 |
|
|
|
|
|
|
|
||
 |
|||||||||
|
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 Heritage Foundation, respectively. |
|||||||||
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The Market Center Blog |
||||||||||
|
Observations and insights on the global fight |
||||||||||
|
CF&P's Market Center Blog Archives |
||||||||||
|
Tuesday, January 31, 2006 ~ 12:47 p.m., Andrew Quinlan Wrote: Nine nations from the old Soviet Bloc have adopted simple and fair flat tax regimes, and others are poised to follow suit. These countries are rejecting the European social
model of progressive taxes and implementing a system based on the notion that all citizens should be treated equally.
. . . Free-market Estonia was the first to adopt a flat tax, implementing a 26 percent rate in 1994, not long after the collapse of the Soviet Union. The two other Baltic states followed in the mid-1990s, with Latvia choosing a 25 percent rate and Lithuania 33 percent. Learning from its neighbors, Russia shocked the world with a 13 percent flat tax that went into effect in 2001. The idea was taken up in 2003 by Serbia, which adopted a 14 percent rate. Slovakia climbed on the bandwagon the following year with a 19 percent rate, as did Ukraine, which chose 13 percent. Romania joined the flat tax revolution in 2005, with a 16 percent rate, along with Georgia, which chose 12 percent - giving it the honor (at least so far) of having the lowest rate.
Tuesday, January 31, 2006 ~ 8:30 a.m., Dan Mitchell Wrote: Often the only incentives for government activities and spending seem to be upward ones, as lobby groups and politicians seek to extend the
power of the State. Hence the historical trend for taxes to increase, and anything that helps counter this will be beneficial. ...tax competition effectively sets up a market for governments, who are forced to
compete for "customers" (whether businesses or individuals). Competition will have the same effects on governments that it has on businesses - they will be forced to be more efficient, and to be more
responsive to "customer" preferences. At its best, competition should result in genuine choice of governments, with different countries
offering different levels of taxation and government activity to suit different preferences. Tax competition...mean[s] that countries will face
the consequences of their choices, and it gives an exit mechanism for minorities to protect themselves from victimization. ...Unfortunately this makes tax competition as popular amongst governments as other
forms of competition are amongst large corporations, and so often their reaction is to form a cartel to guard their patch from upstart smaller competitors. ...The best known attempt by the European governments
to shore up their crumbling tax systems was the Organization for Economic Co-operation and Development's campaign against low-tax jurisdictions. The OECD accepted (in theory) the benefits of tax
competition in keeping taxes low and governments efficient, but sought to emasculate it by preventing "harmful" tax competition (which seemed to be defined as any tax competition that might actually be
effective), forcing non-members to change their tax systems by imposing sanctions on non-compliant countries. ...If Europe's economy is not going to suffer even more damage, its governments will have to
stop their failed attempts to impose a tax cartel and recognize the realities of a global economy. This means lower, simpler taxes, which in turn means that restricted State spending will have to be more
responsive to the wishes of their electorates, and tax competition is the force that has the best chance of bringing this about.
Tuesday, January 31, 2006 ~ 7:41 a.m., Dan Mitchell Wrote: If there is a crisis in health spending, it is the direct result of government policy over the past four decades, which has encouraged
the dramatic rise in third-party payment of health care. Today federal, state and local spending accounts for nearly half of the nation's health
care bill, up from 38% in 1970. In addition, the tax code explicitly favors insurance payment of even routine health bills. That's because only health care spending funneled through employer-provided health
insurance gets a full and complete tax break. The result is that consumers increasingly are shielded from the true cost of health care. In 2004, out-of-pocket spending accounting for just 12.6% of national
health spending, down from 33% in 1970. With the true cost of care mostly hidden from consumers, they naturally demand more and more, pushing up spending and prices. The problem is that most health care
reform proposals -- including those offered so far by the Bush administration -- simply offer more of the same: more government spending, or more generous tax breaks for health care spending.
