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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, March 31, 2008 ~ 3:11 p.m., Dan Mitchell Wrote: At what point does taxation move from that necessary for proper government to tyranny? ...In his 1886 annual message to Congress, President Grover Cleveland stated, "When
more of the people's sustenance is exacted through the form of taxation than is necessary to meet the obligations of government and expenses of its economical administration, such exaction becomes ruthless
extortion and a violation of the fundamental principles of a free government." ...Tax tyranny can exist when members of one group are singled out to pay a disproportionate share of the tax because of their
religion, ethnic group, gender or other circumstance. Nowadays, this is most often seen in government abusing the idea of progressive tax rates. For instance, in the United States, the top 1 percent of the
taxpayers pay 40 percent of the income tax, yet they have only 21 percent of the income. At the same time, the bottom 50 percent of the taxpayers pay only 3 percent of the tax while having 12 percent of the
income. Some politicians want to further increase the tax burden on the top 1 percent while reducing and even eliminating the tax all together on the bottom 50 percent. When a majority shifts almost all of the
tax burden to a small minority who must pay a grossly disproportionate share of their income, it smacks of tax tyranny. Two-dozen countries, many of whose citizens have suffered under the tyranny of communism,
have instituted "flat taxes" to avoid this form of tax tyranny.
Monday, March 31, 2008 ~ 11:50 a.m., Dan Mitchell Wrote: Mistaken regulation contributed greatly to the current problems in financial markets. ...The first principle of regulation is: Lawyers and
politicians write rules; and markets develop ways to circumvent these rules without violating them. The financial markets offer many examples.
In the 1970s, Federal Reserve Regulation Q restricted the interest rate that banks and thrifts could pay depositors. In response, the market developed
money market funds that circumvented the regulation. ...The perennial argument of regulators is: "If only I had more power. . ." Not so.
Regulators did not see the chicanery at Enron. Nor did they prevent the dot-com bubble or the Latin American debt problems in the 1980s. A main
reason is "capture" -- when the interests of the regulated dominate the interests of the public. ...Anyone can see where increased regulation leads.
The Bush administration abandoned its commitment to rein in the government sponsored enterprises. Instead it increased lending by Fannie and Freddie. This moves risky loans from the financial market to the
taxpayers. The Federal Reserve agreed to take $30 billion of risky assets. If defaults occur, the Fed will reduce its annual transfer to the Treasury.
Mr. Frank and Senate Banking Committee Chairman Christopher Dodd are planning more schemes to move the risk to the taxpayers from those who made bad decisions, such as buying mortgages that are now in
default. As a result, ordinary citizens will ask themselves: Why should I pay my mortgage if my neighbors can get theirs reduced? These proposals
have stark long-term consequences. The financial system cannot survive if the bankers make the profits and the taxpayers take the losses. ...If the
government underwrites all the risks, call it socialism. If it underwrites only the failures, call it foolishness.
Sunday, March 30, 2008 ~ 3:22 p.m., Dan Mitchell Wrote: A look at the recent Bush regulatory record makes one wonder why the party's candidates aren't holding it up as a model of Democratic
governance. Just last week, the Environmental Protection Agency announced new ozone rules for the first time in 10 years. As the EPA noted, "ozone is measured out to three decimal places." The new city
limits for ozone from cars, power plants, factories and other "man-made sources" is 0.075 parts per million instead of the old 0.080 ppm. The cost
in lost economic output from this new more stringent rule is estimated at $6 billion a year, and many communities are still struggling to meet the
demands of the old rule. Whether the health benefits of the new rule will exceed these costs is unknown because Congress refuses to allow a cost-benefit analysis for air quality regulations. Last year Bush
rule-making agencies imposed $11 billion of net new economy-wide regulatory costs (mostly in the environmental area). The cost of new regulations has increased every year on Mr. Bush's watch, but last year
was by far the highest. ...With the economy stalling and capital markets looking like sludge, this red-tape roll out makes no sense. The Small
Business Administration calculates that the total cost in 2005 of complying with 145,000 pages of federal rules and procedures was $1.1 trillion. This
is the rough economic equivalent of imposing a second federal income tax on the economy. George Mason University's Mercatus Center reveals in a
soon-to-be released study that every measure of regulatory activity is up in recent years -- agency staffing, budgets, pages of rule making and
compliance costs. ...the budgets of Uncle Sam's 50 largest agencies, such as the Federal Communications Commission and the Consumer Products Safety Commission, are up almost one-third since 2001. There are now
some 200,000 full-time government employees writing and enforcing federal commandments.
Saturday, March 29, 2008 ~ 8:57 p.m., Dan Mitchell Wrote: ...the Supreme Court...insulated American law from the international variety. ...Mexican authorities made the case a referendum on capital
punishment and international legal norms, ultimately suing the U.S. in the International Court of Justice at The Hague. The ICJ ruled in Mexico's
favor, ordering states to give Medellín and some 51 other nationals new hearings. The question before the Supreme Court was whether such international dictates must be enforced by sovereign state courts. An
affirmative answer might have gone a long way toward validating the expansive claims of liberal legal theorists that U.S. courts take instruction
from the U.N., among other moral oases. Chief Justice John Roberts, writing for the 6-3 majority, ruled that the ICJ finding was not binding because the Vienna Convention is an understanding between
governments, a diplomatic compact. It was never intended to automatically create new individual rights enforceable domestically by international bodies. ...Medellín v. Texas also swatted away a claim of
Presidential power. While the Bush Administration did not agree with Mexico's choice of venue, or the intrusion on U.S. sovereignty, it attempted to allay the diplomatic ruckus by directing states to comply with
the ICJ ruling in a 2005 executive order. The Court ruled that the President's power, too, was limited by the Constitution. The authority to make treaty commitments did not extend to unilaterally asserting new
state responsibilities or legal duties. Again, the executive could only make new laws in conjunction with the legislature. Devotees of using foreign
law to overrule American politicians will squawk. But the Medellín majority has delivered a victory for legal modesty and the U.S. Constitution.
Friday, March 28, 2008 ~ 3:33 p.m., Dan Mitchell Wrote: We're not French. Americans want to succeed, not just get by. They don't dream about a better safety net. They dream about getting ahead. If
Democrats default to a traditional recipe of expanding the safety net -- and that is all they offer -- they will hit the brick wall of public antipathy
toward "big government." In a February 2007 poll conducted by Democracy Corps, 57% of Americans agreed that "government makes it harder for people to get ahead in life," and 54% thought that
"government mostly gets in the way of the economy and job growth." While people not hurt by recessions are open to helping those who are, Democrats cannot assume that economic recessions automatically
translate into broad public support for major government interventions.
Thursday, March 27, 2008 ~ 11:19 a.m., Dan Mitchell Wrote: "Tax havens have declared war on honest taxpayers," says US Sen. Carl Levin (D) of Michigan, who along with Sen. Barack Obama (D) of Illinois
is co-sponsoring the "Stop the Tax Haven Act," introduced last year. ...Chas Roy-Chowdhury, head of taxation at Britain's Association of
Chartered Certified Accountants...says... "Governments should open themselves up to the wind of global competition and accept that they need
to run efficiently to keep tax rates low." ...Perez-Navarro [of the OECD] adds that individuals should have the right to a certain banking
confidentiality, but that when investigators want to see numbers they should be handed over.
