Internet that shows 562 dots, each representing a
Manhattan resident who gets a USDA farm payment. Who knew that growing cotton, corn and soybeans was such a thriving industry near Central Park? We don't know the incomes of these people, but it's a fair
guess they're not homeless. ...Washington refers to these people as "absentee farmers." They own the land and collect the subsidy checks, but
few do any actual farming. It is true that the farmers who lease the acreage in Illinois, Iowa or Kansas are usually far from rich (though the
per capita income of farmers is higher than the median family income). But studies indicate that the subsidies provide little financial benefit to
these tenant farmers, who grow and harvest the crops and put food on our table. Most studies agree that the subsidies are capitalized into the price and rental value of the land. So the more generous the farm
payments, the higher the rents that the absentee farmers in New Yorkers can charge. ...Some recipients are even Members of Congress -- including six Senators and a handful of House Members who have received a
combined $6 million in subsidies over the past decade. ...what is it about farm bills that turns Republicans into socialists and Democrats into defenders of welfare for the rich?
Thursday, December 13, 2007 ~ 2:00 p.m., Dan Mitchell Wrote: ...the new White House plan...is a bailout for a tiny fraction of those with adjustable-rate mortgages (ARMs), not subprime loans per se. ...The Bush
administration claims the plan will help "up to" 1.2 million people. Most of that promised help consists of nothing more than another phone
number to call for counseling about refinancing -- a redundant service unlikely to prove wildly popular. ...the only financial aid in this plan goes
to those who qualify for the five-year freeze on mortgage rates -- a curiously selective little group, estimated to number between 145,000 and 360,000. ...On the day the plan was unveiled, the Mortgage Bankers
Association reported that 0.78% of mortgages went into foreclosure in the third quarter, and that 5.59% were far behind in their payments. Neither
group qualifies for any help under the Bush plan. Neither does anyone with imperfect timing -- those who took out a mortgage before 2005 or after this July. Among the few lucky enough to slip through that narrow
window, the primary criterion for a rate freeze is a weak credit rating, below 660. And what happens after five years? Presidential contender
Sen. Hillary Clinton is already talking about stretching it to seven years, and that bidding war has just begun. On the face of it, these criteria for
political favoritism seem only marginally more sensible than limiting special loan terms to, say, short people or redheads. ...Treasury Secretary
Hank Paulson describes the arbitrary rewriting of financial contracts as a win-win situation for everyone. If that were true, the government would
not have to get involved. In a win-win deal, Sen. Clinton would also not have felt compelled to threaten legislation to prohibit lawsuits from
unhappy owners of mortgage-backed securities. If this "changing of the rules in the middle of the game," as many have described it, becomes a
precedent, future funding will dry up quickly and permanently -- particularly for low-income borrowers. Why buy a bond that can have its terms changed by political whim? ...Some in the news industry have
described all this heavy-handed political intervention as the Bush administration's "free-market approach" to the threat of nonperforming
mortgages. On the contrary, honoring contracts and property rights is absolutely essential to the proper functioning of a free society and free
economy. A mortgage is a binding contract between consenting adults. A mortgage-backed security is private property. It is the antithesis of a free
market for the government to fix prices, pressure mortgage service companies into renegotiating contracts, and thereby expropriate property rights of those stuck holding mortgage-backed securities. Another
president, Richard Nixon, gained ephemeral popularity by freezing wages and prices on Aug. 15, 1971, but the end result was disastrous for the economy. The Bush administration may hope now for some political
benefit from freezing interest rates for a select subgroup of high-risk borrowers. But whenever politicians attempt to protect borrowers and lenders from their folly, they just encourage more folly. Thursday, December 13, 2007 ~ 1:41 p.m., Dan Mitchell Wrote: Writing in today's Medical Journal of Australia, Associate Professor Barry Walters said every couple with more than two children should be taxed to
pay for enough trees to offset the carbon emissions generated over each child's lifetime. ...And he implied the Federal Government should ditch the
$4133 baby bonus and consider population controls like those in China and India. ..."Far from showering financial booty on new mothers and
rewarding greenhouse-unfriendly behaviour, a 'baby levy' in the form of a carbon tax should apply, in line with the 'polluter pays' principle." ...the
plan won praise from high-profile doctor Garry Egger. "One must wonder why population control is spoken of today only in whispers," he wrote in an MJA response article.
Thursday, December 13, 2007 ~ 11:31 a.m., Dan Mitchell Wrote: Supporters of campaign finance and speech regulation, in the name of "reform," want to expand government subsidized campaigns. Behind the
rhetoric of "clean" elections is a system that suppresses political speech by ordinary citizens, decreases confidence in government and produces
none of what it promises. The last major campaign finance law, known as McCain-Feingold, required the independent audit and investigative arm
of Congress, the Government Accountability Office, to study government financing systems in Maine and Arizona, states that proponents cited as exemplary of the alleged benefits of government financing. The GAO
concluded that taxpayer-funded elections had no discernable positive effect on electoral competition, voter choice, interest group influence or
voter participation. ...tax financing can erode confidence in government. Political scientists Jeffrey Milyo and David Primo found that it negatively
affects whether people feel "they have a say" in government or whether "officials care" about the public interest. Tax funding of campaigns is
supposed to reduce special-interest influence. But since Maine's program began, the number of lobbyists in the state has increased dramatically.