Monday, January 30, 2006 ~ 8:51 a.m., Dan Mitchell Wrote: Former Treasury Secretary Robert Rubin wrote a tedious essay in the Wall Street Journal that wisely advised "putting aside ideology in favor
of facts and analysis." ...Mr. Rubin identified the unserious heretics as a group of nameless supply-side theoreticians who allegedly made wildly
incorrect predictions about lower tax rates in 2003 and also about higher tax rates in 1993... No supply-side economist asserted any and all tax cuts will pay for themselves. My Wall Street Journal response to
President Bush's initial 2001 tax bill said it was mostly a demand-side effort to reduce revenue (particularly the rebated 10 percent tax rate)
with minimal effect on marginal incentives. On the other hand, quite a few academic economists -- Larry Lindsay, Dan Feenberg and James Poterba, Martin Feldstein and others -- have observed reducing the
highest marginal tax rates soon resulted in larger tax receipts. This is partly a matter of supply-side effects on labor effort and entrepreneurship and partly reduced incentive to avoid taxes. At least
13 studies found reducing the capital-gains tax rate results in more gains and therefore more taxes paid. ...While the top tax rate on salaries and dividends was 28 percent, it brought in 7½ percent of
GDP. After President Clinton added the 36 percent and 39.6 percent tax brackets in 1993, the income tax (aside from capital gains) brought in only 7.4 percent of GDP for four years.
Monday, January 30, 2006 ~ 8:04 a.m., Dan Mitchell Wrote: The prescription drug bill may have temporarily taken Medicare "off the table" for the 2004 election, but Republicans will be bedeviled for
decades by its rising costs and complexity. At current growth rates, Medicare, its cousin Medicaid and Social Security will consume a fifth of the nation's gross national product by 2020. That number represents
the current size of the entire federal government. Nor have Republicans learned much from that mistake. President Bush and the GOP Congress continue to preside over the largest expansion of government since
LBJ's Great Society. Economic growth fueled by the Bush tax cuts created a 22% surge in federal revenue over the past two years. But even that flow is barely keeping pace with spending, which went up by
8% in 2005 and is set to increase by 9% in 2006. When the good times slow down, no one expects it will be easy to slam the brakes on spending. ...Senator Tom Coburn, the Oklahoma Republican who along
with John McCain now promises to challenge every earmark on the Senate floor, says that ultimately good policy is good politics. "The Founders taught us the best policy was limited government that didn't
presume men were angels," he told me.
Sunday, January 29, 2006 ~ 1:55 p.m., Dan Mitchell Wrote: Myriad books with titles such as The Death of the Automobile, Road to Ruin, Highways to Nowhere, Divorce Your Car!, and Asphalt Nation
have been written over the last four decades, all complaining about car culture. Jane Kay Holtz, author of Asphalt Nation, describes America in
the introduction to her book as "a nation in gridlock from its auto-bred lifestyle, an environment choking from its auto exhausts." To her, the
anti-car movement is "a personal activism, an activism that shifts and focuses our own lives to favor the foot, the bike, the public vehicle."
...This anti-car agitprop reveals nothing so much as an ignorance of what cars mean to real people. ...Traveling in a car, on average, takes half as long as a ride on mass transit. According to transportation
expert Wendell Cox, the average American commute in a car is 30 miles per hour, while heavy and light rail are 25 and 15 miles per hour, respectively. Automobile opponents look back fondly to the early 20th
century when streetcars and rail systems served as the dominant modes of transportation. At the peak of rail travel in 1920, the average American traveled about 1,400 miles a year on urban transit and 440
miles a year on inter-city rail, transportation expert Randal O'Toole reports in his book The Vanishing Automobile and Other Urban Myths. No one, except businessmen and the wealthy, ventured farther than a
few miles from home. Today, the average American drives 14,000 miles a year and travels more than 10 times as much as his early 20th century counterpart. The automobile has made life better for everyone. It has
done so by creating not just mobility, but choice, wealth, freedom, and time. ...The rise of the car also means that people living in isolated areas can escape their surroundings. Without cars, some
neighborhoods, both those that are too far out and those that aren't situated near transit stops, would be off limits to non-residents. Medical
care, too, is easily accessible for everyone who owns a car. ...Some countries have banned cars. North Korea, one of the world's most brutal dictatorships, forbade the use of private cars until last year.