Wednesday, March 26, 2008 ~ 2:13 p.m., Dan Mitchell Wrote: An award-winning winemaker whose wares are sold at the royal palaces is facing a £30,000 bill after European bureaucrats ruled that he was using
the wrong-shaped bottles. Jerry Schooler, who sells 400,000 bottles of fruit wines and mead a year, has been threatened with prosecution over
his determination to use traditional measurements. The proprietor of the Lurgashall Winery in West Sussex, has been told to halt the sale of
beverages such as mead, silver birch wine and bramble liqueur in 75cl and 37.5cl bottles. If he continues to sell them, he could be taken to court
under a new EU directive that permits the sale of such products in 70cl, 50cl or 35cl measures only. ...Mr Schooler now faces costs of about
£30,000 to change his production line. "We are going to have to change all our bottling, the labels, machinery, boxes and maybe the corks as well
and it is going to cost me thousands to do it," he said. ...West Sussex County Council's trading standards department said that the winery was
bound by EU Directive 2007/45/EC, which was drawn up in September to "lay down rules on nominal quantities for prepacked products". It said the
directive meant that the use of 37.5cl bottles for liqueurs was illegal. The absurdity of this story makes one wonder how such a regulation came into existence. Did a bureaucrat wake up on the wrong side of the bed one day and decide that wine should only be sold in bottles of certain sizes? Is there some sort of crazy health or safety rationale for the regulation? Speaking of which, that's the alleged reason for a regulation that is forcing English bus companies to make customers disembark in the middle of routes. This foolish regulation apparently is designed to prevent driver fatigue, but, as reported by the Sun, the practical effect is to make people waste their time: Thousands of passengers are being forced to hop off buses midway through journeys to comply with barmy EU laws. A Brussels ruling has
banned local services longer than 30 miles to ensure drivers don't spend too long at the wheel. As a result, drivers have to pull in as they hit that
limit and order everyone off their bus. They then change the route number on the front and invite passengers to jump back on before resuming the
trip. ...Western Greyhound has split its Newquay to Plymouth route in three - even though it uses a single driver throughout. Passengers must
buy three tickets and break their journey twice. Managing director Mark Howarth said: "It's a farce. We have to kick customers off as soon as the
driver hits the 30-mile limit. "Often it's in the middle of nowhere. Passengers think we're crazy."
Tuesday, March 25, 2008 ~ 12:15 p.m., Dan Mitchell Wrote: Democratic presidential contenders Hillary Rodham Clinton and Barack Obama have cast it as an outrage that should be a key target for the next president: a tax break they say encourages employers to ship American jobs abroad. The charge could be dismissed as typical campaign-trail exaggeration during a Democratic primary season marked by populism, except for one thing. Many analysts say it's true. "The U.S. tax system does provide an incentive to locate production offshore," says Martin Sullivan, a contributing editor to Tax Notes, a non-profit publication that tracks tax issues. At issue is the U.S. tax code's treatment of profits earned by foreign subsidiaries of American corporations. Profits earned in the United States are subject to the 35% corporate tax. But multinational corporations can defer paying U.S. taxes on their overseas profits until they return them to the USA - transfers that often don't happen for years. ..."If you had two companies in Pittsburgh that both were going to expand capacity and create 100 jobs, our tax code puts the company who chooses to put the plant in Pittsburgh at a competitive disadvantage over the company that chooses to move to a tax haven," says former White House economist Gene Sperling, a Clinton adviser. But Senators Clinton and Obama, not to mention Martin Sullivan and Gene Sperling, have things backwards. It is America's high tax rate that creates an incentive for jobs to be overseas. Deferral simply means that American companies are only somewhat disadvantaged in their efforts to earn market share in other nations. The USA Today story does acknowledge that America has a high corporate tax rate, but the reporter is surprised that this high rate means low revenue, even though it is actually a sign of "Laffer Curve" responses to punitive taxation: The U.S. has one of the highest corporate tax rates in the world, and its corporate tax code has a well-earned reputation for complexity. But despite the high rate, the U.S. takes in less annual revenue from corporate taxes, measured as a percentage of economic output, than almost all other major economies. The current system is bad for America, but critics have the wrong solution. Instead of making the U.S. tax code even more punitive by ending deferral, America needs a big reduction in the corporate tax rate. So long as America's rate is far higher than other nations, companies will have an incentive to create jobs abroad. Ending deferral would not alter that incentive. All that would happen is that foreign companies would be creating a larger share of those jobs. The story does quote a couple of economists who have starkly different estimates of employment implications, but both agree the current system causes job losses: Kimberly Clausing, a professor of economics at Reed College in Portland, Ore., says the corporate tax code may account for up to 3 million jobs being abroad. Gary Hufbauer, an economist who has written a book on international taxation, puts the number at just 200,000. ...The Bush administration warned last year that U.S. corporate giants are at a competitive disadvantage in world markets because foreign rivals pay lower taxes in their home countries. The article also notes that U.S. companies that create jobs abroad also create jobs in America. In other words, successful, growing firms tend to expand in all markets. A lower corporate tax rates, needless to say, is one of the keys to a pro-growth environment for American companies. Ireland is a good example of a nation that reaps large benefits from a low corporate tax: Matthew Slaughter, a Dartmouth College economics professor who worked in the Bush administration, says that historically, multinationals
that have added jobs at their foreign affiliates also have expanded hiring in the USA. As U.S.-owned foreign units prosper, their corporate parents
must add accountants, marketing specialists and other managers at their U.S. headquarters. In 2004, Slaughter released a study, based on employment data for the decade ending in 2001, which concluded that
U.S. multinationals created two jobs in the USA for every job they added abroad. That comforting conclusion broke down in more recent years. From 1991 through 2005, multinationals created almost as many jobs
abroad (3.6 million) as they added at home (3.8 million). ...Evidence of legal tax-shifting can be seen in government statistics. In 2005, U.S.
multinationals' units in Ireland, which levies a corporate tax of just 12.5%, reported profits that were twice as large as the profits of all U.S. affiliates in Germany, France and Italy combined.
Tuesday, March 25, 2008 ~ 9:47 a.m., Dan Mitchell Wrote: Utterly missing in this election season is a serious focus on limited or constitutional government. The Democrats, generally speaking, want more
government, not less, so their neglect of the issue is to be expected. But the Republican dereliction is more troubling. It represents a falling away from
the standards of Ronald Reagan's conservatism-a decline already reflected in the "compassionate conservatism" of George W. Bush. ...Modern
liberals would have us believe that big government was necessitated by new circumstances-the Industrial Revolution, the joint-stock corporation, technological and economic developments, etc. ...The claim of
inevitability, however, has been exploded by, among others, Robert Higgs, in a very good book called Crisis and Leviathan. What that book shows is
that America's state apparatus didn't grow uniformly in response to the new conditions of the 20th century, but rather in fits and starts, usually in
response to political or economic emergencies. Return, for a moment, to the GDP figure as a rough indicator of the size of government: It rises
dramatically in World War One, again in response to the Depression and the New Deal, again in World War Two, again in the early part of the Cold
War, and then again with the Great Society in the mid-1960s. Between these sudden jumps we see almost flat lines. In fact, there is a slight
decrease in government after each of these periods, but the new level is always higher than the previous one-something Higgs calls the "ratchet
effect." The importance of this fact-that growth in government has been the result of political choices in response to changing political conditions-is that it disproves the notion that big government was
somehow fated.
Monday, March 24, 2008 ~ 4:06 p.m., Dan Mitchell Wrote: Construction on the Visitors Center began in 2001. The entire project was supposed to be finished in 2004, opening in time for the Presidential
inauguration in January 2005. Construction was divided into two phases. The contract for the first phase of construction was worth $100 million. It
was not finished until 2005. The second phase is now in progress, four years after the original scheduled date of completion for the entire project.
The total cost for the project originally was to be about $265 million. It already is up to $554 million and counting. The new grand opening was
supposed to be September 2008 but now the Government Accountability Office is reporting it may be done in November with a final cost of $621
million. Of course this does not account for further "unexpected" delays, which the Associated Press is reporting are plausible. ...The National
Museum of American History, one of the most popular Smithsonian Museums in Washington, D.C., is undergoing the same problem. The Museum closed September 5, 2006 for major architectural renovations.
