 |
|
|
|
|
|
|
|
||
 |
|||||||||
|
www.freedomandprosperity.org |
|||||||||
|
|||||||||
 |
|||||||||
|
The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Cato Institute, respectively. |
|||||||||
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
The Market Center Blog |
|||||||||||
|
Observations and insights on the global fight |
|||||||||||
|
CF&P's Market Center Blog Archives |
|||||||||||
|
Tuesday, September 30, 2008 ~ 5:19 p.m., Dan Mitchell Wrote: Two of the UK's biggest insurers - Prudential and RSA - could be next on the list of companies considering relocating their headquarters to other countries in order to cut the
tax expenses they currently face in the country. It is believed that RSA, who is the UK's second biggest general insurer, is hatching plans to adopt a new headquarters in Ireland, whilst Prudential will favour
either Ireland or Amsterdam for its new domicile. The development follows news earlier in the week that banking giant HSBC is also giving serious thought to a move away from the UK. So far this year, Alliance
Boots has quit Britain for Germany and Shire for Ireland. Meanwhile, several other major UK businesses have announced their intention to move, with British-based retailer and owner of B&Q home stores,
Kingfisher, announcing just two days prior to Wednesday's RSA/Prudential news that it is also giving serious consideration to moving its tax domicile overseas.
Tuesday, September 30, 2008 ~ 3:21 p.m., Dan Mitchell Wrote: Japan's ruling Liberal Democratic Party has chosen Taro Aso to replace Yasuo Fukuda as the new party leader and Prime Minister, signaling that
the government is ready to bring about a long awaited cut in corporate tax and other stimulus measures to revive the Japanese economy. ...Analysts have for a long time pointed to Japan's rate of corporate tax,
which stands at an effective rate of more than 40% - also the highest among the major industrialised nations - as the major barrier to investment and economic growth, but as its fiscal concerns mounted, the
government has been reluctant to lower tax rates. Reports suggest however, the Aso is keen to cut corporate tax, possibly by as much as 10% to about 30%, to spur the business sector. He is also thought to be
keen on other investment-boosting measures, such as accelerating depreciation rates to encourage businesses to investment more in plant and machinery. Aso is also known to be an opponent of raising Japan's
rate of consumption tax, and has argued in the past that such a measure would merely depress consumer spending at a time when Japan is trying to achieve the exact opposite.
Monday, September 29, 2008 ~ 5:50 p.m., Dan Mitchell Wrote: In a speech aimed at silencing many EU critics and ending mounting foreign pressure, the Chairman of the Swiss Bankers Association (SBA), Pierre
Mirabaud, vehemently defended Switzerland's stance on banking secrecy and his own belief in bank-client confidentiality. ...Arguing that protecting privacy
was a fundamental human need, Mirabaud remained undeterred: Switzerland, a state founded on the rule of law, would not deviate from the principle of
treating native citizens and foreigners alike. Financial privacy is firmly rooted within Switzerland and is considered an opportunity and not a risk for
Switzerland and the Swiss financial centre. Emphasising the distinction in Swiss law between tax evasion - which is not a criminal offence in Switzerland - and
tax fraud he stressed that it would be the electorate that decided upon the future of banking secrecy and not foreigners. Turning his criticism and concerns
on others, Mirabaud reiterated his concerns that Germany has set a worrying precedent by paying for information about the German clients of a
Liechtenstein bank, contained on a data disc obtained by "dubious" means.
Monday, September 29, 2008 ~ 4:12 p.m., Dan Mitchell Wrote: Urged by Germany to conduct a review of the European Savings Tax Directive, the European Commission has announced its intention to
tighten the rules of the legislation and consequently close existing loopholes and prevent tax evasion. Germany is leading the onslaught to
review the directive as it witnesses its German investors avoiding tax by pouring millions of euros into investment vehicles which fall outside the
scope of the rules, particularly in neighbouring Liechtenstein and Switzerland. EU Tax Commissioner Laszlo Kovacs is due to issue a formal proposal by November outlining the amendments. However, as in
all EU tax matters, in order to ensure that the proposal is adopted, the unanimous backing of all 27 member states is required. ...However, reports have suggested that the revenues raised from withholding taxes
so far have fallen well below EU expectations. This is because the directive as it stands is fairly easy for investors to circumvent, either by
channelling assets into business entities which are not covered by the rules, such as a company or partnership, or by parking savings in jurisdictions not included in the directive, like Dubai or Hong Kong. By
further amending the rules and extending the scope of the savings directive, the EU hopes to receive a far greater share of the tax revenues
it believes are due from savers and investors. But the EU's attempts to expand the geographical reach of the directive are likely to prove very difficult, with the governments of Hong Kong and Singapore already
having voiced their opposition to such a proposal.
Sunday, September 28, 2008 ~ 7:19 p.m., Dan Mitchell Wrote: The European Commission intends to extend the minimum length of maternity leave from fourteen to eighteen continuous weeks, while
ensuring a full salary. ...Currently, the duration of maternity leave varies from fourteen weeks in Germany to 28 weeks in the Czech Republic and
Slovakia, with the possibility of extending it to 52 weeks in some countries. A parent does not earn her or his full monthly salary during the
entire time, however. ...According to the plan, a mother would be obliged to take compulsory maternity leave of at least six weeks after childbirth.
The remaining part could be taken before or after labour, depending on parents' own preference. ...Additionally, Brussels is seeking to boost
mothers' protection at work by giving women the right to return to "the same job or to an equivalent post and terms and conditions," while it
would be more difficult for an employer to dismiss them within one year of the end of maternity leave.
Sunday, September 28, 2008 ~ 6:33 p.m., Dan Mitchell Wrote: ...out of every crisis comes opportunity. And this crisis presents the opportunity to ensure that Fannie and Freddie will never pose a risk to
the taxpayer, or an even worse systemic risk to the economy, again. While they are under the government conservator, policymakers should move forward on what is the only option that will guarantee a permanent
end to these risks: an orderly liquidation. Back in 2000, I urged Congress in my testimony "to develop a divestiture or breakup plan for Fannie and
Freddie." I suggested that lawmakers "create a liquidation plan that would plausibly avoid a bailout if and when the next economic crisis
occurs." The good news is that just in the past few weeks, the debate has largely moved beyond Fannie and Freddie's hybrid public-private
structure. Across the political spectrum, there is recognition that the GSE model of privatization of profit, yet socialization of risk, is unsustainable.
...Housing became so intertwined with the financial system because of Fannie and Freddie's privileges as well as other subsidies premised on the
die-hard conviction of many lawmakers that every American should own a home. Politicians call homeownership the "American dream," but there
are many other "dreams" Americans pursue in the credit markets. There is no reason to distort this market in favor of housing above other
economic activities. There are no Freddie and Fannie-like entities for auto loans and commercial real estate mortgages, yet financing in these
areas has still evolved. And notably, while these credit markets are now stressed, they have not faced a systemic collapse such as that of the home
mortgage market. By virtue of their sizes, the GSEs helped create the very systemic risk they were created to protect the housing sector from.
Saturday, September 27, 2008 ~ 6:12 p.m., Dan Mitchell Wrote: Americans have been betrayed by a "casino" on Wall Street, Republican presidential candidate John McCain said Tuesday, defending earlier
comments that US economic fundamentals are "strong." "I said the fundamental of our economy is the American worker. I know the
American worker is the strongest, the best, the most productive and most innovative," McCain told ABC television. "They've been betrayed by a
casino on Wall Street." …McCain appeared on cable networks Fox News and CNN as well as ABC early Tuesday, condemning Wall Street greed, an antiquated regulatory system and what he said was Obama's plan to
increase taxes. "We will come back from this crisis, but right now we are the victim of greed, excess and corruption in Wall Street which is hurting
them very, very badly and, unfortunately, it will in the future, but I believe in the American worker and I believe the American worker is the fundamental strength and future of America," McCain told CNN.