When Communist Albania abolished the car, its economy disappeared with it. The absence of cars and highways is consistent in the poorest,
most oppressed countries in the world. ...It's no coincidence that as soon as the automobile became affordable to the masses and ceased being a
luxury good for the wealthy, the anti-car crowd swung into high gear. To them, the car is a symptom of an entire lifestyle they find objectionable: that is, mobility and choice for all. And, not surprisingly,
the people they criticize tend to be people they have little in common with, who have no chance of becoming part of their social circles. One
only has to conjure the names of environmental activists in Hollywood, such as Cameron Diaz or Laurie David--the wife of comedian and Seinfeld creator Larry David--to prove this point. To illustrate the
snobbery of anti-car elitists, car enthusiasts like to quote the Duke of Wellington, who at the advent of the railroad proclaimed the new technology would "only encourage the common people to move about
needlessly."
Saturday, January 28, 2006 ~ 2:43 p.m., Dan Mitchell Wrote: Australian Finance Minister Nick Minchin has proposed that the government should abolish the superannuation tax in the next budget
rather than cutting income taxes which, he argues, could help overheat the economy by boosting consumer spending and increasing inflation. ...Senator Minchin cautioned that further income tax cuts which
boosted consumer spending might force the Reserve Bank to raise interest rates to keep inflation in check. "There is however a very obvious way to reduce taxation without unduly stimulating the economy
and putting upward pressure on interest rates, and that is to look at how we tax savings as opposed to spending or income," Senator Minchin argued. "Abolishing Labor's tax on super contributions would
deliver a very real benefit to Australian workers without overheating the economy," he concluded.
Friday, January 27, 2006 ~ 7:12 a.m., Dan Mitchell Wrote: Mr Bolkestein, who served in the previous Prodi commission from 1999 to 2004, predicted in a speech delivered on Wednesday (25 January)
that the common currency will face a huge test in around 10 years, when a pensions boom is likely to hit Europe. The ageing of Europe's
population will hit the continent "ruthlessly," the outspoken Dutch politician stated, with eurozone states like Italy being unprepared for
the expected jump in pension claims. These states "will be forced by political pressure to borrow more and increase their budget deficit, with
consequences for interest rates and inflation," he indicated, adding "the real test for the euro is not now, but in ten years time".
Friday, January 27, 2006 ~ 5:34 a.m., Dan Mitchell Wrote: German Finance Minister Peer Steinbrück is urging new EU member states to raise taxes, since their currently low rates have "nothing to do
with fair tax competition", he says. ...The German economy has been developing poorly for a number of years. ...Germany is having trouble competing. The finance minister obviously knows this. And he also
seems to realize that high German taxes are partly to blame. But his solution is not for Germany to cut taxes radically. Instead, he wants his
competitors to become less competitive. ...To a large extent, this is all a symptom of the debate on the so-called "European Social Model"
shared by most countries in Western -- "old" -- Europe. We created a highly uncompetitive model -- the core of which is a big state -- and now
find it very hard to pursue reforms that take us away from it. ...the so-called social model makes Western Europe less competitive: First, the size of the state determines what tax pressure you have. High taxes
make a country less competitive. And if the state and its public monopolies constitute a large share of society, there will be less space for all the forces of competition that create wealth.