Like the CVC, it is supposed to open in September 2008 but it also is highly unlikely to open on schedule. ...If the renovation lasts months or
years beyond the scheduled date of completion there is a high probability that the price tag will rise beyond the $45 million already allocated. The
cost of such projects, particularly the CVC, is incredible, as is the ineptitude of Federal construction contracts. New apartment and office
buildings are going up all over D.C. and most are finished in a matter of months. Yet it has taken the Federal Government seven years and counting to build the CVC. It also is more than $350 million over budget.
No private company could afford such an outrageous expense. Because politicians and bureaucrats are able to allocate other people's money with
few restrictions or a sense of accountability, keeping costs to a minimum and ensuring that projects finish on time is not a priority.
Sunday, March 23, 2008 ~ 2:22 p.m., Dan Mitchell Wrote: We've all seen or heard about them. Perhaps they are friends or family members who have demonstrated financial irresponsibility: a college
student who has a budget and quickly exceeds it on wild partying; a cousin or best friend who asks for a "loan" and then never pays it back; people
whose credit cards are maxed out and they can't afford the finance charges. Government behaves similarly, playing any or all of those roles.
It now resembles an irresponsible parent, spending the children's wages and inheritance as if there were no tomorrow. Republicans lost the spending issue - and their congressional majority - because they behaved
like overspending Democrats. Now Democrats in the House are going the Republicans one better. . . . The spending virus has so permeated Congress that members won't even go on the wagon during an election
year. The bipartisan DeMint-McCaskill budget amendment that would have required a one-year moratorium on earmarks was soundly defeated 71-29. This is how little respect most members have for those whose
money they take through taxation, spending it like frat boys on a weekend bender. The Washington Examiner newspaper determined that the longer
someone serves in the Senate, the more likely they are to favor spending more money and to oppose any suggestion that they stop. According to the
Examiner, "the average seniority of senators voting for DeMint-McCaskill was 12 years, while opponents averaged 22 years in the Senate."
Saturday, March 22, 2008 ~ 8:10 p.m., Dan Mitchell Wrote: The Federal Reserve recently announced new measures to tackle the current financial crisis. They include helping J.P. Morgan Chase acquire
Bear Stearns, lowering the discount rate and offering short-term loans to about 20 investment banks-- and they came only days after the government said it would inject $200 billion into the financial system.
These are the latest steps taken by the U.S. government to solve a problem created in large measure by the government itself. We have seen this
movie before. As a reaction to the bursting of the dot-com and telecom bubbles at the end of the 1990s, the Fed inflated the currency through the
actions of its Open Market Committee. By June 2003, the policy of easy money was reflected in the drop of the federal funds rate to 1 percent. The
loose monetary policy was maintained, with variations, for almost five years. The result was a fiction economy in which millions of people borrowed and consumed too much. . . .The history of the boom-bust cycle
since the creation of the Federal Reserve in 1913 has been the deliberate increase of the money supply, the misallocation of resources due to the
perverse incentives of inflation, and eventually the bursting of the bubble. . . .Nobel laureate Friedrich Hayek, whose free-market ideas triumphed with the collapse of the Soviet Union, frequently denounced the
connection between central banks and the boom-bust cycle. In an interview conducted in 1977, he said, "If it were not for government interference with the monetary system, we would have no industrial
fluctuations and no periods of depression. . . The mistake is the creation of a semi-monopoly where the basic money is controlled by the government. . . . In many countries, money used to be in private hands
(think House of Rothschild). The fact that money was issued by private institutions in part accounts for the extraordinary prosperity that Argentina enjoyed in the 19th century. In a system of free banking,
institutions that do not protect the value of the currency simply collapse--and their collapse does not wreck the entire economy. Under a rule of law that punishes fraud and counterfeiting, the risk of failure
without bailouts is enough to guarantee a more stable system. . . . Advocating the abolition of the Federal Reserve, an institution people take
for granted, seems too radical for most people, who think financial crises are the result of too little, not too much, government regulation. So the
knee-jerk reaction, as exemplified in so many editorials and statements on the campaign trail nowadays, is to scream in favor of government intervention--the reason why bank rescues and the pumping of new money
is the government's sacrosanct policy.
Friday, March 21, 2008 ~ 11:56 a.m., Dan Mitchell Wrote: The Swiss finance minister has warned that anyone challenging the Swiss banking secrecy laws will break their teeth on them. Hans Rudolf Merz
used an emergency debate in Switzerland's Parliament on Wednesday to defend the country's competitive position as a business location. ... Merz claimed that Switzerland's competitive position as an international
business base of choice was at risk and called it vital that the position was not only held but if possible improved. ... "The sovereignty of each state,
however, - in particular with reference to its tax legislation - has to be respected," Merz said. He mounted a strong defence of Switzerland's right
to provide a well-regulated financial system with "an internationally competitive tax burden". ... Merz added that Switzerland's political and
economic stability, modern financial infrastructure and highly qualified workforce also contributed to its attractiveness, but that the banking
secrecy was not just crucial to the country's international financial position but central to the country's value system.
Friday, March 21, 2008 ~ 11:21 a.m., Dan Mitchell Wrote: . . . the finance minister, Peer Steinbrück, has accused "greedy" Germans of costing the state "hundreds of millions" of euros. Threatening financial
sanctions against Liechtenstein, Steinbrück has said that "we have to put on the screws," while finance ministry spokesman Thorsten Albig has said
that "taxing all transfers at the source is an option." Kurt Beck, the leader of Germany's center-left Social Democratic Party, has said that
Liechtenstein, a tiny city state of 35,000 people, is guilty of "robber baron" policies, while Chancellor Angela Merkel has pressured
Liechtenstein to change its banking secrecy laws, saying on February 20 that "the clock is ticking." German political leaders are drawing all the
wrong lessons from this scandal: the problem lies not with Liechtenstein and its low rate of taxation, but with Germany and its Byzantine tax system that drives out productive capital and incites abuse among
otherwise law-abiding citizens. Indeed, a cumbersome and grossly inefficient tax system-one with high rates and thousands of loopholes-actually increases the odds that people will cheat. So bad is the
German tax system-with a top rate of about 47 percent (and higher in some cases) and incomprehensible rules-that Dieter Ondracek, head of the German Tax Union, told the German broadcaster Deutsche Wellethat
Germany loses about 30 billion euros ($44 billion) each year due to tax evasion. ... Germany should eliminate the root cause of its current tax
predicament. It should do something guaranteed to greatly increase tax compliance, raise tax revenues, and boost economic growth-namely,
simplify the tax code and create a flat tax... Germany's political elite has vowed to punish tax dodgers harshly and force Europe's tax havens to
change their rules. Yet no amount of punitive measures can make people comply with a tax code that is fundamentally flawed.
Friday, March 21, 2008 ~ 10:50 a.m., Dan Mitchell Wrote: Currently, the average combined federal and state corporate tax rate in the U.S. is 39.3 percent, second among OECD countries to Japan's
combined rate of 39.5 percent. ... Many states impose state corporate income taxes at rates above the national average of 6.6 percent. Iowa, for
example, imposes the highest corporate tax rate of 12 percent, followed by Pennsylvania's 9.99 percent rate and Minnesota's 9.8 percent rate. When
added to the federal rate, these states tax their businesses at rates far in excess of all other OECD countries. When compared to other OECD
countries: 25 U.S. states have a combined corporate tax rate higher than top-ranked Japan. 35 states have a combined corporate tax rate higher
than third-ranked Germany. 46 states have a combined corporate tax rate higher than fourth-ranked Canada. All 50 states have a combined
corporate tax rate higher than fifth-ranked France. Thus, if lawmakers are serious about making the U.S. corporate tax system more competitive
internationally, corporate tax rates will have to be reduced both in Washington and in state capitals. ... In just the past two months, at least
six countries have announced plans to cut their corporate tax rates: Canada, Hong Kong, Korea, South Africa, Spain and Taiwan. In an interview in the Korea Times, Choi Kyung-hwan, a member of the new
Administration's Presidential Transition Committee, said, "The corporate income tax reduction is not a matter of choice, but a matter of life and
death for Korea in an increasingly globalized business environment.''