Saturday, September 27, 2008 ~ 5:44 p.m., Dan Mitchell Wrote: What...is the excuse for the corporate welfare for GM, Ford and Chrysler? Ford's assembly plant in Louisville, Ky., is participating in that
corporation's struggles. The Toyota plant in Georgetown, Ky., is flourishing as part of the other American auto industry. It is located largely in the South, employs 92,000 Americans and is not in the toils of
the cost structure Ford and GM negotiated with the United Auto Workers union. Lemon socialism -- the subsidization of the weak -- is supposedly
needed lest a U.S. automaker file for bankruptcy, causing the sort of civil disorder and social chaos that accompanied the disappearance of
Studebaker, Packard, American Motors and others. Detroit is striking for subsidies while the iron is hot -- while the 37 electoral votes of two
automaking states, Ohio and Michigan, hang in the balance. Where is the "partisan rancor," which John McCain deplores, now that we really need
it? He and Barack Obama agree on the corporate welfare for the three Detroit mendicants. Obama perhaps believes that lemon socialism is better than no socialism at all. McCain, reacting viscerally, sees
everything as a moral melodrama; his economic thinking, which really is nothing of the sort, owes more to Moses than to Adam Smith. In
McCainism -- the politics of "honor" -- there are no mere mistakes; they must also be dishonorable, because corrupt. Anyway, taxpayers have
been conscripted into subsidizing $25 billion of government loans for Detroit, which says that sum is nice as an appetizer, but hardly a meal. It wants more.
Friday, September 26, 2008 ~ 7:11 p.m., Dan Mitchell Wrote: French president Nicolas Sarkozy, whose country currently holds the rotating EU presidency, on Tuesday (23 September) called for an
international summit to tackle the global finance crisis and its consequences, saying that capitalism should be more "regulated" and less
"opaque." ...Mr Sarkozy hopes to see an international meeting to discuss the crisis, the worst the world has seen, he said, since the Great
Depression. ...Additionally, the French president suggested a general overhaul of the financial system should be considered, where capitalism
would be more "regulated." "Let us rebuild together a regulated capitalism in which whole swathes of financial activity are not left to the
sole judgment of market operators, in which banks do their job, which is to finance economic development rather than engage in speculation," he was reported as saying by Deutsche Welle.
Friday, September 26, 2008 ~ 6:32 p.m., Dan Mitchell Wrote: A dubious and dangerous idea seems to be gaining strength — that government caused the financial crisis by giving capitalism free rein. If
anything, it hasn't done enough of that. ...AFL-CIO President John Sweeney said it's time to roll it back: "The system of regulation of these
integrated banks has failed, and it is clear that much stronger firewalls are needed." ...If people are convinced that capitalism is the problem,
they'll accept a regulatory regime that sharply pulls in its reins, shifting power from business owners to union bosses such as Sweeney. Ken Blackwell makes the same point is his Townhall column, noting that political intervention is rewarding those who make mistakes: Some on the left criticize this as thefailure of the free market. They will demand increased government control of the economy, but they are
wrong. Markets have both potential and risk. Business leaders get paid to exercise their judgment of the markets in order to maximize a company's
profits. Boards of directorsexercise their judgment to elect corporate officers who will best achieve this goal. ...With freedom comes responsibility. Those who would have self-government must, by
definition, govern themselves. Self-government only works when people act responsibly and fulfill their obligations. When people abuse these
freedoms to enrich themselves at the expense of others, then the public will demand the government to step in. That is how government grows,and how freedom is diminished. ...As my grandmother was fond of
saying, if you reward bad behavior all you are going to get is more bad behavior.
Friday, September 26, 2008 ~ 6:00 p.m., Dan Mitchell Wrote: The EU's economic and monetary affairs commissioner, Joaquin Almunia, has said Europe should not employ what he called "financial
socialism" to solve the ongoing banking crisis by bailing out failing companies.
Thursday, September 25, 2008 ~ 4:29 p.m., Dan Mitchell Wrote: The UK and Germany believe that a new international system regulating the financial sector must be constructed to prevent a repeat of global
banking crisis in the future. Peter Steinbrueck, Germany's Social-Democrat finance minister, raised on Sunday (21 September) the idea of "an international authority that will make the traffic rules for
financial markets," while speaking to German radio, Reuters reports. ...Meanwhile, UK Prime Minister Gordon Brown is to outline proposals for just such a body, run under the authority of the International
Monetary fund, in a speech to the Labour Party conference on Monday... Meanwhile, Germany's chancellor, Angela Merkel, has publicly chastised
the US and UK for historical opposition to stronger financial regulation.
Thursday, September 25, 2008 ~ 4:17 p.m., Dan Mitchell Wrote: The Obama campaign is using Wall Street's woes as a new rationale for its massive tax increases and protectionism. The last president to take
that approach helped cause the Great Depression. ...that kind of reaction by Obama to troubles in the financial sector is reminiscent of President
Herbert Hoover's handling of the Great Depression. Hoover more than doubled the top marginal income tax rate and signed into law the Smoot-Hawley act, raising tariffs to record levels the summer after the
1929 stock market crash. Sen. Obama promises, according to his economic advisers, that "The top two income-tax brackets would return to their 1990s levels of 36% and 39.6% (including the exemption and
deduction phase-outs)." That is, he'll hike taxes during a weak economy. As for the North American Free Trade Agreement, before sewing up the
Democratic nomination, Obama's campaign expressed "serious concerns about the effect that the agreement would have on the American auto,
beef, and rice industries, as well as the lack of labor and environmental protections in the agreement. ...Massive new taxes and the abandonment
of global economic freedom sold as "patriotism" is not only an outrage; it's a huge danger to an economy that has enough troubles already.
Thursday, September 25, 2008 ~ 3:21 p.m., Dan Mitchell Wrote: The stock market crash of October 1929 and the Great Depression were not the same thing. What made the depression great was not magnitude
but duration -- the fact that unemployment was still 20% 10 years later. In the 1930s, policies...did not speed recovery; they impeded it. Not long
after the market crashed to 199 from its 381 high at the end of the summer of 1929, President Herbert Hoover turned on short sellers. Like
our SEC, he demanded a curb on short sales. "Bear raids" or "bear parties" were to be stopped; the blame for the crash all belonged to
"certain gentlemen." Then, as now, there was a lengthy discourse on the difference between "normal" short sales and "naked" ones. New York
Stock Exchange President Richard Whitney argued that curtailing such sales postponed unavoidable pain -- or even made it greater.
Wednesday, September 24, 2008 ~ 12:42 p.m., Dan Mitchell Wrote: A cut in the UK's rate of corporation tax could not only give the struggling economy a much-needed boost, but also lead to an increase in
the Treasury's tax take, according to a new report. With large corporations such as Shire Pharmaceuticals and Krom River leaving Britain due to high tax rates, and shortfalls in public finances growing
swiftly, the research, written for Conservative Way Forward (CWF) by Matthew Elliott, Matthew Sinclair and Corin Taylor of the TaxPayers' Alliance (TPA), claims to be the most wide-ranging, comprehensive and
up-to-date report on the issue of corporation tax. By studying the economic records of 23 other high income developed countries, TPA researchers identified evidence showing that reducing corporation tax
rates has a positive effect on a country's competitive standing, and that cutting corporation tax by 10% would result in the rate of growth in revenue raised by corporation tax increasing by 5%. "A cut in
corporation tax would encourage companies struggling under the burden of high taxes to stay in Britain, and attract new investment which would
drive up the amount raised in tax over time," observed Matthew Elliott, Chief Executive of the TaxPayers' Alliance.