And in Arizona, Gov. Janet Napolitano relied heavily on labor unions to do the work needed for her to receive the government subsidy. Additionally, most taxpayer-financing schemes only further entrench the
status quo and empower political insiders by penalizing independent citizen speech. And, as usual, there is waste. A candidate for governor in Maine used taxpayer dollars to pay her husband nearly $100,000 in
consulting fees. In Arizona, public money was used to "campaign" in nightclubs and to buy a frozen drink maker. Wednesday, December 12, 2007 ~ 10:47 a.m., Dan Mitchell Wrote: Migration patterns instead reveal which states have the most dynamic and desirable economies, and which are "has-been" states. The winners in
this contest for the most valuable resource on the globe -- human capital -- are generally the states with the lowest tax, spending and regulatory
burdens. The biggest losers are almost all congregated in the Northeast and Midwest. Liberals contend that tax rates, regulations, forced union laws and runaway government spending don't matter when it comes to
creating jobs, high incomes and a higher quality of life. People tell us otherwise by voting with their feet. ...Over the past decade, the 10 states
with the highest taxes and spending, and the most intrusive regulations, have half the population and job growth, and one-third slower growth in
incomes, than the 10 most economically free states. In 2006 alone 1,500 people each day moved to the states with the highest economic competitiveness from the states with the lowest competitiveness. ...Our
study also finds that states with antigrowth tax and spending policies don't just lose people. Noncompetitive states like New York, Michigan, Pennsylvania, Illinois and New Jersey are plagued by falling housing
values, a shrinking tax base, business outmigration, capital flight and high unemployment rates, and less money for schools, roads and aging
infrastructure. These factors of decline hurt the poor the most. ...One Southern governor (who didn't want to be identified) recently told us his
state had closed its economic development offices in Europe. "Why search for factories overseas when we can plunder high tax areas like
Connecticut and New York?" he said. ...Five of the states near the bottom of our competitiveness ratings -- Illinois, Maryland, Michigan, New Jersey
and Wisconsin -- have enacted major tax increases in the last two years. Maryland and Michigan just raised business and income taxes on upper-income earners, while arguing that raising the cost of doing
business will attract more businesses. More likely it will induce companies to stay away, and people to move out.
Wednesday, December 12, 2007 ~ 10:08 a.m., Dan Mitchell Wrote: The booming alternative investment business is driving major new competition between offshore jurisdictions. But the threat of external
political interference remains a clear and present danger... With billions of dollars in assets under administration, offshore jurisdictions like the Cayman Islands, Bermuda and the Channel Islands of Jersey and
Guernsey have become central pillars of the fast growing alternative funds business. This is the result of much more than just the traditional
tax considerations. The regulatory framework in the Cayman Islands, for instance, earned glowing praise from the IMF following a recent assessment... Yet despite their success to date the offshore jurisdictions
still face external pressures that could undermine their position in the global financial services machinery. ...There have been similar developments in the US, with presidential hopeful Barack Obama recently
launching a withering attack on Bermuda and the offshore jurisdictions of the Caribbean. ...Other jurisdictions are seeking to emulate...success by
overhauling their own regulations with a view to replicating, or even surpassing, the flexibility and freedom granted to hedge funds in Cayman. ...offshore jurisdictions will face competition from not only their
contemporaries, but also from their onshore counterparts in the future. February 2007 saw the launch of a flexible Specialised Investment Funds (SIF) regime in Luxembourg.
Wednesday, December 12, 2007 ~ 9:34 a.m., Dan Mitchell Wrote: Young Danes, often schooled abroad and inevitably fluent in English, are primed to quit Denmark for greener pastures. One reason is the income
tax rate, which can reach 63 percent. …The problem, employers and economists believe, has a lot to do with the 63 percent marginal tax rate paid by top earners in Denmark - a level that hits anyone making more
than 360,000 Danish kroner, or about $70,000. … The movement toward lower taxes passed Denmark by, even as it took root in much of Europe. Small East European countries, notably Estonia and Slovakia, started the
trend by imposing low, flax taxes on income and corporate profits about five years ago. Those moves helped prod Austria, and eventually, Germany, to slash high marginal rates as well. Danish taxes also contrast
sharply with those in nearby London, often jokingly referred to among Danes as a Danish town, because so many of them live there. Lower taxes
on high earners have been a centerpiece of the policy mix that has fed the rise of London as a global financial center since the 1980s. … Danish
business normally keeps its distance from politics, but in parliamentary elections this year, a few companies jumped into the fray. Lars Christensen is co-chief executive of Saxo Bank, a Copenhagen financial
services firm specializing in currency trading and retail brokerage services. New employees at Saxo Bank get a copy of "Winning," the
playbook of Jack Welch, the brass-knuckled former chief executive of General Electric, and "Atlas Shrugged," the libertarian manifesto by Ayn
Rand, suggesting that the boss has little time for solutions that beat around the bush. "The high tax rate is the No. 1 problem we have," Christensen said. "It's that simple."