Thursday, March 20, 2008 ~ 8:41 p.m., Dan Mitchell Wrote: Luxembourg will not dilute its bank secrecy rules and is against hasty changes to European Union law that taxes foreign savings, the Grand
Duchy's Treasury Minister Luc Frieden said. ...The 2005 rules only tax cash deposits while trusts, stocks and bonds are outside their scope, but
Luxembourg won't be rushed. "I'm amazed that some people want to change this directive even before having had any evaluation about how
the current system works," Frieden told the Reuters Funds Summit. The current directive took years to agree as unanimity among all the bloc's
members is needed in tax matters. ..."I think we should not change things again that work well," Frieden said. The Grand Duchy's Central Bank
Governor, Yves Mersch, said the privacy laws were widely supported in Luxembourg and the EU should focus instead on tackling cross-border
abuses. ..."Bank secrecy is for me part of our social consensus because confidentiality in a small country is extremely important for the
maintenance of democratic rule. ..."The Luxembourg government sees no need and will not come up with new proposals in this context and will not
change the bank confidentiality rules as they have proven to be in the interest of a good working system in Europe," Frieden. ...Frieden was
critical of how the Alpine state [Liechtenstein] has been treated. "I expect all countries to be treated with respect, independent of their size. I feel
that is the case with Luxembourg and would like it to be the case vis-a-vis other countries even if they are smaller than Luxembourg," he said.
Wednesday, March 19, 2008 ~ 6:23 p.m., Dan Mitchell Wrote: Under a bill passed in November, such tech services as Web design, computer repair and programming would all get hit with a 6% tax
statewide. If the tax isn't repealed before it takes effect in July, it would be one of the most burdensome regimes in the nation on the growing
industry. ...Proponents say the $200 million in revenue the tax is projected to garner is indispensable when Maryland is already facing a budget
shortfall. Senate President Mike Miller insists that "We can't afford to cede to businesses $200 million in revenue without an alternative." Wait
until they see what happens to revenue when business begins to leave the state. Many Maryland companies and small businesses say they could be
forced to relocate if the tax isn't repealed. And nearby states are courting potential departees: 70 Maryland computer services firms got a letter last
month from Delaware economic director Judy McKinney-Cherry to encourage companies to "include Delaware when you are contemplating an expansion." Other states have tried similar tax experiments -- with
dismal results. In Pennsylvania, a 6% computer services tax was repealed after it handicapped the state's ability to compete with other states for
business. Ditto Connecticut, which enacted a 6% computer consulting tax in the late 1980s, only to walk it back in 1997 as the importance of the
computer industry became apparent, and business associations revolted.
Tuesday, March 18, 2008 ~ 4:44 p.m., Dan Mitchell Wrote: ...farmers are about to score the most lavish subsidies in American history. ...Corn producers will get subsidies of $10.5 billion over five years, which
is on top of the deal of a lifetime these farmers were handed when Congress expanded ethanol subsidies. ...There's also a new $5.1 billion
emergency "trust fund" for farmers, with almost all the money directed to Georgia, Minnesota, North Dakota and Texas. ...The giveaways are so
large that the House version is the first farm bill ever that would raise taxes to pay for it -- by $14 billion, mostly on the U.S. subsidiaries of
foreign companies. This only discourages new foreign investment in the U.S. at a time when the weak dollar is already chasing it away. ...Congress has also spurned the Bush Administration's sensible proposal
to establish a $200,000 income ceiling in order to receive subsidies. Instead, full-time farmers will be able to earn up to $1 million per farm ($2
million for a married couple) and still be eligible for a USDA handout. That means you can be in the top 0.2% in income in the U.S. and still get a
subsidy check from Uncle Sam. Yet Robert Goodlatte of Virginia, the Republican who helped craft the House bill, says with a straight face that
the bill is "real reform and a real safety net for the farmer." Yes, thank heavens for that millionaire safety net.
Monday, March 17, 2008 ~ 3:27 p.m., Dan Mitchell Wrote: Internet search giant Yahoo is moving its European headquarters from London's Shaftsbury Avenue to Geneva after being driven away by British
taxes. Yahoo becomes the latest of a host of multinational businesses being lured away from the UK by rival countries with lower corporation taxes.
...Video games maker Electronic Arts moved its engineering HQ from London to Zurich. ...Even at the new 28% rate, Britain is still well above
other countries including Switzerland, where the national average rate is nearer 20%. The Swiss have succeeded in luring a host of big companies in
recent years. More are expected to follow in the wake of Darling's new rules on non-doms. Swiss councils have been directly approaching wealthy
London non-doms running hedge funds and other investment businesses to highlight the benefits of moving to the Alpine haven. Procter & Gamble
and Colgate-Palmolive-the giant US companies, both elected to site their European HQs in Switzerland. Kraft recently upped sticks from offices near Kew. ...Holland, with its corporate tax rate of nearer 25%, has
attracted Shell to locate its global HQ there, as well as Starbucks' European base. ...Kraft Foods: taste for Zurich The foods giant upped sticks from west London, citing taxes... Experian: moved to Dublin When
Experian split from GUS, expectations were that it would choose a London head office. Instead it opted for low-tax Ireland. ...Catlin: chose Bermuda The Lloyd's insurer opted to move its domicile from London to
Bermuda, citing the 11% tax rate there and lack of red tape. Hiscox: off to Bermuda too Hiscox, Catlin's bigger rival, followed suit.
Sunday, March 16, 2008 ~ 5:48 p.m., Dan Mitchell Wrote: The UK Government has announced that non-domiciles will have to pay a flat tax rate of $ US 60,000 a year on their foreign assets. For the
extremely wealthy, like Russian billionaire Roman Abramovich, it will be a petty change, but for many foreigners the new tax will be a burden.
...Many say the levy is unfair and as a result some of them will leave the country in favour of other tax heavens. This, in turn, will have a knock-on
effect on the economy. It's doubtful the tax refugees will include the likes of Britain's wealthiest man Lakshmi Mittal or Chelsea FC's owner Roman
Abramovich. For them - 30,000 pounds a year is pocket change. However, for those who earn around 200,000 pounds a year it does make a difference. ...The levy is set to be introduced on the April 5, but some
businessmen and entrepreneurs are already leaving.
Saturday, March 15, 2008 ~ 10:02 a.m., Dan Mitchell Wrote: A proposed law currently making its way through the Florida legislature might help you with what can be an embarrassing problem. Here's the
bottom line, the bill would be a mandate that all eating establishment must have enough toilet paper when you go into the restroom. The only problem
is the bill doesn't dictate how much toilet paper is "enough." State Senator Victor Crist, a Republican from Tampa, felt the problem was so important,
a law must be passed to protect the backsides of anyone in Florida. The measure will also try to regulate the cleanliness of restrooms in eating establishments.
Friday, March 14, 2008 ~ 12:51 p.m., Dan Mitchell Wrote: Mr. Obama has recently veered sharply left. He now proposes to solve the looming Social Security shortfall exclusively with higher taxes.