Wednesday, September 24, 2008 ~ 12:18 a.m., Dan Mitchell Wrote: In 2007, overall real median family income increased to $50,233, up $600 from 2006. The real median income for intact families -- mother and
father in the home -- rose to $78,000, an all-time high. ...these latest statistics reflect a 25-year trend of upward economic mobility. More important, Barack Obama is wrong when he states on his campaign Web
site that the economic policies started by Ronald Reagan have rewarded "wealth not work." ...households in the lowest income quintile saw a
roughly 25% increase in their living standards from 1983 to 2005. ...In the U.S., people who had low incomes in 1983 didn't necessarily have
incomes as low a decade later. People in this country have long moved up over time, and this income mobility continues to be true. While some people do remain in the lowest income group, they are the exception.
...From 1996 to 2005, we have the income mobility data for income quintiles. Of those filers who were in the lowest 20% in 1996 and who also filed in 2005, 42.4% remained in the bottom 20%, 28.6% were in the
next highest quintile, 13.9% were in the middle quintile, 9.9% were in the second highest quintile, and 5.3% were in the highest quintile. What is
also striking about the data is that the poor today are, in general, not the same people who were poor even a few years ago. For example, the new
Census data find that only 3% of Americans are "chronically" poor, which the Census Bureau defines as being in poverty for three years or
more. ...Taking from the rich through much higher tax rates in order to help the poor and middle class makes no sense intellectually and has seldom worked in practice. Reducing rates, on the other hand, does
increase the share of taxes paid by the highest income-earning group. For example, in 1981, when the highest tax rate on the rich was 70% and the
top capital gains tax rate was close to 45%, the richest 1% of Americans paid 17% of total income taxes. In 2005, with a top income tax rate of 35% and capital gains at 15%, the richest 1% of Americans paid 39%.
Tuesday, September 23, 2008 ~ 11:07 p.m., Dan Mitchell Wrote: There is a misconception that President Bush's years in office have been characterized by a hands-off approach to regulation. In large part, this
myth stems from the rhetoric of the president and his appointees, who have emphasized the costly burdens that regulation places on business.
But the reality has been very different: continuing heavy regulation, with a growing loss of accountability and effectiveness. That's dysfunctional
governance, not laissez-faire. ...there was plenty of regulation — yet much of it made the problem worse. These laws and institutions should have reined in bank risk while encouraging financial transparency, but
did not. This deficiency — not a conscientious laissez-faire policy — is where the Bush administration went wrong. It would be unfair, however, to blame the Republicans alone for these regulatory failures. The
Democrats have a long history of uncritically favoring expansion of homeownership, which contributed to the excesses at Fannie Mae and Freddie Mac, the humbled mortgage giants. ...Still, the Bush
administration's many critiques of regulation are belied by the numbers, which demonstrate a strong interest in continued and, indeed, expanded
regulation. This is the lesson of a recent study, "Regulatory Agency Spending Reaches New Height," by Veronique de Rugy, senior research fellow at the Mercatus Center at George Mason University... In the
meantime, if you hear a call for more regulation, without a clear explanation of why regulation failed in the past, beware. The odds are that we'll get additional regulation but with even less accountability and
even less focus on solving our very real economic problems.
Tuesday, September 23, 2008 ~ 10:08 p.m., Dan Mitchell Wrote: Now is a good time to check. The government operates under a fiscal calendar that ends Sept. 30. When the Democrats took power in January
2007, much of the budget for the 2007 fiscal year was already set. The 2008 fiscal year is just about to end, providing the first data with which
one can evaluate whether the Democrats delivered on their promises. First, let's look at the setting. From 2001 through 2007, total government
spending increased a whopping 47 percent, from $1.86 to $2.73 trillion. It didn't do that all at once, but rather, grew each year an average of 6.2
percent. The worst year during that time period for government growth was 2002, when it increased 7.9 percent. The best was, perhaps surprisingly, 2007, the last year that was mostly baked by the
Republicans. Government spending only advanced 2.8 percent that year. Republicans tried to reform themselves, but did too little too late. How
did the Democrats do? Spending has advanced this year an astronomical 8.3 percent, to $2.96 trillion, exceeding even the worst of the Bush years.
Total spending this year was more than a trillion dollars higher than it was when Bush took office in January 2001, and more than $200 billion of that increase was accomplished in just the last year.
Monday, September 22, 2008 ~ 2:11 a.m., Dan Mitchell Wrote: Fannie Mae and Freddie Mac are an excellent case study illustrating the consequences that arise when vague notions of "Corporate Social
Responsibility" are combined with a for-profit business model. In the case of Fannie Mae and Freddie Mac, the consequences are diminished U.S. economic performance and increased overall financial risks.
...Treasury's plan does not address the larger systemic problems that helped to create the current mortgage market problems in the first place:
the adverse economic incentives created by the current GSEs financial structure. Not linking the current solvency problem to the fundamental
reforms necessary to prevent such crises from happening again squanders an opportunity to improve the workings of our financial system. ...The government subsidy to the GSEs allows them to raise funds at "below
market" interest rates. Lower borrowing costs for Fannie and Freddie redirect resources away from other potential uses in the economy toward
mortgages, raising the borrowing costs for other investments. Productive investments in other parts of the U.S. economy are, consequently, "crowded out" due to the favorable borrowing costs of Fannie Mae and
Freddie Mac. Greater opportunities to fund emerging small businesses, increase economic efficiencies, or finance opportunities that people value
more are subsequently lost. The subsidy also creates adverse economic incentives for the GSEs themselves that compromises the efficiency of the mortgage market and violates the companies' very raison d'être. The
private shareholders of Fannie Mae and Freddie Mac reap the profits when their investment strategy makes money. But, when the strategy loses money, the government steps in and forces the taxpayer to share in
the company's losses. Consequently, the system provides the incentive and opportunity for individuals to profit from their risks but not suffer
the consequences if these risks go bad. Under such circumstances, it should not be surprising that people take on more risk.
Sunday, September 21, 2008 ~ 10:24 p.m., Dan Mitchell Wrote: Nick Clegg yesterday admitted he might send his children to a private school - as his party vowed to end 'educational apartheid'. He said he
would not rule out ' dipping into his pocket' for Antonio, six, and Alberto, four, because of the poor quality of state schools. 'I am not holding my
children's future and education hostage to a game of political football. I am a father before a politician,' said Mr Clegg, who attended the independent Westminster School. He said he was concerned about the
state secondaries close to his home in Putney, South-West London, claiming they were 'too big and alienating'
Saturday, September 20, 2008 ~ 7:30 a.m., Dan Mitchell Wrote: …the hedge funds and grand corporate headquarters of west London are being lured abroad by rival tax authorities. The Swiss recently relaxed
their rules to enable them to compete with the charms of Mayfair. They were immediately rewarded by the departure of the Krom River hedge fund from London to the tax haven of Zug. The whole of Europe is at it.