Tuesday, December 11, 2007 ~ 5:15 p.m., Dan Mitchell Wrote:
Tuesday, December 11, 2007 ~ 3:21 p.m., Dan Mitchell Wrote: The Board of Hardy, a major specialist Lloyd's insurer, announced that it proposes to move the Group's corporate domicile to Bermuda "in order to
improve the Group's strategic positioning in the global insurance and reinsurance market." …With Hardy's arrival, Bermuda will look even
more like EC3 (the City of London postal area that includes Lloyd's and many other insurers and brokers). The Group joins Catlin and Hiscox as an old-line Lloyd's company, as well as ACE, XL and a host of newer
companies who are headquartered on the island. Kiln is also in the process of moving to Bermuda.
Tuesday, December 11, 2007 ~ 1:11 p.m., Dan Mitchell Wrote: Austrian prime minister Alfred Gusenbauer has said the EU should reform its pension system with up to EUR1 billion expected to be paid out
to retired eurocrats next year. ...According to Die Welt, the average yearly pension for EU civil servants is EUR70,124, meaning a monthly amount of EUR5,844. From this, around EUR1000 a month is deducted
for tax and social security. In total, EU officials pay 10.25 percent of their gross wage into a fund. But only a third of eurocrats' pensions are paid
out of this fund, the major part is paid by EU member states.
Monday, December 10, 2007 ~ 2:15 p.m., Dan Mitchell Wrote: Scores of London-based hedge fund managers are moving part of their operations to Switzerland in readiness for a proposed UK tax crackdown
on non-domiciled residents, according to Kinetic Partners, an investment management consultancy. London has become a popular base for the industry, with the city's 950 or so hedge fund firms managing about 80
per cent of European hedge fund assets. But according to David Butler, founding member of Kinetic, at least 40 per cent of the founders of the
consultancy's 300-plus hedge fund clients are non-domiciles and they are reportedly getting increasingly jittery about the likelihood of a harsher
tax regime. ... From next April, non-doms who have lived in the UK for more than seven years will face a Ł30,000 a year levy if they choose to keep their offshore income and gains out of the tax net. However, a
greater threat to the hedge fund industry comes from proposals to crack down on offshore trusts that also allow non-doms to escape tax on their
investments. "Remove this [exemption] and the general view that is starting to prevail is that Ł30,000 is the thin end of the wedge," said Mr
Butler. ... "There will come a time when people are using the UK just for their finance and back office operations. The key value operations will move offshore." This is why tax competition is so important. Politicians (at least some of them) are learning that the geese with the golden eggs can fly across the border. This means that there is growing pressure to lower tax rates and reduce the tax bias against saving and investment. So long as international bureaucracies such as the OECD and European Commission do not succeed in their efforts to cripple tax competition, more and more governments will implement better tax policy. Not because they want to, but because a competitive global economy is forcing them to do the right thing.
Monday, December 10, 2007 ~ 2:01 p.m., Dan Mitchell Wrote: A recent Internal Revenue Service proposal to remove tax deductions for certain US captives may drive more companies to go offshore, with
Cayman and Bermuda the prime beneficiaries of the change. If approved, this proposal would eliminate the ability of US captives to claim tax
deductions for money set aside in reserves to pay for future claims and losses. Instead, these deductions would only be allowed at the time the
actual claims are paid out, potentially leading to millions of dollars in taxes being collected up front. …Vermont has been the only real onshore
competitor for Bermuda and Cayman as large numbers of US companies have turned to captives, transforming this once exotic product into a
mainstream choice on the global market place. …To date, Bermuda leads the captive market with about 870 companies, followed by Cayman (756) and Vermont (562).
Monday, December 10, 2007 ~ 10:12 a.m., Dan Mitchell Wrote: It's not as if banks, investors and mortgage servicers don't have incentive to avoid foreclosures on their own. Investors typically lose 30% to 50% of
the unpaid mortgage balance when a home has to be resold due to foreclosure. So they have every incentive to renegotiate subprime loans that are expected to become delinquent. And that process is already well
under way. ...The U.S. economic and legal systems are built on the sanctity of contract, and even the hint that government is compelling investors who now own these mortgages (the banks having sold them as
bundled securities) to take less money puts the U.S. on a very dangerous road. At a minimum, it will raise the future risk premium that investors
will demand for investing in U.S. real estate, which means it will be costlier to get a mortgage in the future. ...The refinancing plan might only
delay the day of reckoning and lead to bigger losses in a falling market. An analysis by the financial services consulting firm Graham Fisher calls
this "the rolling loan gathers no loss" philosophy, and notes its similarity to the strategy that prolonged the "S&L crisis and the Japanese banking
crisis." By the way, another part of Mr. Paulson's nonplan would allow states to float more tax-exempt bonds to refinance subprime borrowers.