...Currently, all wages below about $100,000 are subject to a 12.4% Social Security payroll tax. But all wages above that amount are not subject to the tax. Mr. Obama wants to eliminate the cap, but, in a
concession to taxpayers, exempt wages between $100,000 and $200,000. ...Mr. Obama's plan would keep Social Security in the black for only three
additional years. Under his proposal, annual deficits would hit in 2020, instead of 2017. By the 2030s the system would still run an annual deficit
exceeding $150 billion. Mr. Obama's modest improvements to Social Security's financing come at a steep cost. ...The top marginal federal tax rates would effectively increase to 50.3% from 37.9%, equivalent to
repealing the Bush income tax cuts almost three times over. If one accounts for behavioral responses, even the modest budgetary improvements from Mr. Obama's plan are likely to be overstated. If
employers reduce wages to cover their increased payroll-tax liabilities, these wages would no longer be subject to state or federal income taxes, or Medicare taxes. A 2006 study by Harvard economist and Obama
adviser Jeffrey Liebman concluded that roughly 20% of revenue increases from raising the tax cap would be offset by declining non-Social Security taxes. Assuming modest negative behavioral responses, Mr. Liebman
projected an additional 30% reduction in net revenues, leaving barely half the intended revenue intact. Mr. Obama's plan would also dramatically
raise incentives for tax evasion, further degrading revenue gains. Many high-earning individuals evade the Medicare payroll tax by setting up "S
Corporations," paying themselves in untaxed dividends rather than taxable wages. John Edwards avoided $590,000 in Medicare taxes this way in the 1990s. ...The U.S. already collects far more Social Security
taxes from high earners than other countries do. Social Security taxes here are currently capped at about three times the national average wage -- far
above other developed countries. In Canada and France payroll taxes are levied only up to the average wage. In the United Kingdom, taxes stop at 1.15 times the average wage; in Germany and Japan at 1.5 times.
Obama also wants to let the Bush tax cuts expire, which means the top tax rate would rise even farther - to more than 55 percent. But the bad news may get even worse. It is unclear how Obama will "fix" the alternative minimum tax. If his Social Security plan is any indication, he may propose to raise the top rate even further. What would all this mean? Simply stated, European-style tax rates will mean European-style stagnation.
Thursday, March 13, 2008 ~ 4:34 p.m., Dan Mitchell Wrote: . . . a recent New York Times editorial has returned to a familiar theme among those on the left, on both sides of the Atlantic, with its lament that
"incarceration rates have continued to rise while crime rates have fallen." . . . Back in 1997, New York Times writer Fox Butterfield expressed the
same lament under the headline, "Crime Keeps on Falling, But Prisons Keep on Filling." Then, as now, liberals seemed to find it puzzling that
crime rates go down when more criminals are put behind bars. Nor is it surprising that the left uses an old and irrelevant comparison -- between
the cost of keeping a criminal behind bars versus the cost of higher education. . . . The relevant comparison would be between the cost of
keeping a criminal behind bars and the cost of letting him loose in society. But neither the New York Times nor others on the left show any interest in
that comparison. In Britain, the total cost of the prison system per year was found to be £1.9 billion, while the financial cost alone of the crimes
committed per year by criminals was estimated at £60 billion. . . . A study of the treatment of criminals in Britain -- "A Land Fit for Criminals" by
David Fraser -- has several chapters on the games that are played with statistics, in order to make "alternatives to incarceration" programs look
successful, even when they are failing abysmally, with tragic results for the public.
Thursday, March 13, 2008 ~ 2:12 p.m., Dan Mitchell Wrote: . . . the Census Bureau tells us is that the share of the pie consumed by the poor has been shrinking (to 3.4% in 2006 from 4.1% in 1970). But the
"pie" has grown enormously. This year's real GDP of $14 trillion is three times that of 1970. So the absolute size of the slice received by the bottom
20% has increased to $476 billion from $181 billion. Allowing for population growth shows that the average income of people at the bottom of the income distribution has risen 36%. They're not rich, but they're
certainly not poorer. In reality, economic growth has raised incomes across the board. . . . the average household size has shrunk to 2.57
persons from 3.14 -- a drop of 18%. The meaning? Even a "stagnant" average household income implies a higher standard of living for the
average household member. Last year, the Census Bureau published a new set of income statistics that adjusted for changing household size and
composition. In a single year (2006), this "equivalence-adjusted" computation increased the income share of the poor by 8% and reduced
the standard measure of inequality (Gini coefficient) by 4%. . . . When you look at the really big picture, it's apparent that living standards are rising
across the entire spectrum of incomes. Just since 2000, GDP has risen by 18% while the population has grown by 6%. So per capita incomes have
clearly been rising. The growth of per capita income since 1980 or 1970 has simply been spectacular. . . . Some people would have you believe that
all of this added income was funneled to the rich. But the math doesn't work out. The increase in nominal GDP since 2000 amounts to over $4
trillion annually. If you assume that all that money went to the wealthiest 10% of U.S. households, that bonanza would come to a whopping $350,000 per household. Yet according to the Census Bureau, the top 10%
of households has an average income of $200,000 or so. The implied bonanza is so absurd that the notion that only the rich have gained from the economic growth can be dismissed out of hand.
Wednesday, March 12, 2008 ~ 11:57 a.m., Dan Mitchell Wrote: All politicians campaign on the promise to cut federal spending by identifying hitherto unfound waste, fraud and corruption. None of them
ever do so in a meaningful way. ...That is the first thing you need to know. The next thing is that the Republican Party (my party and yours) has for
the last 30 years or so been operating under a demonstrably false and misleading premise: that tax cuts pay for themselves by generating so
much economic growth that they replace the sums lost by tax cutting. ...In fact, tax cuts lower federal revenue and generate federal deficits. ...What
to do? ...You can propose still more tax cuts... Or, you can raise taxes. But whom to tax? ...The first step toward putting our house in order, once we
are past the seemingly looming recession, is much higher taxes on the truly rich and serious enforcement to prevent offshore tax evasion. ...we can have some integrity and levy taxes equal to what we spend. Stein's analysis is horribly wrong. First, he asserts that government spending cannot be reduced and that this means either runaway deficits or higher taxes. While it would be nice if government outlays actually were reduced, a more modest measure of success is whether the private economy is growing faster than the government. If that happens, deficits will fall since tax revenues generally increase at least as fast as nominal GDP. This modest level of fiscal discipline is not an impossible task, as former Cato expert and CF&P Board member Veronique de Rugy has shown (http://www.aei.org/publications/filter.all,pubID.20675/pub_detail.asp and http://www.aei.org/publications/filter.all,pubID.23352/pub_detail.asp). Before urging Senator McCain to raise taxes, perhaps Stein should be arguing that the presumptive Republican nominee merely hold the growth of government to, say, the rate of inflation. Stein is equally misguided on tax policy. He correctly notes that many Republicans have wrongly claimed that all "tax cuts pay for themselves." Indeed, that is the same point I made in the Center for Freedom and Prosperity's first video on the Laffer Curve (http://www.youtube.com/watch?v=fIqyCpCPrvU). But he fails to realize that there are some tax policies that have very significant Laffer-Curve effects, and the second video in the series (http://www.youtube.com/watch?v=YsB_rnzBA08) specifically shows that Stein's proposal of "much higher tax rates" on the rich almost surely would backfire.
Wednesday, March 12, 2008 ~ 10:04 p.m., Dan Mitchell Wrote: Ethanol contains water that...can cause major damage to automobile engines not specifically designed to burn ethanol. The water content of
ethanol also risks pipeline corrosion and thus must be shipped by truck, rail car or barge. These shipping methods are far more expensive than
pipelines. Ethanol is 20% to 30% less efficient than gasoline, making it more expensive per highway mile. It takes 450 pounds of corn to produce
the ethanol to fill one SUV tank. That's enough corn to feed one person for a year. Plus, it takes more than one gallon of fossil fuel - oil and natural
gas - to produce one gallon of ethanol. After all, corn must be grown, fertilized, harvested and trucked to ethanol producers - all of which are
fuel-using activities. And, it takes 1,700 gallons of water to produce one gallon of ethanol. ...Ethanol is so costly that it wouldn't make it in a free
market. That's why Congress has enacted major ethanol subsidies, about $1.05 to $1.38 a gallon, which is no less than a tax on consumers. In fact,
there's a double tax - one in the form of ethanol subsidies and another in the form of handouts to corn farmers to the tune of $9.5 billion in 2005
alone. There's something else wrong with this picture. If Congress and President Bush say we need less reliance on oil and greater use of
renewable fuels, then why would Congress impose a stiff tariff, 54 cents a gallon, on ethanol from Brazil? ...Ethanol production has driven up the
prices of corn-fed livestock - and thus prices of beef, chicken and dairy products - as well as prices of products made from corn, such as cereals.