Since Ireland and the Netherlands began undercutting larger neighbours with lower rates, even the Swedes have joined in - pitting national tax authorities against each other in a downward spiral that means not a
single developed economy was able to put up corporation tax last year. Over the summer, four large companies announced plans to leave the UK
for Ireland. More are likely to follow. …A minister in the court of King Louis XIV once warned that the art of taxation consists in so plucking the
goose as to get the most feathers with the least hissing. Unfortunately, our geese are now not just hissing: they have stopped laying golden eggs,
started honking loudly and are preparing to fly out across the open ocean.
Friday, September 19, 2008 ~ 6:30 a.m., Dan Mitchell Wrote: What do Azerbaijan, Albania and the Kyrgyz Republic have in common? They're all Eastern European or Central Asian states, and they all
currently top the list of the world's most enthusiastic economic reformers. So says "Doing Business 2009," the latest instalment in the World Bank
and International Finance Corporation's series of annual reports on the state of pro-growth policies around the world. There's little change at the
top of the league table in absolute terms -- Singapore still ranks No. 1, with the U.S., Hong Kong, U.K., Canada and Australia also in the top 10.
But a look at the changes in other rankings shows a still-growing tide of liberalization just about everywhere. ...Top reformer Azerbaijan, for
example, opened a one-stop shop to handle new business registrations and cut the number of regulatory steps to six from 13. For these and many other improvements, it now ranks 33rd, up from 97th last year.
Other countries are attracting investment by cutting tax rates or by making it easier and cheaper to file. Malaysia did both, simplifying and
cutting corporate income taxes (now a 26% flat tax, which will drop to 25% next year) and introducing online filing. It moved up to 20th from 25th. Colombia, South America's top reformer, embraced trade by
cutting export- and import processing times via a host of administrative reforms, helping to improve its ranking to 53rd from 66th. ...A lot of
work clearly remains to be done; and some countries, such as Indonesia, Bulgaria and Bolivia, slipped down in the rankings. Yet overall this report
is a welcome sign that many countries are pushing ahead with reforms. The timing couldn't be better: The IFC notes that countries with liberalized business regulations frequently grow faster than their peers
and are more resilient when tough times hit.
Thursday, September 18, 2008 ~ 9:23 p.m., Dan Mitchell Wrote: Politicians always promise that their programs will create jobs. It's used to justify building palatial sports stadiums for wealthy team owners.
Alaska Rep. Don Young claimed the infamous "bridge to nowhere" would create jobs. The fallacy is the same in every case: Even if the program
creates jobs building bridges or windmills, it necessarily prevents other jobs from being created. This is because government spending merely diverts money from private projects to government projects.
Governments create no wealth. They only move it around while taking a cut for their trouble. So any jobs created over here come at the expense
of jobs that would have been created over there. ...Creating jobs is not difficult for government officials. Pharaohs created thousands of jobs by
building pyramids. Our government could create jobs by paying people to dig holes and then fill them up. Would actual wealth be created? Of
course not. It would be destroyed. It's like arguing the hurricanes create jobs. After all, the destruction is followed by rebuilding. ...One reason
decentralized markets are preferable to government central planning is that human beings are fallible. Mistakes are inevitable. Some investments
will be errors. Mistakes in the market tend to be on a comparatively small scale. If one company invests in plug-in hybrids and it goes bust, only a
relatively few people suffer. The assets of the bankrupt firm pass into more capable hands. But decisions by government, especially the federal government, affect all of us. When government makes a mistake, the
bureaucracy can't go bankrupt. Instead, it will use its failure to justify increased appropriations in the next budget. If "green jobs" make so
much sense, the market will create them. They will be created by private entrepreneurs and venture capitalists who are eager to profit from
winning investments. The best ideas will rise to the top, and green energy will gradually replace coal and oil. If politicians were serious about
creating jobs and cleaner technologies, they would step aside and let the free market go to work.
Wednesday, September 17, 2008 ~ 3:12 p.m., Dan Mitchell Wrote: The real news in [the] Congressional Budget Office semiannual report is that federal expenditures on everything from roads to homeland security
to health care will on present trends reach 21.5% of GDP next year. That's a larger share of national output than at anytime since 1992. If the
cost of the federal takeover of Fannie Mae and Freddie Mac prove to be large and are taken into account, next year federal outlays could be higher as a share of the economy than at anytime since World War II. In
this decade alone, federal spending has increased by almost $1.2 trillion, or 57%. ...We hope Congress and the Presidential candidates don't obsess
over the deficit per se, because the real fiscal drag from government comes from how much it spends, not how much it borrows. ...in the two years that Democrats have run Congress, federal expenditures are up
$429 billion -- to $3.158 trillion. The fiscal blowouts have included a record farm bill, notwithstanding record farm income; an aid bill for distressed homeowners, extended unemployment benefits, and more
generous veterans benefits. Next up: votes on $50 billion for Detroit auto firms, an $80 billion energy bill, as much as $50 billion for spending
masked as a "second stimulus," plus $100 billion or more for the Fannie and Freddie rescue. Rather than sort through priorities, Congress is spending more on just about everything.
Tuesday, September 16, 2008 ~ 10:14 p.m., Dan Mitchell Wrote: Henry Paulson's plan is a major disappointment. ...the plan put forward by the treasury secretary this weekend prioritizes steering them back to
financial health and defers into the future what is to become of the companies. What's worse, after blaming the collapse of the companies on
a "flawed business model," the plan will preserve that model indefinitely, allowing the shareholders of what are now insolvent entities to recover
some value. ...The plan is relatively simple, but its implications for the future are troubling. First, Fannie and Freddie will be put under government control in an arrangement called a conservatorship. The
purpose of a conservatorship is, essentially, to keep things as they are. A conservator does not have the power to make any significant changes to
the business model of a company; rather, its focus is to guide the company back to stability. Why anyone would sustain what Paulson himself called a flawed business model is hard to understand. It gets
worse. Under the plan, the Treasury is committed to providing equity capital to Fannie and Freddie. Another puzzle: Why is it necessary to inject taxpayer funds into these companies as equity? Ordinary
companies need capital so that they can meet their obligations, but both these companies will have access to a financial facility at the Treasury
that will allow them to borrow all the funds they require. They don't need capital. The injection of capital is, in fact, a gift to the existing
shareholders, who--as the owners of insolvent companies--own nothing and deserve no benefits from the taxpayers. ...There was an alternative,
one that was simpler and much more sensible from a policy perspective. Since Fannie and Freddie operated under this "flawed business model"--by which Paulson probably meant government backing for
shareholder-owned companies, the essence of a GSE--the plan should have set things in motion for the elimination of this model. Instead of a
conservatorship, the plan should have provided for a receivership. That system would get rid of the common stockholders while still monitoring the companies for an indefinite period in order to keep the mortgage
market functioning smoothly. ...Republican presidential candidate John McCain has been campaigning against the culture of corruption in the federal government. Democratic presidential candidate Barack Obama
has based his campaign on the idea of change in Washington. Fannie Mae and Freddie Mac are telling illustrations of corporate welfare--the profitable private exploitation of a cozy relationship with the
government. And the Paulson plan will foster just what a cynic might expect: more of the same.