Thursday, January 26, 2006 ~ 8:32 a.m., Dan Mitchell Wrote: ...the reality for Europe's biggest economies is brutal. This ageing Continent can't create enough jobs for its people, especially the young,
or stay competitive in a fast changing world. Europe fusses about a widening gap with the U.S. on nearly every economic criteria. Forget about trying to close that. The more immediate worry is that rising
powers like China and India are catching up to a Continent stuck in place. Any discussion of a solution for the EU's problems needs to begin with its bloated state sectors, its restrictive labor markets and its
aversion to free competition. ...Employment is Europe's greatest failing. The U.S. labor market takes in millions of new workers each year and comes as near as possible to full employment. Its magic formula:
flexibility. But no one in Europe is willing to embrace this path to "social cohesion," i.e. making sure everyone has a job. The current
view still sees government welfare checks as the proof of a just society. ...The reckoning for Europe, with its stagnant growth and demographic time bomb, may be years or even a decade off. Concerning the previous slogan of the so-called Lisbon Agenda, to make Europe the most competitive economy by 2010, the commission
experts point out that they are no longer "obsessed" with that goal, which had been expressed mainly in terms of "catching up" with the
US. "Our goal is simply to do much better in growth and jobs," they said on Monday. But Eurochambers' 2004 figures show that the EU has
fallen further behind its American competitor, lagging 18 years behind in terms of income and 14 years in productivity per employee. The EU's 2004 employment rate was reached by the US in 1978 and the R&D
investment per capita level in 1980, with both European indicators deteriorating between 2003 and 2004.
Thursday, January 26, 2006 ~ 8:17 a.m., Dan Mitchell Wrote: ...the recently-appointed leader of the Conservative Party, David Cameron, has stressed that economic and fiscal stability must be the
Party's first priority before tax cuts, although the new Tory leader said that low taxation remains a long-term goal. ..."When it comes to the
economy, I am absolutely clear that stability and responsibility come first, second and third as our priorities - and that they come before the
commitment to cut taxes," he argued. ...Shadow Chancellor George Osbourne explained that the fruits of economic growth would be shared between improving public services and cutting taxes. "That is the
sustainable path to lower taxes. It will make Britain more competitive and protect public services," Mr Osbourne noted. ...Mr Osbourne also
used his speech as an opportunity to attack the record of his opposite number, Chancellor of the Exchequer Gordon Brown, who, he remarked, had increased UK taxes as a share of the economy while the
UK's competitors had reduced theirs.
Wednesday, January 25, 2006 ~ 7:18 a.m., Dan Mitchell Wrote: Teachers unions keep telling us they care deeply, profoundly, about poor children. But what they do, as opposed to what they say, is behave
like the Borg, those destructive aliens in the Star Trek TV series who keep coming and coming until everyone is "assimilated." We saw it in Florida this month when the state supreme court struck down a
six-year-old voucher program after a union-led lawsuit. And now we're witnessing it in Milwaukee, where the nation's largest school choice program is under assault because Wisconsin Governor Jim Doyle
refuses to lift the cap on the number of students who can participate. ...Mr. Doyle, a union-financed Democrat, has vetoed three attempts to loosen the state law that limits enrollment in the program to 15% of
Milwaukee's public school enrollment. ...There's no question the program has been a boon to the city's underprivileged. A 2004 study of high school graduation rates by Jay Greene of the Manhattan Institute
found that students using vouchers to attend Milwaukee's private schools had a graduation rate of 64%, versus 36% for their public school counterparts. Harvard's Caroline Hoxby has shown that
Milwaukee public schools have raised their standards in the wake of voucher competition. ...The unions scored a separate "victory" in
Florida two weeks ago when the state supreme court there struck down the Opportunity Scholarship Program. ...Barring some legislative damage control, the 5-2 ruling means these kids face the horrible
prospect of returning to the state's education hellholes next year. ...What the Milwaukee and Florida examples show is that unions and their allies are unwilling to let even successful voucher experiments
continue to exist. If they lose one court case, they will sue again -- and then again, as long as it takes. And they'll shop their campaign cash
around for years until they find a politician like Jim Doyle willing to sell out Wisconsin's poorest kids in return for their endorsement. Is there a more destructive force in American public life?