As a result of higher demand for corn, other grain prices, such as soybean and wheat, have risen dramatically. ...The ethanol hoax is a good example
of a problem economists refer to as narrow, well-defined benefits vs. widely dispersed costs. It pays the ethanol lobby to organize and collect
money to grease the palms of politicians willing to do their bidding because there's a large benefit for them - higher wages and profits.
Tuesday, March 11, 2008 ~ 9:54 p.m., Dan Mitchell Wrote: The State Assembly Majority announced yesterday that it's considering a dramatic increase in state personal-income taxes that will come down
hardest on New York City residents and the key industries that are the engine for economic growth across the state. ...the measure would hike personal-income taxes 1 percent on households earning more than
$250,000, 2 percent for those over $500,000 and 3 percent for those over $1 million. This translates into a combined city-state income tax of 11.5
percent to 13.5 percent. Add in federal taxes, and the burden approaches 50 percent. Taxes in New York City already are nearly 50 percent more
than in any other US city. ...This approach is also a money-loser for the state. Gov. Arnold Schwarzenegger last week said that half of California's
$14 billion deficit is due to people and business leaving the Golden State because of high taxes. If the Assembly measure passes, many of the city's
highest earners and biggest taxpayers -- who all enjoy global mobility -- are likely to pack up and leave. It's a great economic development strategy -- for New Jersey, Connecticut, Florida and London. States such as Maryland and California already have demonstrated the damage caused by high state tax rates, but New York politicians apparently are oblivious to the real-world impact of such policies or they put class-warfare politics above every other relevant consideration.
Monday, March 10, 2008 ~ 12:30 p.m., Dan Mitchell Wrote: Berlin is spearheading efforts to cut off tax havens as investigations continue into large-scale tax evasion on the part of hundreds of wealthy
Germans. But it found its quest blocked by Vienna at a meeting of EU finance minister in Brussels on Tuesday, March 4. ..."Bank secrecy is not
on the table," Austrian Finance Minister Wilhelm Molterer stressed after the meeting. Austrian Finance Minister Wilhelm Molterer said his country
would veto the attempt to water down bank secrecy regulations unless "other European countries," followed suit. He was referring to
Switzerland, Liechtenstein, Andorra, San Marino and Monaco, all of which profit from strict bank secrecy laws. EU members Austria, Belgium and
Luxembourg had opted out of the 2005 legislation which allows foreign bank account holders to remain anonymous.
Monday, March 10, 2008 ~ 11:23 a.m., Dan Mitchell Wrote: Even a cursory look at comparative economic indicators shows that the adoption of a French- or German-style labor regime reduces workers' job
options and diminishes wages while bogging down economies and discouraging enterprise. In labor productivity, the United States has not only been the most productive country in the world, but has also grown in
productivity at a greater rate than other developed nations. In 2006, U.S. productivity per employed person was nearly $65,000 compared to $49,000 for France and $43,000 in Germany. Regarding unemployment,
the United State's highest rate - 6.1% in 1994 - doesn't come close to the lowest unemployment rate for France, which was 8.4% in 2001. For the past 15 years, the U.S. average unemployment rate was 5.1% while
France's was double that at 10%. In the U.S., workers stand a better chance of getting another job and sooner. Less than 20% of those unemployed have been looking for a job for six months or longer and only
about 10% were looking for more than a year. In France in recent years, nearly 70% of the unemployed have been out of work for more than six months and nearly 45% for more than a year.
Sunday, March 9, 2008 ~ 7:22 p.m., Dan Mitchell Wrote: There's no doubt times are tough in Ohio. The state has lost 200,000 manufacturing jobs since 2000, home foreclosures are soaring, and real
family income is lower now than in 2000. Meanwhile, the Texas economy has boomed since 2004, with nearly twice the rate of new job creation as
the rest of the nation. ….Ohio Governor Ted Strickland, a Democrat who supports Mrs. Clinton, blames his state's problems on President Bush. But
Ohio's economy has been struggling for years, and most of its wounds are self-inflicted. Ohio now ranks 47th out of 50 in economic competitiveness,
according to the American Legislative Exchange Council. Ohio politicians deplore plant closings even as they impose the third highest corporate
income tax in the country (10.5%) and the sixth highest personal income tax (8.87%). A common joke is that Ohio lays out the red carpet for
companies -- when they leave the state. By contrast, Texas has no income tax, a huge competitive advantage. …Texas embraces free trade, keeps
taxes low, doesn't impose unions on business and has tooled itself for 21st century global competition. Ohioans may not like to hear this, but for any
company considering where to locate a new plant or move an existing one, the choice between Ohio and Texas isn't even a close call.
Saturday, March 8, 2008 ~ 8:49 p.m., Eugene Slaven Wrote: Sen. Obama: You have said that you will require all parents to have health insurance for their children. What will you do to enforce this law?...In
Texas, 850,000 children are eligible but not enrolled. The available programs provide check-ups, prescription drugs, hospital care, and dental
care. The state runs radio ads, hands out brochures in several languages, and partners with community organizations to inform parents about these
programs, but parents still fail to act…- Sen. Clinton: a question about young adults. They think of themselves as invincible and are not apt to buy
insurance. Your "mandate" would force them to do so, and more than that, to pay the same premium as middle aged people whose health care
needs generally are much greater. You defend the one-price rule as "shared responsibility," but isn't it an unjust, hidden tax on the younger
generation?...Today in Austin, Texas a 25-year-old man can buy a $1,000 deductible policy for $70, according to e-healthinsurance.com. A 55-year-old man pays $270 for the same policy. In nearly all states, young
adults currently get price breaks, and for good reason. They need, on average, about $1,500 a year in health care. Your health plan bars insurers from giving these price breaks to the young…- Sen. Obama: You
have pledged to make health insurance "affordable." Texas lawmakers have made insurance less affordable by requiring that every plan include
in vitro fertilization, acupuncture, marriage counseling and some 50 other features. This is like passing a law saying that the only car you're
permitted to buy is a fully loaded luxury sedan…Would you allow Texans (and all of us who live in states with similarly costly insurance requirements) to shop for cheaper insurance outside our own state?
Friday, March 7, 2008 ~ 2:47 p.m., Dan Mitchell Wrote: German finance minister Peer Steinbrueck, speaking at the start of EU talks, said he expects better Europe-wide coordination to curb the
effectiveness of tax havens abroad amid German, French and British probes looking into nationals that hid money in Liechtenstein. He said EU nations also had to support efforts by the European Commission to
negotiate new agreements with tax havens to close international loopholes that make it possible for Europeans to hide money abroad. "We have to
support the Commission in its negotiations with tax havens like Singapore, Macau and Hong Kong. It cannot be that some European countries through their own agreements undermine the Commission negotiations,"
Steinbrueck told reporters. … Slovenian Finance Minister Andrej Bajuk, who was chairing Tuesday's meeting as current EU president acknowledged it would be difficult to bring very differing views on tax
policy in agreement to get tougher with tax havens.