State housing authorities can now float tax-exempts to help first-time home buyers, but Treasury wants to let them float bonds to refinance loans or pay closing costs as well. This is clearly a taxpayer-financed
bailout. ...the Bush Administration would be better off politically opposing anything that smacks of a "bailout." A Public Opinion Strategy polls find
that 62% of Americans oppose a mortgage bailout. More than 95% of homeowners are making their payments on time, and they believe it is unfair to pay more in taxes to assist those who've been less responsible.
They're right. (subscription required)
Sunday, December 9, 2007 ~ 12:58 p.m., Dan Mitchell Wrote: ...desire for government intervention to fix problems that grown adults have created for themselves is dangerous. Constantly counting on the
government to save the economy undermines confidence in free markets, conditions people to believe they don't have to live with bad decisions,
and creates a willingness to take imprudent risk. Actions to stabilize the economy in the short term can destabilize it in the longer term, and set the
stage for even more intervention to fix the new problems at a later date. ...Attempting to offset the problems caused by a few (i.e., a bailout),
actually creates larger risks for the economy as a whole. The very act of saving the world puts it at greater risk.
Sunday, December 9, 2007 ~ 11:21 a.m., Dan Mitchell Wrote: World Bank staffers are cheering the return of their traditional holiday parties under new President Robert Zoellick. The paper reports that last
year Mr. Wolfowitz "pulled the plug on holiday festivities, or at least strongly nudged divisions to do so" on the grounds that the celebrations
were unseemly at an institution dedicated to fighting poverty. But the natives of 1818 H Street objected: "Many employees groused that the
parties had been a rare chance to socialize with colleagues." It's easy to feel sorry for the bankers, given their tax-exempt salaries and the long
hours they log at five-star hotels world-wide. Then again, a source tells us the tab for these holiday parties would have come to $500,000, or about
$45 per head -- and that was just for the catering, never mind security, coat checks and the rest. Mr. Wolfowitz's modest proposal was to ask his
managers to cap expenses at $38 a head, with any additional savings going to a charity of their choice. From the standpoint of the bank staff,
Mr. Wolfowitz's proposal would have meant, roughly, replacing the tuna tartare hors d'oeuvres with chicken satay. From the standpoint of the world's poor, $500,000 is enough to purchase as many as 100,000
anti-malarial mosquito nets.
Saturday, December 8, 2007 ~ 4:15 p.m., Dan Mitchell Wrote: There's a lot to be said for taxing consumption over income, and the fair tax would be worth consideration if we were writing a tax code from
scratch. Realistically, we're not. The plan would require repealing the Sixteenth Amendment that allowed a federal income tax, and the chances
of that happening are approximately zero. The political risk, given the nature of government, is that we'd end up with both an income tax and a
national sales tax. Europe, here we come. ...As a political matter, the fair tax would offer a bull's-eye for Democrats, who would love to run against
a plan that would instantly make most purchases 30% more expensive. Though the fair tax includes a complicated rebate system to shield the working poor, a levy on consumption would nonetheless hit hard the
young, middle-income families that Mr. Huckabee is courting. It would also tax medical services and home prices, sure to be flashpoints this election season in particular. In 2004, Democrats came from nowhere to
nearly beat South Carolina Senator Jim DeMint by pounding his support for the fair tax. His opponent said it would raise taxes on 95% of state
residents, and Mr. DeMint had to disavow his support. In the American system, such a radical change as the fair tax is possible only in a crisis, and we aren't living in one now.
Saturday, December 8, 2007 ~ 2:43 p.m., Dan Mitchell Wrote: ...when government takes our money by force and gives it to others, that's not sharing. And sharing can't be a basis for production -- you can't share
what hasn't been produced. My point is that production and prosperity require property rights. Property rights associate effort with benefits. Where benefits are unrelated to effort, people do the least amount
necessary to get by while taking the most they can get. Economists have a pithy way of summing up this truth: No one washes a rental car.
Friday, December 7, 2007 ~ 4:32 p.m., Dan Mitchell Wrote: Controlling for inflation, in 1967, 8 percent of households had an annual income of $75,000 and up; in 2003, more than 26 percent did. In 1967, 17
percent of households had a $50,000 to $75,000 income; in 2003, it was 18 percent. In 1967, 22 percent of households were in the $35,000 to $50,000 income group; by 2003, it had fallen to 15 percent. ...The only
reasonable conclusion from this evidence is that if the middle class is disappearing, it's doing so by swelling the ranks of the upper classes.