Tuesday, January 24, 2006 ~ 8:41 a.m., Dan Mitchell Wrote: Thomas Jefferson recognized the dangers of pork-barrel spending back in 1796 when he wrote James Madison that allowing Congress to spend
federal money for local projects would set off "a scene of scramble among the members [for] who can get the most money wasted in their
State; and they will always get most who are meanest." ...In his last act before leaving the presidency in 1817, Madison vetoed a bill for federal
financing of roads, bridges and canals. The man popularly known as "the Father of the Constitution" rejected the view of Congress that its
general welfare clause justified the expenditure. He wrote that "such a view of the Constitution would have the effect of giving to Congress a
general power of legislation instead of the defined and limited one hitherto understood to belong to them, the terms 'common defense and general welfare' embracing every object and act" imaginable.
Ultimately, the answer to the Jack Abramoff scandals is to combine immediate reforms with the realization that unless the size of government is reduced, even conservatives inevitably get caught up in
the care and feeding of the state. Industries that want favors or protection from government will hire the powerful to manipulate the levers of power. Local governments will be similarly motivated to look
for free federal money. Abuse and corruption will inevitably follow. The current scandals in Washington should remind us just how far we have strayed from the vision of limited government the Founders handed
down to us. Madison urged those who wanted federal largesse for "county roads" to amend the Constitution to permit it.
Tuesday, January 24, 2006 ~ 7:57 a.m., Dan Mitchell Wrote: Angered by a Supreme Court ruling that gave local governments more power to seize people's homes for economic development, a group of
activists is trying to get one of the court's justices evicted from his own home. The group, led by a California man, wants Justice David Souter's
home seized to build an inn called the "Lost Liberty Hotel." They submitted enough petition signatures only 25 were needed to bring the
matter before voters in March. ..."This is in the tradition of the Boston Tea Party and the Pine Tree Riot," Organizer Logan Darrow Clements
said, referring to the riot that took place during the winter of 1771-1772, when colonists in Weare beat up officials appointed by King George III who fined them for logging white pines without approval.
"All we're trying to do is put an end to eminent domain abuse," Clements said, by having those who advocate or facilitate it "live under it, so they understand why it needs to end."
Monday, January 23, 2006 ~ 8:13 a.m., Dan Mitchell Wrote: America is not competing for jobs with China. We are competing for capital. Double taxing dividend and capital gains income drives capital
to China, where it earns higher after-tax returns. When that happens, American workers are left behind with falling productivity and uncompetitive companies. Reducing or eliminating dividend and
capital-gains tax rates keeps capital in America, where it makes workers productive and supports high incomes. Congress must act now to keep rates from increasing in 2008, by extending or eliminating
dividend and capital gains taxes. ...America enjoys the highest living standard in the world because American workers enjoy the use of the largest and most advanced stock of tools in the world. But tools are
mobile, workers are not. While America continues to double-tax capital income through dividend and capital gains taxes, China, India, and other countries are aggressively competing for American capital with
investor-friendly policies. When the capital leaves, the paycheck goes with it. We can't afford to let that happen.
Monday, January 23, 2006 ~ 7:52 a.m., Dan Mitchell Wrote: The Health Care Choice Act sponsored by Rep. John Shadegg (R., Ariz.) and Sen. Jim DeMint (R., S.C.), would let American consumers purchase
health insurance across state lines, just as they now may shop coast to coast for mortgages. Shadegg-DeMint would let insurers licensed in one
state sell to individuals in the other 49. As such, Congress would use its constitutionally enumerated powers to liberate interstate commerce and
transform 50 separate, closed markets for medical coverage into one open, national market for health insurance. ..."Just as Delaware became a magnet for banking, some states will become magnets for
health insurance," predicts Dr. David Gratzer, a physician and Manhattan Institute senior fellow, and one of this idea's earliest proponents. "People seem to understand intuitively that it doesn't
matter whether their checks come from Delaware or New York or California. Likewise, the issues around health insurance are cost and availability rather than state of origin." Location matters. A health
policy for a single Pennsylvanian costs roughly $1,500 annually. Cross the Delaware into New Jersey, as George Washington did in 1776, and a similar health plan costs about $4,000, thanks to government
regulations.