Friday, March 7, 2008 ~ 2:02 p.m., Eugene Slaven Wrote: In the new pessimistic indictment, the home-mortgage meltdown has not occurred because too many speculative buyers were hoping to flip houses
for quick profits. It had nothing to do with misguided attempts of government and lending institutions to put first-time buyers in homes through zero-down payments, interest-only loans, and subprime but
adjustable mortgage rates — as part of liberal efforts to increase home-ownership rates…Likewise, we're told that students are failing to graduate from college because there are too few government-guaranteed
student loans. We don't hear that thousands enter public universities without basic reading and mathematical skills — or that their college problems might be due in part to their own misplaced priorities in high
school, and in part to an educational system that is mostly therapeutic, offering fluffy courses and self-esteem training rather than rigorous math,
science, literature, and history classes. Nor is there ever mention of teachers' unions, the system of tenure, or a vapid, politically correct
curriculum, as explanations for why our students are not competitive in the global marketplace… Neither Obama nor Clinton suggests that the middle classes of America have more purchasing power and have
accumulated more consumer goods than any people in history. ...As Sens. Obama and Clinton try to outdo each other in blaming government for
our lack of individual responsibility and promising solutions by raising taxes to give us more government, they offer little change and less hope.
Thursday, March 6, 2008 ~ 3:00 p.m., Dan Mitchell Wrote: Under pressure from Germany, the European Commission will draw up new proposals this year that are likely to widen the scope of legislation on
tax evasion - and close a loophole under which trusts and some other savings escape the same controls as cash. …However the newest initiative
seems destined to re-ignite the long-running and bitter EU battle over banking secrecy. On Tuesday, Luxembourg, Belgium and Austria hinted that they would resist any moves to force them to provide information to
other tax authorities on the savings of nonresident investors. …Germany and Britain want Luxembourg, Belgium and Austria to agree to exchange information so that the EU can apply pressure to the non-European
jurisdictions to do the same. Broadly speaking, the tax also is only applied on interest earned on cash deposits, not dividends or the type of trusts that
were being used in Liechtenstein. During a meeting Tuesday, the German finance minister, Peer Steinbrück referred specifically to the "spectacular
case of tax fraud" emanating from Liechtenstein, according to one official who attended the closed-door discussion. …"German tax payers have
effectively been made fools of by high earners using the system to avoid paying tax," said Steinbrück, who described evasion as a "social and
moral issue," the official added. …"Tax paradises in practice become tax parasites," argued Anders Borg, the Swedish finance minister. …However
the EU is likely to be much more divided about banking secrecy. Jean-Claude Juncker, Luxembourg's premier and finance minister, made a
veiled threat at the Tuesday meeting to stall any potential changes. "I look forward to many years of fascinating, fundamental, discussion," Juncker
said, according to the official. …Kovacs also said that he would escalate efforts to persuade other jurisdictions to abide by the terms of the deal, including Hong Kong, Macao and Singapore.
Thursday, March 6, 2008 ~ 2:44 p.m., Dan Mitchell Wrote: Over the past few weeks, [Angela Merkel] has been leading an all-out assault on her tiny neighbor Liechtenstein. Its crime? Not cooperating in
Germany's investigation of alleged tax evaders. The tussle between Germany and Liechtenstein is just the overture to a wider battle between the big European nations and the tiny low-tax principalities. Next up:
Monaco and Andorra. And yet, the attacks are completely unfair. Places such as Monaco and Liechtenstein have a right to keep banking secrecy and shouldn't be forced to act as tax enforcers for other countries.
Germany should spend more time worrying about why so much wealth is fleeing its borders -- and less time picking on places a mere fraction of
their size. … You can see why the tax havens are an irritation for the big European governments. In a world of increasing mobility, and better
communication links, it has become easier for the wealthy to shift their base to a more tax-friendly environment. Half the British corporate
establishment seems to be based in Monaco these days. Plenty of Germans appear to be storing money away in Liechtenstein. … Germany has a right
to set whatever laws it likes for people living in Germany. If it wants to ban its citizens from holding accounts -- or setting up trusts and
foundations -- in other countries, it can do so (and deal with the flight of people and capital). But it can't harass other countries into changing their
practices. If people invest in low-tax countries or in legal structures such as foundations, their tax liability is their business, not the responsibility of
the host nation. For most legitimate investors, low-tax principalities provide a useful alternative to the high-tax, big-government consensus
that suffocates much of Europe. Lastly, it is ludicrous to say that this kind of tax ``competition'' is unfair. All competition is unfair. These are small
nations entitled to make their living any way they want to. It is no more unfair than Germany's proficiency at making cars, or the French aptitude
at making wine. Should the Germans shut down their luxury-car industry because it makes life difficult for auto workers in the rest of Europe? Of
course not. So why should Liechtenstein close its financial-services industry? Naturally, tax havens should make sure they aren't harboring
assets for criminals or terrorists. And yet, that is a red herring. Mounir el-Matassadeq, the only person to stand trial over the Sept. 11 terror
attacks in the U.S., operated out of Hamburg, not Liechtenstein. One of the suspected hijackers used accounts in Florida, not Monaco. In reality, terrorists use everyday banks because they attract less suspicion.
Thursday, March 6, 2008 ~ 12:41 p.m., Eugene Slaven Wrote: The presidential candidates have been repeatedly asked how they would "manage the economy." With the exception of Ron Paul, every candidate
has accepted the premise that this is something the president of the United States should do…Nonsense…Democrats act like the president is national
economic manager. Republicans pay lip service to free markets, tax and spending cuts, and less regulation -- before proposing big programs to
achieve "energy independence," job training and a cooler climate…John McCain says it's important for government to do something "to sustain
our leadership in manufacturing". Why? Manufacturing jobs are no better for America than other jobs. Some argue that they are worse. How many
parents want their children to work in factories rather than offices? Increasing service jobs in medical, financial and computer sectors while importing manufactured goods doesn't hurt America. It helps
America…McCain says, "It is government's job to help workers get the education and training they need for the new jobs". ...Barack Obama
talk[s] in similar terms…That hardly shows confidence in the free market, which, if allowed, would train and educate workers just fine. But it shows
misplaced confidence in the federal government, which, as journalist Jim Bovard has shown, has an unbelievably bad track record at doing it. The
endless list of programs, like the Manpower Development and Training Administration, Comprehensive Employment and Training Act, Job Training Partnership Act, STIP, BEST, YIEPP, YACC, SCSEP, HIRE, etc.,
wasted billions and "distorted people's lives and careers by making false promises, leading them to believe that a year or two in this or that
program was the key to the future. Federal training programs have tended to place people in low-paying jobs, if trainees got jobs at all."…government action more often than not interferes with the
productive activities that benefit everyone. When politicians propose regulations to fix some problem, they should ask if some earlier intervention created the problem and if the new regulations will make
things worse. The answer to both questions is usually yes…
Wednesday, March 5, 2008 ~ 12:54 p.m., Dan Mitchell Wrote: Americans might be surprised to learn that "Old" Europe is actually ahead of us in tackling many of the most vexing domestic policy
challenges. Without much fanfare, Sweden, Holland, and other countries known for their social-democratic welfare states have adopted innovative,
market-based reforms on issues such as pensions, transportation, and education. What's more, while U.S. politics remains paralyzed by partisanship, European parties on the left and the right have teamed up to
implement free-market policy ideas that are criticized by the American left as extreme. ...Take the case of Swedish school vouchers and pensions.