What about the concentration of wealth? ...In 1920, America's richest one percent held about 40 percent of private wealth; by 1980, the private
wealth held by the richest one percent fell to about 20 percent and has remained stable at that level since. Demagogues duping Americans about
stagnant and declining income give politicians justification to raise taxes and place regulatory obstacles in the path of risk-taking, productivity and
hard work that will impede the enviable income mobility that has become a part of American tradition.
Friday, December 7, 2007 ~ 3:45 p.m., Dan Mitchell Wrote: The president of the European Parliament is under pressure to justify his 46-strong entourage. The office of Hans-Gert Poettering includes three
drivers, 13 advisers and seven press officers. A conservative estimate of the total annual running costs of the German MEP's cabinet alone has
been put at EUR3.5 million (Ł2.5 million). This includes about Ł1.6 million on staff salaries, plus travel expenses and publicity costs. Klaus Welle, his
German chief of staff, is the top earner but six department heads directly below him are also believed to receive six-figure salaries.
Friday, December 7, 2007 ~ 2:12 p.m., Dan Mitchell Wrote: The Bush administration, federal regulators and big banks are "aggressively pursuing," in the words of Treasury Secretary Henry
Paulson, a deal to save some mortgage borrowers and their lenders from facing the consequences of their bad decisions. The deal, called "Hope
Now," could be called "Hope Now, Worry Later." ...First, the deal will reward irrational behavior and encourage such behavior by homebuyers
in the future. It was not logical for people to take out mortgage obligations they couldn't afford, but it will become logical for them to do
so in the future if they can reasonably expect that the government and their lender will later bail them out when the going gets tough. Second,
the deal will thwart the market by keeping home prices artificially high. In recent years, laughably easy credit has let many people "buy" homes who
otherwise could not have done so, pushing up prices. ...the deal will allow investors in these mortgage securities as well as participants in the housing market to delay new pain, beyond what they've already
experienced. America's economy is so successful, though, in part because of its efficient markets. Companies and investors periodically screw up, sometimes disastrously, but when they do, they have to take their
punishment in the markets so that everyone can move on to the next big thing. ...It's similar to how Japanese government officials and regulators
encouraged banks to keep bad loans on their books during that country's own economic malaise. This only prolonged Japan's stagnation. ...this
mortgage mulligan will permanently alter investors' perception of the risk of government interference in the American credit markets. ...The willingness of a Republican president to endorse such mass-scale
interference in the private markets doesn't bode well for future interest rates on all American consumer financing, including mortgages, because
investors will see that the political risk is far greater than they had thought.
Thursday, December 6, 2007 ~ 10:27 p.m., Dan Mitchell Wrote: ...the FairTax has given Huckabee a convenient talking point, and it boosted him in a key test of Iowa strength five months before anyone
actually votes. For the seat-of-the-pants Huckabee operation, this must make it ipso facto good policy. Never mind that it is unworkable and
would be politically deadly in a general election. To avoid the risk of getting both a national sales tax and an income tax, FairTaxers would have to repeal the 16th Amendment. Good luck. Huckabee's magic wand
will come in handy. Then, there's the rate of the sales tax. FairTaxers say that a 23 percent rate would be enough to replace current revenues. What
they really are talking about is a tax of 30 cents on every dollar -- what most people would consider a 30 percent rate. The government would pay
the tax on all its purchases, a gimmick "done solely to make revenues under the FairTax seem larger than they really are," writes economist
Bruce Bartlett. Budget trickery aside, the congressional Joint Committee on Taxation has estimated that the rate would have to go as high as 57
percent. The tax would apply to everything, even medical expenses, so it would amount to an incredibly regressive tax on even the most necessary purchases of low- and middle-income taxpayers. The home mortgage
deduction would be gone, and instead buyers would pay a 30 percent (at least) tax on their homes. To make up for this burden, the government
would send monthly "prebate" checks to all Americans based on income. (And you thought our current tax scheme was complex?)
Wednesday, December 5, 2007 ~ 3:19 p.m., Dan Mitchell Wrote: Word is that the Bush Administration will soon propose a cut in the U.S. corporate income tax, following House Democrat Charlie Rangel's
proposal this fall to cut the rate to 30.5% from 35%. As a new study makes clear, such a reduction would give a lift to the U.S. economy when it really needs it. The study, from the National Bureau of Economic
Research, looked at corporate taxes in 85 countries from 1996 to 2005. ...The study found that corporate taxes have a statistically significant
negative effect on economic performance. High business taxes were found to reduce a nation's domestic capital investment, the amount of foreign
investment into that country, and its overall growth in GDP. The authors conclude that "corporate taxation reduces the return on capital and thus
discourages investment" and "reduces the cash flow of the firm" in such a way as to reduce the after-tax capital available for reinvestment. The
researchers also found that high corporate levies reduce entrepreneurship, which drives new industries and job growth. ...the U.S. is far behind the rest of the world in reducing corporate tax rates. The
U.S. corporate income tax rate is the world's second highest after Japan's among developed nations.