Monday, January 23, 2006 ~ 7:27 a.m., Dan Mitchell Wrote: The modern CEO position requires a variety of skills and experience that aren't easily found. Especially in a Sarbanes-Oxley world, CEOs
face more scrutiny and have shorter tenures. It's also notable that many of today's most informed and sophisticated investors are only too happy to pay handsomely, perhaps even exorbitantly, for the right CEO
candidate. Private-equity firms in particular have persisted in giving out large pay packages to the top managers they hire to turn companies around. And because they are paying with their own money, they have a
big stake in getting it right. No doubt some executives earn more than their performance deserves, but that ought to be an issue for shareholders. And the best way to give shareholders influence over
managers and their pay is to restore the market for corporate control--that is, remove the legal and other impediments to takeovers. The CEOs and boards most likely to pad their own pay despite lousy
performance are those who know their jobs aren't at risk. ...If certain media moralists want to oust bad CEOs, they should call for a repeal of
the Williams Act, which requires that investors disclose any large share accumulation to the broader public. This has the effect of preventing quiet accumulations and making takeovers less profitable and more
difficult.
Sunday, January 22, 2006 ~ 2:02 p.m., Dan Mitchell Wrote: Britain's road to economic ruin under Tony Blair and Gordon Brown is nearly complete. Next year the U.K. government will spend more as a
percentage of GDP than its German counterpart for the first time in a generation -- 45.7%, according to OECD estimates. That's up from 37.5% in 2000 and surpasses Germany's figure of 45%, which has been
falling. ...It is no coincidence that growth numbers for the British economy are starting to feel very Continental. While final GDP growth figures for 2005 have not been published yet, the OECD's latest
projection for Britain was 1.7% -- slightly ahead of Germany's rate of 1.5% and a fraction behind France's 1.9%. ...Mr. Brown, the chancellor
of the exchequer, has blamed high oil prices and a slow housing market for Britain's sluggishness. No mention was made of explosion in public-sector employment, red tape and stealth taxes. The former has
seen an increase of over 860,000 since 1997 according to the think tank Reform, bringing the total number of people employed by the state to a
staggering six million, or one in 10 Britons. ...with both main political parties seemingly agreeing on the flawed concepts of social justice and
redistribution, and committed to ever more state interference, Britons can expect their country to decline slowly but inevitably, yet again, into an international has-been.
Sunday, January 22, 2006 ~ 11:46 a.m., Dan Mitchell Wrote: A recent tax cut in a city already known for its low-tax policies could boost Hong Kong's standing as an asset-management center for wealthy
international investors. Late last year and with little fanfare, Hong Kong eliminated its estate tax, which exacted as much as 15% of the value of any assets held in the city, including real estate, stocks and
luxury goods, when their owner passed away. ...Getting rid of the tax also levels the playing field with Hong Kong's biggest competitor as a
financial hub in Asia, Singapore. The city-state doesn't impose an estate tax on nonresidents. ...Florence Yip, a partner at PricewaterhouseCoopers, notes that the absence of an estate tax will
help woo overseas capital that already has been attracted by a policy of no capital-gains tax. It also could prompt some small- and midsize-business owners concerned with inheritance issues to set up
holding companies in Hong Kong rather than in offshore tax havens such as the Cayman Islands or the British Virgin Islands, says a Hong Kong-based banker.
Saturday, January 21, 2006 ~ 9:45 a.m., Dan Mitchell Wrote: Public employee pensions have become increasingly generous since 2000, promising a more comfortable retirement for civil servants but a
serious financial challenge for future taxpayers. ...Governments have been ...increasing monthly benefits, making it easier to retire at 55 and
spending more on retiree health benefits. ...Average annual benefits for retired state and local workers grew 37% to $19,875 from 2000 to 2004, the most recent data available, according to the Census Bureau.