School vouchers were enacted by a conservative-led government in 1992. Initially, every Swedish student had the option of using a private school
voucher equivalent to 85 percent of per-pupil spending at the local public school. When the Social Democrats took power in 1994, they could have
repealed this law. Instead, they chose to increase the amount of the voucher to 100 percent of public school expenditures-but they forbade private schools from charging tuition on top of the voucher amount. This
compromise fused the conservative goal of full public funding for educational choice with the socialist goal of equal spending on all children. Swedish parties reached a similar compromise with regard to
pension reform. The talks that began in 1989 under a Social Democrat-led government continued through a period of conservative governance and were concluded during another stretch of Social Democratic rule. The
eventual reform included features that the left wanted, such as the continuation and full funding of a large, purely public pension regime,
along with features that the right demanded, such as a free-market system allowing all Swedes to invest a portion of their tax dollars in up to 800 different private sector pension plans.
Tuesday, March 4, 2008 ~ 12:45 p.m., Dan Mitchell Wrote: Obama's costly, dangerous and altogether bad bill (S. 2433), which could come up in the Senate any day, is called the Global Poverty Act. It would
commit U.S. taxpayers to spend 0.7% of our gross domestic product on foreign handouts, which is at least $30 billion over and above the exorbitant and wasted sums we already give away overseas. ...The scariest
phrase in the bill is "Millennium Development Goal." That refers to the declaration adopted by the United Nations Millennium Assembly and
Summit in 2000 (blessed by President Bill Clinton) that called for the "eradication of poverty" by "redistribution (of) wealth and land,"
cancellation of "the debts of developing countries" and "a fair distribution of the earth's resources" (from the U.S. to the rest of the world, of course).
...Empowering the United Nations to impose a direct international tax on Americans has been a U.N. goal ever since the 1995 Copenhagen Summit embraced the so-called Tobin Tax. By adopting the Millennium goals in
2000, the U.N. escalated its demands to impose international taxes. Specifically, the Millennium called for a "currency transfer tax," a "tax on
the rental value of land and natural resources," a "royalty on worldwide fossil energy projection - oil, natural gas, coal," "fees for the commercial
use of the oceans, fees for airplane use of the skies, fees for use of the electromagnetic spectrum, fees on foreign exchange transactions, and a
tax on the carbon content of fuels." It doesn't bother U.N. sycophants that most U.S. handouts go into the hands of corrupt dictators who hate us and
vote against us in the U.N., and that only 30% of our foreign aid ever reaches the poor.
Tuesday, March 4, 2008 ~ 12:00 p.m., Dan Mitchell Wrote: ...government policy itself played a big role in creating the bubble, on the bipartisan theory that homeownership begets "social stability." Like all
good things, when converted to a slogan, this idea became our road to perdition. Charles Kindleberger, the late MIT economist who wrote the
classic handbook "Manias, Panics, and Crashes," noted as early as 2002 an emerging housing bubble. In an interview with this newspaper, he
pointed a finger first of all at Fannie and Freddie, whose channeling of government subsidized capital into the housing market helped turn
housing into a leverageable, tradeable asset class. Result: The minting of new homes and home loans as speculative chits, which in turn has made housing more susceptible to the ups and downs of other speculative
markets. So here's the question: Do the people who would be bailed out want to be bailed out? Do they benefit from being bailed out? For starters, many homebuyers in the last two years were rank speculators,
taking out zero-down subprime loans, then walking away when the bet didn't pay off. A careful study of recent Massachusetts foreclosures by Federal Reserve Bank of Boston economists suggests that the key factor
wasn't an inability to pay, but an unwillingness to pay, once falling house prices made homeownership no longer a winning speculation. These people are already skipping out, because that's their best option.
...drawing out the correction prevents the market from finding a bottom. It prevents owners and shoppers alike from having confidence to judge
what houses are worth. It bails out lenders and investors who incautiously or fraudulently financed home purchases for speculative buyers, which can only encourage more of the same behavior in the future.
Monday, March 3, 2008 ~ 5:34 p.m., Dan Mitchell Wrote: Lobbying is constitutionally protected, but that doesn't mean we have to like it all. Let's agree to frown upon bad lobbying, such as getting a tax
break for a particular industry. Let's agree to welcome good lobbying -- the actual redress of a legitimate grievance -- such as protecting your
home from being turned to dust to make way for some urban development project. There is a defense of even bad lobbying. It goes like this: You
wouldn't need to be seeking advantage if the federal government had not appropriated for itself in the 20th century all kinds of powers, regulations,
intrusions and manipulations (often through the tax code) that had never been presumed in the 19th century and certainly never imagined by the
Founders. What appears to be rent-seeking is thus redress of a larger grievance -- insufferable government meddling in what had traditionally been considered an area of free enterprise.
Monday, March 3, 2008 ~ 4:16 p.m., Dan Mitchell Wrote: ...the best way to create long-term economic growth and stability and to stave off sluggishness is to reduce our corporate capital-gains rate, lower
tax rates on entrepreneurs and give American business the fuel to create and retain jobs. ...Currently, the American corporate capital-gains tax
rate is 35 percent, which happens to be the highest rate in its history, with the exception of 1940-41 owing to World War II. Some of our global competitors like Belgium, Hong Kong, Malaysia, New Zealand and
Singapore don't tax corporate capital gains. Other competitors offer far better capital-gains taxation than the United States. For instance, Japan and the United Kingdom have exemptions when capital gains are
reinvested. Even France and Germany passed a 95 percent exclusion. And, only the United States, Sweden and the Netherlands still tax corporate income at the corporate level and then again at the individual
level when shareholders receive dividends. The whopping 35 percent U.S. rate creates a "lock-in" effect of investment capital.
Sunday, March 2, 2008 ~ 12:36 p.m., Dan Mitchell Wrote: They are the new aristocrats of Europe - elected representatives who enjoy free holidays, dinners at Michelin-starred restaurants, an on-call
chauffeur service and generous second pensions funded entirely by the taxpayer. But MEPs who take full advantage of their well-funded allowances are often not breaking any rules technically, as a secret audit
hushed up by the European Parliament would show, were it ever to see the light of day. The shocking truth about the gilded life of some MEPs is that
their largesse is sanctioned mostly by the Brussels Establishment... One well-known trick involves the overseas travel allowance, an annual pot of
EUR3,500 (£2,650) a year for trips outside of Europe on EU business. It was too much to resist for the British MEP said to have enjoyed a relaxing
holiday in Thailand. ..."He went to Thailand for a holiday and made sure that he popped into the European Commission office in Bangkok for a
half-hour meeting. This was officially recorded and used to claim the whole trip on expenses."
Sunday, March 2, 2008 ~ 11:15 a.m., Dan Mitchell Wrote: ...laws that make it difficult or impossible to carry a concealed handgun do deter one group of people: law-abiding citizens who might have used a
gun to stop crime. Gun laws are laws against self-defense. Criminals have the initiative. They choose the time, place and manner of their crimes, and
they tend to make choices that maximize their own, not their victims', success. So criminals don't attack people they know are armed, and anyone thinking of committing mass murder is likely to be attracted to a
gun-free zone, such as schools and malls.
Saturday, March 1, 2008 ~ 4:50 p.m., Dan Mitchell Wrote: There is no official way to define a tax haven, but Liechtenstein fits into a class of countries that the governments of major economies have come to
dislike. They have low or no tax rates for corporations, they offer secret banking services and, in some cases... Through electronic banking and
credit card programs, they have begun to appeal to upper-middle-class professionals around the world. ...governments...might like to see an end
to tax havens - no more revenue escaping their treasuries.. But would that really be in their best interests? Perhaps not. One argument, a favorite of
advocates of small government, is that tax havens put pressure on other countries to keep tax rates low and regulations light, in addition to
starving the authorities of tax revenue that would just be wasted. Another theory, which doesn't require a political imperative, comes from Mihir
Desai, a professor of business administration at Harvard University: Tax havens may actually bring business to nearby economies. "The presence of
a nearby tax haven can actually generate more activity in the non-haven," he said. "The intuition is, 'Are you more likely to locate in Germany if you
know you can use a nearby tax haven to reduce the cost of capital?' "
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