Wednesday, December 5, 2007 ~ 3:06 p.m., Dan Mitchell Wrote: Fred Thompson wants the government to keep its hands off your dinner plate. …"I'm telling you, I don't think that it's the primary responsibility
of the federal government to tell you what to eat," Thompson said to applause when asked if his health care plan included any details on
preventative care, a priority for Democratic candidates. "The fact of the matter is we got an awful lot of knowledge," said the former Tennesse
senator. "Sometimes we don't have a whole lot of will power, and I don't know of any government program that's going to instill that." Thompson,
ever a fan of small government, said healthy living should be the responsibilities of families first. Based on these sentiments, Thompson presumably does not want Congress micro-managing school cafeteria menus. But what about the other GOP candidates? Ron Paul surely is on the right side. Does anybody know where Giuliani, McCain and Romney stand on this issue?
Wednesday, December 5, 2007 ~ 2:46 p.m., Dan Mitchell Wrote: Plans to apply sales tax in the country in which services are consumed, rather than the location of the company that sells them, are the latest
assault on Luxembourg's ability to act as a tax haven. ...With its low rates of sales tax, or value added tax, Luxembourg has attracted many of the
biggest names in online sales, including companies like Amazon.com, Skype and PayPal. Luxembourg levies VAT at 15 percent, the minimum allowed under EU rules. But most EU countries have a higher rate,
making the small but prosperous duchy an attractive location for companies offering electronic services. ...Until Tuesday, Luxembourg had blocked proposals to levy sales tax at the place of consumption, saying
the change would cost it EUR220 million, or $324 million, a year, equivalent to 1 percent of its economic activity. Taxation matters require unanimous agreement within the EU, but a country like Luxembourg -
which has a population of only 429,000 - finds it difficult to withstand pressure from other countries if it isolated. In exchange for lifting its veto,
Luxembourg extracted valuable concessions. The change will not come into force until 2015, five years later than the date proposed by the European Commission. Even after that, Luxembourg would be allowed to
retain 30 percent of VAT revenue from 2015, with the rest going to the country where the consumer is based. This 30 percent would be phased
out by the end of 2018. The deal was welcomed by larger countries, which stand to increase their revenue.
Wednesday, December 5, 2007 ~ 2:26 p.m., Dan Mitchell Wrote: The retail giant, founded in 1962 (incorporated in '69), grew phenomenally throughout the '70s, '80s and '90s. But the company didn't
hire a single lobbyist until 1999. In the 1998 cycle, Wal-Mart's PAC donated a total of $135,000 to federal candidates. Seems they were focused on pleasing customers, not politicians. Former Arkansas Senator
Dale Bumpers explained Wal-Mart's disinterest in making political donations this way: "They were doing very well without any government assistance, and the government was not interfering with them too much.
And I guess they felt it would be money sort of wasted." But now the besieged company spends $2.5 million a year on lobbyists; political contributions have jumped a whopping ten-fold. Same thing happened
back in the '90s when the Clinton Justice Department decided to launch a witch-hunt against Microsoft. Microsoft had been working its business instead of plying politicians with donations. After the government
mugging, Microsoft's political donations soared 9,000 percent
Wednesday, December 5, 2007 ~ 11:27 a.m., Dan Mitchell Wrote: Tax reform gets lip service on the political trail, but it's usually buried under a pile of other issues such as Iraq, health care and immigration.
Democratic presidential candidates campaign to repeal President Bush's "tax cuts for the rich," even as evidence mounts that those reductions
have turned into a treasure trove of new revenues. They also propose repealing the Alternative Minimum Tax, enacted originally to snare a handful of rich who used loopholes to avoid the income tax but now
dipping into the pockets of millions of Americans, particularly in blue states. Republican contenders talk of preserving the Bush tax cuts and opposing any tax increases. Only two candidates, Mike Huckabee and
Fred Thompson, have pushed specific tax reform plans. Huckabee proposes jettisoning the income tax in favor of the "fair tax," a 20 percent national sales tax. Thompson recommends a volunteer plan that
would let Americans choose to pay under the current system or opt for a two-tier flat tax -- 10 percent and 25 percent brackets -- with a family of
four exempt from the first $39,000 in income and the higher category for families earning more than $100,000. The problem with Huckabee's idea
is that we could end up with both a national sales tax and the income tax unless the Constitution was amended to eliminate the paycheck levy.
Thompson's strategy thus appears to be the wiser route, but its problem is that it doesn't take the flat tax to its logical conclusion of one rate for
everyone. Critics see the low flat tax rates draining government coffers. But they always underestimate the economic stimulative effect and overstate the revenue loss. The flat tax has been so good for economic
growth and revenues that more than 20 countries have embraced it in recent years.