...The portion of the private workforce enrolled in plans that pay monthly benefits for life has fallen from 39% in 1980 to 18% in 2004, according to the Employee Benefit Research Institute. By comparison,
more than 90% of government workers are covered by such plans, the Bureau of Labor Statistics says.
Saturday, January 21, 2006 ~ 9:16 a.m., Dan Mitchell Wrote: Not enough money for education? It's a myth. The truth is, public schools are rolling in money. If you divide the U.S. Department of
Education's figure for total spending on K-12 education by the department's count of K-12 students, it works out to about $10,000 per student. Think about that! For a class of 25 kids, that's $250,000 per
classroom. This doesn't include capital costs. Couldn't you do much better than government schools with $250,000? You could hire several good teachers; I doubt you'd hire many bureaucrats. Government
schools, like most monopolies, squander money. America spends more on schooling than the vast majority of countries that outscore us on the
international tests. But the bureaucrats still blame school failure on lack of funds, and demand more money. ...A study by two professors at the Hoover Institution a few years ago compared public and Catholic
schools in three of New York City's five boroughs. Parochial education outperformed the nation's largest school system "in every instance,"
they found -- and it did it at less than half the cost per student.
Friday, January 20, 2006 ~ 8:59 a.m., Dan Mitchell Wrote: Twenty-five years ago today, Ronald Reagan was inaugurated as the 40th President of the United States promising less intrusive
government, lower tax rates and victory over communism. ...If the story of history is one long and arduous march toward freedom, this was a momentous day well worth commemorating. All the more so because
over this 25-year period prosperity has been the rule, not the exception, for America--in stark contrast to the stagflationary 1970s. Perhaps the
greatest tribute to the success of Reaganomics is that, over the course of the past 276 months, the U.S. economy has been in recession for only
15. That is to say, 94% of the time the U.S. economy has been creating jobs (43 million in all) and wealth ($30 trillion). More wealth has been
created in the U.S. in the last quarter-century than in the previous 200 years. ...Where Republicans have most strayed from the Reagan vision
has been on controlling federal spending. ...They should all recall the Gipper's words in his inauguration speech 25 years ago: "It is no
coincidence that our present troubles parallel and are proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government."
Friday, January 20, 2006 ~ 8:48 a.m., Dan Mitchell Wrote: A much better explanation for the millions going to the campaign coffers of Washington politicians lies in the awesome growth of
government control over business, property, employment and other areas of our lives. Having such power, Washington politicians are in the position to grant favors. The greater their power to grant favors, the
greater the value of being able to influence Congress, and there's no better influence than money. ...Campaign finance and lobby reform will only change the method of influence-peddling. If Congress did only
what's specifically enumerated in our Constitution, influence-peddling would be a non-issue simply because the Constitution contains no authority for Congress to grant favors and special privileges.
Friday, January 20, 2006 ~ 8:31 a.m., Dan Mitchell Wrote: A senior UK tax lawyer says that Treasury hostility towards the corporate sector could drive major companies out of the country,
reports London's Lehmann Communications plc. Jonathan Ivinson, Head of Tax at Hogan & Hartson says: "Gordon Brown believes that UK corporates do not pay enough in taxes. He has no idea that by
restructuring their affairs and relocating staff out of the UK they could leave a huge hole in the public finances". Mr Ivinson says that at least
one FTSE 100 company is investigating domiciling itself outside the UK following an 18-month crackdown by Revenue & Customs on tax avoidance. ...Richard Collier-Keywood, head of tax at PwC, said: "A
lot of UK tax is paid by relatively few companies, and many of those have a choice about where they site some of their operations - the tax situation could persuade them to site discretionary additional business
elsewhere."