Tuesday, September 16, 2008 ~ 9:43 a.m., Dan Mitchell Wrote: Anyone who thinks the path to "fiscal discipline" is through higher taxes ought to look at the current budget spectacles in New York and
California. The two liberal states have among the highest tax burdens in the country, yet both now find themselves with huge budget deficits and
are debating still higher taxes to close the gap. California has the highest state income tax rate in the country (10.3%), while New York State also
has a high income tax rate (6.85%), with the combined state and city rate rising to 10.5% in New York City. Their overall government spending totals also happen to top the national charts. And, what do you know,
California is $15 billion in the red this year while New York is trying to close a $6.4 billion 2009 budget hole... The Democrats in Sacramento
have proposed a series of new taxes on businesses and individuals with incomes above $1 million. Their plan would raise the top income tax rate
to 12%, which would be the highest in the nation. ...A similar mess is playing out in Albany, where Assembly Democrats and Republicans have passed a budget with two added tax rates. Millionaires would face a
one-percentage-point rate income tax hike (to 11.5% in New York City), while anyone making more than $5 million would get hit with another 0.85-point hike (to 12.35% in NYC). A new business tax of 4% would also
apply to hedge fund managers. The politicians who want all these new taxes are the same ones who scratch their heads and wonder why so many hedge funds are already based in Connecticut, or why Manhattan is
losing its status as financial capital of the world. ...New York State spending has climbed by 45% in the last five years, according to the
Manhattan Institute. As for California, its spending soared to $145 billion in 2008 from $104 billion in 2004. Every time the politicians raise taxes,
they merely lift their spending by as much or more, and then plead poverty and demand another tax hike during the next economic slowdown. The "progressives" who dominate politics in these states
target the rich on grounds that they have the ability to pay. They also have the ability to leave. From 1997-2006, New York State lost 409,000 people (not counting foreign immigrants). For every two people who
move into the state, three flee. Maybe the problem for New York is merely bad weather, not high taxes. Except that sunny California is experiencing
a similar exodus. Over the past decade 1.32 million more native-born Americans left the Golden State than moved in -- despite beaches, mountains and 70-degree weather. Mostly the people who have fled are
the successful, the talented and the rich. If taxes don't matter, then maybe someone can explain the divergent economic paths of California and New York and America's two other most populous states, Florida and
Texas. The latter two states have no personal income tax. Personal income has been growing about 50% faster in Florida and Texas than in California and New York.
Monday, September 15, 2008 ~ 4:41 p.m., Dan Mitchell Wrote: ...we taxpayers are now being asked to guarantee Fannie and Freddie's tab, one that could make the $124 billion S&L bailout of the late 1980s
look cheap. So how did we get stuck with this bill? Well, Congress wanted to "do something" about what it saw as a "housing problem." To
them that meant that they should create an even bigger problem. So Congress passed laws that made it easier for hopeful home-buyers to buy houses ... even when they couldn't afford them. Then the Fed and other
regulators helped, in the form of easy money and loose credit standards for mortgages. ...Years earlier Congress established Fannie and Freddie
as purchasers of these mortgages, which they could bundle up, repackage and sell to investors, freeing up more mortgage money. As government
creations tend to do, the two companies grew until they either owned or guaranteed about half the nation's $12 trillion dollars in mortgages.
Fannie and Fred were "government sponsored enterprises" which means heads they win, tails you lose. If they make money stockholders, creditors
and Fannie and Freddie employees - some making millions annually - get the benefit. But now that mortgages have hit the skids, with mounting
losses, the taxpayers potentially face trillions in exposure. This is because there is an "implicit" (read "actual") government guarantee of Fannie
and Freddie's obligations and both are now too big to be allowed to fail. This is called the "bailout phase," which will probably lead to a bigger
bubble in the future. ...You'd think we'd have learned by now: when the backstop of the federal treasury makes it easier for politicians, lenders,
borrowers, welfare recipients, government contractors, or anyone else, to serve their own self interest at the expense of the taxpayer, many will do
just that. That is why we continue to see self-dealing, moral lapses, outright fraud and lack of management and oversight in a wide array of programs and government-sponsored entities, from housing to Medicare,
education and the Small Business Administration, all costing taxpayers billions, even trillions of dollars.
Monday, September 15, 2008 ~ 4:23 p.m., Dan Mitchell Wrote: Swedish Prime Minister Fredrik Reinfeldt announced on Monday that a cut in the rate of Sweden's corporate tax will form the centrepiece of an
autumn budget which aims to relieve tax and administrative costs on businesses operating in the country. In a pre-budget announcement, the government revealed its plans to cut corporate tax to 26.3% in 2009
from the current rate of 28%... Sweden's corporate tax has remained static at 28% for 13 years, and while it used to be one of the more competitive rates in Europe, the recent trend towards lower corporate
tax rates means that the current rate now stands well above the EU average rate of 23.2%.
Sunday, September 14, 2008 ~ 5:20 p.m., Dan Mitchell Wrote: Treasury Secretary Henry Paulson wants to prop up the walking dead so the world keeps buying their mortgage-backed securities. His action may
calm jittery credit markets, and it may get the companies through the current mortgage crisis -- albeit at enormous cost to American taxpayers.
The tragedy is that he and Congress didn't act 18 months ago -- when the cost would have been far less -- and that he still isn't killing the Fannie and Freddie business model that has done so much damage. These
corpses could still return to haunt us again. ...The new federal "conservatorship" is a form of nationalization that puts regulators firmly
in control. The feds fired the company boards and CEOs, though the clean up needs to go further to change the corporate cultures. Both companies remain Beltway satraps that hire for reasons of political
connection, not financial expertise. The taxpayer purchase of preferred stock means that the feds will own about 80% of the companies if all the warrants are ultimately exercised. The feds also stopped dividend
payments, saving about $2 billion a year. ...We only wish Mr. Paulson had gone further and erased all private equity holders the way the feds do
in a typical bank failure. Fan and Fred holders had profited handsomely for decades by exploiting an implicit taxpayer guarantee that their management claimed didn't exist. Now that the taxpayers are in fact
stepping in, the current common and preferred holders deserve to lose everything. ...The Treasury chief also gave a free pass to the holders of some $18 billion in Fan and Fred subordinated debt. He did so even
though these securities were understood not to have the same status as mortgage-backed securities or other Fannie debt, and even though this
will set a bad precedent for other bailouts. ...By far the biggest risk here, however, is that the companies could still emerge with their business
model intact. That model is the perverse mix of private profit and public risk, which gave them an incentive to make irresponsible mortgage bets with a taxpayer guarantee.
Saturday, September 13, 2008 ~ 10:48 p.m., Dan Mitchell Wrote: Senate Finance Committee Chairman Max Baucus (D - Mont.) has expressed dismay at the findings of a report by the Government
Accountability Office (GAO), which show that US multinational companies are increasingly reporting income offshore to cut their tax bills. The GAO report, published on Monday, found that the number of
foreign operations of US companies is increasing, with the largest companies paying the lowest effective tax rates, and more income being reported in lower tax rate jurisdictions outside the US. However, what
has provoked the ire of Baucus and his Republican counterpart on the committee, Chuck Grassley, is the report's conclusion that businesses may be manipulating existing tax laws by shifting corporate income and
tax planning to foreign tax rate jurisdictions in which they operate. ...The GAO, which based its report on an analysis of Internal Revenue Service
(IRS) data on corporate taxpayers, found that the average US effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2%, although there was
considerable variation in tax rates across these taxpayers. The average US effective tax rate on the foreign-source income of these large
corporations was around 4%, reflecting the effects of both the foreign tax credit and tax deferral on this type of income. Effective tax rates on the
foreign operations of US MNCs vary considerably by country, according to the report. Estimates for 2004 show that Bermuda, Ireland, Singapore, Switzerland, the United Kingdom, Caribbean Islands, and China had
relatively low rates among countries that hosted significant shares of US business activity, while Italy, Japan, Germany, Brazil, and Mexico had
relatively high rates. ...the GAO concluded that the reporting of the geographic sources of income "is susceptible to manipulation for tax
planning purposes" and appears to be influenced by differences in tax rates across countries. "Most of the countries studied with relatively low
effective tax rates have income shares significantly larger than their shares of the business measures least likely to be affected by income shifting practices: physical assets, compensation, and employment. The
opposite relationship holds for most of the high tax countries studied," the GAO stated.