Tuesday, December 4, 2007 ~ 7:45 p.m., Dan Mitchell Wrote: Federal lawmakers are considering the broadest effort ever to limit what children eat: a national ban on selling candy, sugary soda and salty, fatty
food in school snack bars, vending machines and cafeteria lines. ...Senator Tom Harkin, Democrat of Iowa and the chairman of the Agriculture Committee, has twice introduced bills to deal with foods other
than the standard school lunch, which is regulated by Department of Agriculture. Several lawmakers and advocates for changes in school food
believe that an amendment to the $286 billion farm bill is the best chance to get control of the mountain of high-calorie snacks and sodas available
to schoolchildren. Even if the farm bill does not pass, Mr. Harkin and Senator Lisa Murkowski, Republican of Alaska, a sponsor of the amendment, vow to keep reintroducing it in other forms until it sticks.
...Food for sale would have to be limited in saturated and trans fat and have less than 35 percent sugar. Sodium would be limited, and snacks must have no more than 180 calories per serving for middle and
elementary schools and 200 calories for high schools. The standards would not affect occasional fund-raising projects, like Girl Scout cookie sales.
Tuesday, December 4, 2007 ~ 4:10 p.m., Dan Mitchell Wrote: Some of the country's greatest economists, including Nobel Prize winners, have been saying for years that the Federal Reserve has probably caused
more problems than it has solved since its creation in 1913. Its role in the last century's boom and bust cycles is a matter of record; it looks as
though it played a similar role in the current housing market crisis too. While the creation of the Federal Reserve was essentially a response to a
series of bank runs, those crises were mild compared to the ones that were to follow. ... All in all, financial instability has been far greater since the
creation of the Federal Reserve. What did the Great Depression teach us? Essentially that even with the best of intentions, it is impossible for the
authorities to manage the supply of money in accordance with the exact needs of the economy. A country's economy is the sum of millions of people making decisions that no single individual is in a position to
anticipate. ... The current housing market and debt market crises are in good part the children of the Federal Reserve. By cutting rates 13 times between 2001 and 2003, and then keeping them very low for years,
monetary policy contributed to the housing bubble. ...once again, the Fed has turned out to be a factor of financial instability. Tuesday, December 4, 2007 ~ 3:25 p.m., Dan Mitchell Wrote: Many wealthy Dutch residents want to move abroad next year for tax reasons. At least 4 percent is considering crossing the border in 2008 and
becoming a taxpayer in another country. . The study was held in the context of the presentation of the Finance Guide 2008, a new publication
by the magazine. The study polled 480 people with an income of at least 2.5 to 3 times the average. The researchers say that it is primarily the
very wealthiest who are considering fleeing to avoid the levelling policy of the cabinet. "At least 9 percent plans to leave the country," says Onno Aerden, editor in chief of Miljonair. Tuesday, December 4, 2007 ~ 1:30 p.m., Dan Mitchell Wrote: With portfolios of almost $3 trillion, capital of $65 billion, and no obvious end to the fall in home values, the continued solvency of Fannie Mae and
Freddie Mac has to be in question. . Since no one can predict where the bottom of the housing market may be, it is important to recognize that a
loss of, say, 3% on portfolios of $3 trillion would easily wipe out what is left of their capital. . there is very little that their regulator, the Office of
Federal Housing Enterprise Oversight (OFHEO), can do in the event that their losses mount to the point that they become insolvent. . Even if Fannie and Freddie are insolvent, they will not become illiquid; the
capital markets will continue to fund institutions they believe are backed by the federal government. Thus, it will be tempting for all concerned simply to wait for things to improve, leaving the GSEs' current
managements in place. . Allowing either of these GSEs to continue operating would be a disaster for the taxpayers, and the S&L industry experience shows why. As long as a company is insolvent, it has nothing
to lose -- and everything to gain -- from risk-taking. The fact that insolvent S&Ls were allowed to continue to operate through much of the
1980s was the major source of the $150 billion in losses they ultimately imposed on the federal government and the taxpayers. The GSEs are nothing more than huge S&Ls, but in one respect they are more
dangerous. The S&Ls were fueled in their risk-taking by federally insured deposits of up to $100,000, but Fannie and Freddie have what the capital markets consider to be government backing for all their debt.
Monday, December 3, 2007 ~ 6:55 p.m., Dan Mitchell Wrote: According to demographic predictions, the EU's population will not only shrink by almost 20 million people by 2050, but its make-up will also
change dramatically. While there are currently about four working people of working age for each person of pension age in the EU's 27 member
states, there will be fewer than two people to support every elderly person by 2050, with the population gradually ageing.
Monday, December 3, 2007 ~ 5:29 p.m., Dan Mitchell Wrote: Last summer, the Centers for Medicare and Medicaid Services (CMS), the agency that administers the country's two largest insurance programs,
announced a pilot program to investigate fraud in the medical device industry. Law enforcement officials, for example, visited 1,600 businesses
in Miami that were billing Medicare for services. One-third of them didn't even exist, yet they billed Medicare for $237 million in the previous year.