Friday, September 12, 2008 ~ 12:03 p.m., Hubbel Relat Wrote:
Intellectual Property Rights USF Student Contest Winner
Friday, September 12, 2008 ~ 11:45 a.m., Dan Mitchell Wrote: The Trades Union Congress (TUC) is urging Prime Minister Gordon Brown to increase tax on the wealthy in order to pay for morale-boosting
tax cuts for the low-paid, with the UK teetering on the brink of recession. Brendan Barber, the general secretary of the TUC, the umbrella organisation for the UK's trades unions, told a news conference on the
eve of the TUC conference, which starts on Monday, that the Labour government should demonstrate it is on the side of ordinary people by redistributing wealth from those who are in a better position to ride out
the economic storm, to those at the bottom of the pay scale... Barber also argued that the government could raise an additional GBP8bn per year
in revenues by putting in place some form of windfall tax on the profits of energy companies.
Thursday, September 11, 2008 ~ 11:33 p.m., Dan Mitchell Wrote: The UK government must do something quickly to improve the country's corporate tax environment or risk presiding over an exodus of insurance
firms to offshore jurisdictions, Lord Levene, the chairman of Lloyd's of London, has warned. Speaking at Lloyd's sixth annual London City dinner on Thursday evening, Levene said that, while Lloyd's, the world's
oldest insurance market, remains in healthy shape, the government's recent dithering over tax policy threatens to erode its competitiveness in
the face of strong competition from the likes of Bermuda, Switzerland and Ireland, which offer much friendlier tax regimes. The rate of corporate tax in the UK has recently been lowered to 28% from 30%, but
with Bermuda offering a virtually tax-free environment to insurance companies, including a 0% corporate tax, some insurance firms have already made the decision to defect, including Hiscox and Hardy's.
Others, such as Brit Insurance, are actively considering their domicile for tax purposes. "The tax treatment of Lloyd's in the UK must be amended for us to stay on top," he argued. Other companies have moved beyond the restless stage. Forbes.com and Tax-news.com report on two companies that are shifting to jurisdictions with better tax law: The world's largest speciality retail jeweller Signet Group Plc. said the Court has sanctioned the company's plans to change its domicile to Bermuda. Krom River, a London-based hedge fund, has announced this week that it is set to relocate its headquarters to one of Switzerland's low-tax areas in
an attempt to reduce the company's tax bill. The company, which has been running for two years and has accumulated assets in the region of GBP453m, has relocated its office to the canton of Zug, a move that will
not only save the company in tax, but also allow its fund managers to pay tax at 10% instead of the 40% top rate on the bulk of their income in the UK. But there is a tiny bit of good news for Gordon Brown and his fellow tax-aholics. HSBC has stated that there are "no current plans to relocate." The wording of that announcement, though, suggests that it may be just a matter of time before the bank decides that the UK is too collectivist: Banking giant HSBC responded at the weekend to speculation that it is planning to move its corporate headquarters from London, announcing
that it has "no current plans to relocate".
Thursday, September 11, 2008 ~ 11:15 p.m., Dan Mitchell Wrote: The Parliament voted 504 to 110 to adopt a nonbinding report on gender stereotypes in advertising in an attempt to prod the industry to discuss
the practice. That debate might well lead to legally binding legislation, according to Mary Honeyball, a British lawmaker and a member of the Women's Rights and Gender Equality Committee, which developed the
report. "What I think it might do is encourage the industry in member states of Europe to improve," she said. "The report was passed by a big
majority and so there's obviously recognition that there is a need to look at this. There is unacceptable stereotyping." This blatant political correctness is ruffling feathers. An Irish columnist unloads on the European political elite: What was initially meant as a post-war, placatory common market working under the clever concept that countries are less likely to invade
each other when they are trading partners, has somehow morphed into a giant Nanny, with cane in hand, who wants to tell the rest of us what to
think, what to believe and, as we have seen in the wake of the Lisbon Treaty, how to vote. But the latest example of the EU -- or 'the EUSSR',
as one Euro-sceptic memorably described it -- legislating how we should think comes from a Swedish politician who wants to ban all commercial advertisements which could be construed as "sexist, demeaning,
stereotypical or offensive". Eva-Britt Svennson, the joyless MEP -- surely a job that is nearly as pointless as being a member of our Seanad -- is
outraged that some commercial advertisements use, can you believe it, sexualised imagery. And she's having none of it. This woman, who none of us voted for, yet she has the power to impact on how Irish society
governs itself, says that she wants "a zero tolerance policy against sexist insults or degrading images of women in the media." ...Not only is she
against the portrayal of women as sexual beings, she is even against the portrayal in commercials of women being housewives and cleaning the
kitchen because: "When women are portrayed in a stereotypical way, the consequence may be that it becomes difficult in other contexts to see women's resources and abilities in areas other than those of the
traditional gender roles." So...she also wants to ban the notion of woman as housewife.
Wednesday, September 10, 2008 ~ 11:14 a.m., Dan Mitchell Wrote: This year's cut in the corporate tax rate has failed to push the UK decisively up the international rankings, according to a new survey that
shows Britain's efforts to improve its tax competitiveness have been blunted by similar efforts elsewhere. The UK now has the 20th lowest corporate tax rate of the 27 European Union member states, a slight
improvement for businesses on last year's 21st position, according to the survey by KPMG, professional services firm. ...KPMG said: "This continued downward pressure on worldwide and European corporate tax
rates will add to the pressure on the UK authorities to address the UK's perceived lack of competitiveness on tax." The impact of April's 2
percentage point cut to 28 per cent was tempered by cuts elsewhere, which pushed average global and European corporate tax rates down by 1 percentage point. The UK's corporate tax rate remains higher than the
global average of 25.9 per cent and the EU average rate of 23.2 per cent. The UK's corporate rate cut ensured that it continued to have a lower
rate than Germany at 29.5 per cent, preserving the Treasury's goal of having the lowest rate in the G7. But the UK is facing tough competition
for holding companies from smaller low-tax European rivals, particularly Ireland, Luxembourg, Switzerland and the Netherlands, as demonstrated by recent moves out of the UK announced by Shire, UBM, Henderson,
Charter and Regus.
Wednesday, September 10, 2008 ~ 10:32 a.m., Dan Mitchell Wrote: The trickle of firms renouncing their residency in the UK for tax purposes has now increased to a steady stream after two more companies revealed
plans to relocate their corporate HQs offshore. On Thursday, Charter, the London-based engineering group, announced proposals to change its corporate structure involving the creation of a new holding company in
Jersey, to be called Charter International plc, but with its head office and tax residence in the Republic of Ireland. While the company will remain
listed on the London Stock Exchange, its new corporate HQ will move to Dublin. ...The move is seen as further evidence of UK plc's increasing dissatisfaction with the international tax regime compared with
jurisdictions such as Ireland, and especially the Treasury's plans to impose tax on foreign profits to discourage multinationals to send profits
to low-tax jurisdictions to avoid UK corporate tax. ...Meanwhile, Regus, the world's largest provider of services office space, has revealed plans to
shift its corporate headquarters from the UK to Luxembourg in what appears to be another tax-related relocation. Like Charter, it has also decided to form a holding company in Jersey. ...These announcements
have come hot on the heels of news that fund firm Henderson is to defect for tax reasons, capping another bad week for the under-fire government of Prime Minister Gordon Brown which has copped much flak recently
over its dithering over tax policy and its desperation to raise new revenues amid a weak economy. Lloyd's of London insurer Brit Insurance
has also confirmed that "it is actively considering the issue of tax domicile." ...Earlier in the year, Shire, the pharmaceutical firm, and
United Business Media, both announced plans to redomicile in Ireland.
Tuesday, September 9, 2008 ~ 11:39 a.m., Dan Mitchell Wrote: The issue of a government bailout for General Motors, Ford and Chrysler is moving to center stage. Barack Obama has said yes to this proposal
early on, and last week John McCain climbed on board. So much for change and fighting pork-barrel spending. We're moving beyond moral hazard here, folks, and into a moral quagmire. ...Late last year, in its
energy bill, Congress authorized $25 billion of low-interest loans to high-risk borrowers -- a strategy perfected by home-mortgage lenders in
recent years. In this case the high-risk borrowers are the loss-plagued Detroit car companies. The loans are supposed to help them develop new,
fuel-efficient cars, and retool their factories to produce them. Detroit, not being satisfied with this taxpayer largess, wants $50 billion. ...if the
Freddie Mac and Fannie Mae debacles teach us any lesson, it is that subsidizing private profits with public risk is a terrible idea. Implicit government backing has led the managements of these two companies to
make reckless investments that have backfired badly. ...we can all hope that shareholders do well, that executives reap handsome rewards for work well done, that the Cerberus billionaires make more billions on
Chrysler, and that workers get paid on whatever terms the car companies agree. But we taxpayers shouldn't subsidize any of this. ...If we bail out
Detroit, where do we stop? The newspaper industry is in financial trouble because more readers and advertisers are turning to the Internet. Newspapers are good for democracy -- Thomas Jefferson said he would
choose newspapers over government, after all -- so shouldn't they get low-interest government loans to help them adjust to the Internet? Of course not, and ditto for Detroit.
Monday, September 8, 2008 ~ 5:00 a.m., Dan Mitchell Wrote: Americans have not committed to Mr. Obama. Why? …voters are paying attention and appear not to like what Candidate Obama is saying. Mr.
Obama has proposed a massive tax increase on investors, business owners, and the "wealthy." At a time when the American people rate the
economy as the central issue of the campaign, a tax hike doesn't make a lot of political sense. Voters know that a tax hike won't help the economy.
Moreover, Mr. Obama's tax plans would directly or indirectly harm U.S. investors by raising the capital gains and dividend taxes. More than half
of U.S. households are equity owners, so Mr. Obama's proposal risks alienating half the population. Mr. Obama claims to offer a tax cut to moderate-income families, but a significant portion of Mr. Obama's tax
plan is a welfare giveaway costing more than $648 billion over 10 years, according to the Tax Policy Center. …Mr. Obama's health-care proposal
is not quite HillaryCare, but it comes close. A national health insurance, heavily subsidized by taxpayers, would be offered to the currently
uninsured. Mr. Obama's instincts on health care are always to move more people onto rolls of government-paid and government-mandated insurance, while depriving the marketplace the oxygen it needs for
greater innovation, life-saving cures, and efficiency. Americans have heard the refrain for government-provided health care before and know an expensive government giveaway when they see it. Mr. Obama's energy
policy is to drill less, consume less, tax more, and spend more. …he is promising a massive increase in domestic, noncarbon-based energy from sources that produce only a fraction of our energy now. He has also
proposed massive tax increases on U.S. oil and gas companies while continuing to cut off vast swaths of U.S. territory to drilling.
Sunday, September 7, 2008 ~ 12:04 p.m., Dan Mitchell Wrote: Representative Charles B. Rangel has earned more than $75,000 in rental income from a villa he has owned in the Dominican Republic since 1988,
but never reported it on his federal or state tax returns, according to a lawyer for the congressman and documents from the resort. ...A lawyer for Mr. Rangel, Lanny Davis, said on Thursday that the congressman
would most likely file amendments to his tax returns for the years in question. Mr. Davis said Mr. Rangel's accountant believed he would most
likely owe back taxes to the state and New York City. ...Mr. Davis said the congressman did not realize he had to declare the money as income,
and was unaware of the semiannual payments from the resort because his wife, Alma, handled the family finances and conferred with their accountant, John Viardi, on tax matters. ...Mr. Davis said on Thursday
that Mr. Rangel would most likely file amendments to the disclosure forms as well. The disclosure is a sworn statement, and intentionally filing
a false report is a felony that carries a possible five-year prison sentence, but in most cases the House ethics committee does not punish members
for errors or omissions. New York State law classifies filing a false city or state tax return a felony punishable by up to four years in prison, but
Kathleen M. Pakenham, a tax lawyer at the law firm of White & Case, said criminal prosecutions are rare and in most cases, the taxpayer is
simply fined 20 percent of the back taxes owed. ...His finances have been under scrutiny since July, after news reports that a major real estate
developer had allowed him to lease four rent-stabilized apartments, including one he had used as a campaign office. I'm sure plenty of commentators will be dragging out petards (whatever those are) and hoisting Cong. Rangel on them, but I want to express some sympathy. In a good tax system, governments only tax income earned inside national borders - the common-sense practice of "territorial" taxation. As such, the only government that should be concerned about Mr. Rangel's Domincan Republic-source income is, you guessed correctly, the Dominican Republic. The Ways & Means Chairman is only in trouble with American tax authorities because the United States has a very imperialistic system of "worldwide" taxation. But before you feel sorry for Mr. Rangel and start organizing a petition drive on his behalf, it's worth noting that the Chairman has not tried to fix this policy. Indeed, he wants the make the IRS bigger and the tax code more onerous. Let's hope, though, that this experience will push him in the right direction.
Saturday, September 6, 2008 ~ 8:30 a.m., Dan Mitchell Wrote: Corporate income tax rates in Korea are still too high, despite plans for a 5% reduction, according to Strategy and Finance Minister, Kang
Man-soo. …Under this plan, the corporate tax rate would initially be cut from 25% to 22%, with the rate to be cut still further in coming years,
bringing it down to between 10% and 20% by 2013. However, according to reports in the national media this week, Kang observed that Korea's business tax rates will still be higher than those in place amongst its
peers, making it difficult for the country to compete. "High tax policies do not help the economy. They do not promote hard work, competition
and innovation," he was quoted by the Korea Times as observing, raising hopes that further cuts are on the cards.
Friday, September 5, 2008 ~ 5:00 p.m., Dan Mitchell Wrote: The Democratic Party Convention in Denver has been called political theater, but it was really a masquerade ball. Again and again, speakers
invoked the language of Margaret Thatcher and Ronald Reagan -- stressing the value of hard work and responsibility for self and family -- while advancing a set of pro-union and collectivist economic policies. If
today's Democrats had their way, they would put the United States in the same approximate position as pre-Thatcher Britain, when the streets of London were choked with garbage because of a strike by sanitation
workers and Britain was known around the world as "the sick man of Europe." …the real thrust of the message that Mr. Obama and [Biden]
gave to the cheering multitudes in Denver was: You are entitled to your job. If you are hit by a foreign competitor who is leaner and hungrier and less coddled than you, get down and stay down, and expect the
government to put you back on your feet. …In his speech to the Democratic convention, Mr. Obama said: "I'll help our auto companies
re-tool, so that the fuel-efficient cars of the future are built right here in America. I'll make it easier for the American people to afford these new
cars. And I'll invest $150 billion over the next decade in affordable, renewable sources of energy -- wind power and solar power and the next
generation of biofuels; an investment that will lead to new industries and five million new jobs that pay well and can't ever be outsourced." One
has to wonder who Mr. Obama thinks he is to suppose he'd be able to make so many correct calls in directing investment flows in one industry
after the next while sitting in the White House. But his presumptuousness is not unprecedented. The Labour Party politicians in Britain who came to power at the end of World War II shared the same enthusiasm for
government direction and micromanagement of the economy.