The government has now charged 120 people in 74 cases, and Medicare filings in the area are down by $1.4 billion from last year. This monitoring costs taxpayers money. Is it wasted? Does Mrs. Clinton think that
private-sector insurers aren't the target of fraud? Part of the cost of claims adjudication is for the detection of fraud. Does Mrs. Clinton believe insurers should instead just pay? ...regulation is one of the
primary causes of high health-insurance costs. States impose more than 1,900 mandates (requirements that insurers cover, or offer to cover, specified providers and benefits). Mandates raise the cost of coverage.
Some states micromanage who insurers have to accept, and impose price controls on the policies. All of those states have significantly higher premiums than the less-regulated states.
Monday, December 3, 2007 ~ 3:26 p.m., Dan Mitchell Wrote: Hogan's argument is a fine illustration of prohibitionist logic, which says anything that can be done to excess should be illegal. But as Miss Duke
noted, "If the government is going to ban every activity that can lead to harmful compulsion, the government is going to have to ban nearly every
activity. Shopping, day trading, sex, [eating] chocolate, even drinking water - these and myriad other activities, most of which are part of
everyday life, have been linked to harmful compulsions." According to a survey reported in the October 2006 American Journal of Psychiatry,
about 6 percent of shoppers experience "compulsive buying." Data from the federal government indicate the rate of alcohol abuse or dependence
among past-year drinkers is something like 13 percent. By comparison, a 2007 government-sponsored survey in the United Kingdom, where Internet wagering is legal, found 6 percent of people who had placed
sports bets online and 7.4 percent of people who had placed other kinds of online bets in the previous year qualified as "problem gamblers" based on
American Psychiatric Association criteria. ...The prevalence of problem gambling among all past-year gamblers (excluding lottery ticket buyers) was 1.3 percent.
Sunday, December 2, 2007 ~ 6:09 p.m., Dan Mitchell Wrote: Tommy Hilfiger Corp., which left the New York Stock Exchange to go private in 2006, may go public again, this time on the Amsterdam
exchange. ...it's...another warning about the competition facing American capital markets. Kate Mitchell of Scale Venture Partners says that even
start-up companies are spending up to $3 million per year to comply with Sarbanes-Oxley in preparation for going public. "We're at the point of
overkill," she notes, adding that regulation has changed the message her companies hear from investment banks. "When we get pitches for IPOs,
they always bring into the mix European exchanges, Asian exchanges, even the Canadian exchanges . . . Five or 10 years ago, we never heard
that." ...Wealthy investors and companies raising capital are voting with their wallets against America's regulated markets, and that means
individual investors lose access to an increasing number of stock issues -- one more ironic result for Sarbanes-Oxley and other laws that were promoted and passed in the name of aiding small investors.
Sunday, December 2, 2007 ~ 4:43 p.m., Dan Mitchell Wrote: ...the "militia" the Framers had in mind was not the National Guard of the present, but referred to all able-bodied male citizens who might be
called upon to defend their country. The notion that the average American urbanite might today go to his gun locker, grab his rifle and sidearm and rush, Minuteman-like, to his nation's defense might seem
quaint. But at stake is whether the "militia" of the Second Amendment is some small, discreet group of people acting under government control, or
all of us. The phrase "the right of the people" or some variation of it appears repeatedly in the Bill of Rights, and nowhere does it actually
mean "the right of the government." When the Bill of Rights was written and adopted, the rights that mattered politically were of one sort--an
individual's, or a minority's, right to be free from interference from the state. Today, rights are most often thought of as an entitlement to receive
something from the state, as opposed to a freedom from interference by the state. The Second Amendment is, in our view, clearly a right of the latter sort.
Sunday, December 2, 2007 ~ 3:16 p.m., Dan Mitchell Wrote: Parliament approved on November 23, in first reading, amendments to the Income Tax for Natural Persons Act, which will introduce a 10 per
cent flat tax rate starting from January 2008. The amendments were supported with 152 against 36 votes, with four abstentions, Bulgarian news agency (BTA) said. The flat tax rate will replace the current
progressive tax system.
Saturday, December 1, 2007 ~ 11:20 a.m., Dan Mitchell Wrote: Just days after only 29 percent of the Romanian electorate turned out for the country's first ever European elections, MEPs said that European
political parties - currently numbering ten - should be able to use public money to finance political campaigns. They also voted to set up political
foundations. These institutions - to get EUR7 million in EU funds next year - will be politically affiliated to a particular European party and will
be designed to get people talking about Europe. ...Low turnout has long been a source of frustration for many euro-deputies who feel their claims
to belonging to the most democratic of the EU's main institutions is often undermined by the fact that so few people vote to put them there. ...Answering questions on fears about whether EU taxpayers money will
be safely spent, Mr Leinen said that there is a "very compact system of control and audit."
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