Friday, September 5, 2008 ~ 4:27 p.m., Dan Mitchell Wrote: How does the performance of the U.S. economy really compare with other advanced economies over the eight years of George Bush's
presidency? …U.S. output has expanded faster than in most advanced economies since 2000. The IMF reports that real U.S. gross domestic product (GDP) grew at an average annual rate of 2.2% over the period
2001-2008 (including its forecast for the current year). President Bush will leave to his successor an economy 19% larger than the one he inherited from President Clinton. This U.S. expansion compares with
14% by France, 13% by Japan and just 8% by Italy and Germany over the same period. The latest ICP findings, published by the World Bank in its World Development Indicators 2008, also show that GDP per capita
in the U.S. reached $41,813 (in purchasing power parity dollars) in 2005. This was a third higher than the United Kingdom's, 37% above Germany's and 38% more than Japan's. …The ICP study found that the
average per-capita consumption of the U.S. population (citizens and illegal immigrants combined) was second only to Luxembourg's, out of 146 countries covered in 2005. The U.S. average was $32,045. This was
well above the levels in the UK ($25,155), Canada ($23,526), France ($23,027) and Germany ($21,742). China stood at $1,751. …The U.S. employment rate, measured by the percentage of people of working age
(16-65 years) in jobs, has remained high by international standards. The latest OECD figures show a rate of 71.7% in 2006. This was more than five percentage points above the average for the euro area. The U.S.
unemployment rate averaged 4.7% from 2001-2007. This compares with a 5.2% average rate during President Clinton's term of office, and is well below the euro zone average of 8.3% since 2000.
Thursday, September 4, 2008 ~ 10:05 a.m., Dan Mitchell Wrote: ...the Census Bureau reported yesterday that the number of people in the U.S. with health insurance actually increased by 3.6 million last year.
That's the good news. The bad news is that nearly three million of them got their coverage through government programs. The slide toward a government-dominated, taxpayer-supported health sector will continue
unless the 45.7 million Americans who don't have insurance now are given more opportunities to buy private coverage. ...A new study by University of Minnesota researchers Stephen Parente and Roger Feldman
shows that Congress could boost by more than 12 million the number of people who have health insurance without spending taxpayer dollars. The
change required is to allow people to buy health insurance across state lines, so they can shop for less expensive policies. The cost of health
insurance varies widely, but it is closely tied to state regulations and legislative mandates dictating what services and providers must be covered. More regulation and less competition generally mean less
affordable coverage, and vice versa. For example, a typical health-insurance policy in heavily regulated New York costs more than three times as much as in less regulated Iowa ($388 a month versus $98 a
month for the same coverage). ...laws designed to make health insurance more affordable often backfire. Many states tell insurance companies
they must charge similar rates to everyone; they also force insurers to sell policies to people who wait until they are sick to buy coverage. It's a little
like allowing a person to wait until his house is on fire, and then requiring an insurance company to sell him a homeowner's policy at the same rate
as those who paid the premiums all along. States should be giving residents more options to buy policies that suit their budgets, not the priorities of politicians. Rep. John Shadegg, a Republican from Arizona,
has proposed federal legislation that would allow people to buy health insurance across state lines.
Wednesday, September 3, 2008 ~ 3:33 p.m., Dan Mitchell Wrote: One of the most common arguments supporting Social Security is that it reduces poverty among the elderly. Last week, Barack Obama stated
that, "Social Security has lifted millions of seniors and their families out of poverty. Without it, nearly 50 percent of seniors would live below the
poverty line." This is almost certainly untrue. Social Security affects poverty among the elderly in two offsetting ways. While it reduces
poverty by providing income to retired persons, it discourages private saving during the working years-ultimately decreasing the private assets
people bring to their retirement. The net effect of this is increased poverty among the retired population. To understand this conclusion, it is
important to compare the rate of return on taxes paid that is generated by Social Security to the rate of return people could receive on their
private saving. For those retiring in 2008, the average implicit real (inflation-adjusted) rate of return on Social Security taxes paid was
slightly below 3 percent-and it is scheduled to decline to under 2 percent in the next forty years. In contrast, if people retiring in 2008 had invested
the taxes they paid into Social Security in a balanced portfolio (60 percent stocks and 40 percent bonds), they would have received a return of 5.5 percent. The difference between a 5.5 percent return and a 3.0
percent return may not sound like much, but in annual returns compounded over a lifetime, this difference has a huge influence on the income available during retirement. In fact, the annual retirement income
provided by a 5.5 percent return is double than that provided by the 3.0 percent return of Social Security. Even more compelling, an investment in
the stock market averages a 7 percent real return, which would mean an annual income of three times what Social Security provides.In short, it is
likely that we would have fewer poor among the elderly had they been free to invest their taxes in private assets. Once Social Security's rate of
return drops to below 2 percent, it will only continue to aggravate poverty in the future. While this simple comparison is compelling, it overlooks the huge hidden costs of this system. By reducing the incentive
for workers to save privately for their own retirement, we reduce the economy's saving and investment in productive assets. This means the economy grows more slowly as a result of Social Security and people end
up with lower incomes even before they pay their taxes. When this cost is taken into account, the real return from Social Security to those retiring today is actually negative!
Tuesday, September 2, 2008 ~ 4:29 a.m., Dan Mitchell Wrote: Hungarian Prime Minister Ferenc Gyurcsany unveiled Wednesday an ambitious programme of tax cuts to boost economic growth... Gyurcsany
proposed easing the burden on taxpayers by up to 1.2 trillion forint over the next three or four years... Around two thirds of the cuts would be
enjoyed by companies. The so-called 'solidarity tax' of 4.0 percent -- introduced in September 2006 as an additional levy on company profits
to help finance the government's austerity measures -- would be scrapped from next year. Instead, the corporate tax rate would be increased to 18
percent from 16 percent at present. Companies would also see their payroll tax rate -- the tax they pay on their employees' wages -- cut by one third or 10 percentage points over a period of a number of years.
Private individuals would not actually see a cut in income tax rates, but the threshold at which they started to pay a higher tax would be raised,
meaning a bigger proportion of their wage packet would fall into the lower tax bracket. The bad news, though, is that Hungary will not join its neighbors and implement a simple and fair flat tax. The Financial Times reports: Ferenc Gyurcsany ruled out introducing the flat tax that has proven so successful at boosting revenues and attracting investors to booming
neighbouring countries including Romania and Slovakia.
Monday, September 1, 2008 ~ 7:05 a.m., Dan Mitchell Wrote: The Greek government has...signalled that the corporate and individual income tax rate would fall by 5% over five years. ...Alogoskoufis said
that he wanted to see a fall in the overall tax burden, and he announced the rate of corporate and the middle band of individual income tax, both
25% at present, will be reduced to 20% by 2014, starting with a 1% cut in 2009. |
|||||||||||
 |
|||||||||||