Friday, January 20, 2006 ~ 7:59 a.m., Dan Mitchell Wrote: Organized labor, having mightily tried and miserably failed to unionize even one of Wal-Mart's 3,250 American stores, has turned to organizing
state legislators. Maryland was a natural place to begin because it has lopsided Democratic majorities in both houses of its legislature. ...Wal-Mart's enemies say Maryland is justified in expropriating some of
the company's revenues because the company's pay and medical benefits are insufficient to prevent some employees from being eligible for Medicaid. ...Maryland's new law is, The Washington Post says, "a
legislative mugging masquerading as an act of benevolent social engineering.'' And the mugging of profitable businesses may be just beginning. ...Maryland's grasping for Wal-Mart's revenues opens a new
chapter in the degeneracy of state governments that are eager to spend more money than they have the nerve to collect straightforwardly in taxes. Fortunately, as labor unions and allied rent-seekers in 30 or so
other states contemplate mimicking Maryland, Wal-Mart can contemplate an advantage of federalism. States engage in "entrepreneurial federalism,'' competing to be especially attractive to
businesses. A Wal-Mart distribution center, creating at least 800 jobs, that has been planned for Maryland could be located instead in more hospitable Delaware.
Friday, January 20, 2006 ~ 7:15 a.m., Dan Mitchell Wrote: The EU should be fed by its own tax instead of member states' donations, the Austrian presidency said on Wednesday... "Europe needs
stronger own resources," Austrian chancellor Wolfgang Schussel indicated... He hinted the tax could target short-term financial investors, air-travel and maritime transport... A spokesman for UK
prime minister Tony Blair quickly responded that London has "strong reservations" about any EU tax plan... But French diplomats reacted
warmly, saying "We should have an open mind in the discussion on how the future undertakings of the EU can be met. This might include a new European tax."
Thursday, January 19, 2006 ~ 10:14 a.m., Dan Mitchell Wrote: Economic behavior, whether measured in terms of employment, work effort, saving, investment, risk-taking, entrepreneurship or capital
formation, is highly responsive to changes in marginal tax rates. In other words, incentives matter. The economic power of lower tax-rate incentives has been proven at national and state levels. It is also borne
out by the results of lower tax-rate systems put in place internationally. Allowing people to keep more of the extra dollar earned or the extra
dollar invested, by providing a reward for incentive, is a tried-and-true prescription for economic growth. Raising after-tax rewards for work,
investment and risk-taking is the surest path to long-term prosperity and competitiveness... waging class war against the wealthy is nonsensical; it merely wages war against...non-rich working people who
are deprived of scarce and valuable capital that is so necessary to create new technologies, businesses, equipment, jobs and job training.
Thursday, January 19, 2006 ~ 10:02 a.m., Dan Mitchell Wrote: In a poll conducted for the University of Maryland's Program on International Policy Attitudes between June and August last year, fully
74% of Chinese citizens said they agreed with the statement "the free enterprise system and free market economy is the best system on which
to base the future of the world." The Philippines, at 73%, and the U.S., at 71%, were second and third. The poll, which surveyed 20,791 people
in 20 countries, seems like a pretty good snapshot of current sentiment, as such things go. Remarkable, isn't it, that residents of the Middle Kingdom have maintained their appreciation of the benefits of free
enterprise through six decades of oppression and economic backwardness imposed by their Communist cadres? ...Less encouraging were the responses of European citizens, who arguably could do with a
much bigger dollop of capitalist religion, given the moribund state of their economies. Fully half of the French disagreed that capitalism is the best way forward, for instance. (We'd be curious to hear their
proposed alternative, given how their socialist experiment has produced double-digit unemployment and low growth.)
Thursday, January 19, 2006 ~ 9:45 a.m., Dan Mitchell Wrote: One that believes the government should improve living standards for the poor, and the other which believes that people should take care of
themselves, without government help. Those protesting the president's current budget would label the first group as "compassionate" and the
second group as "uncompassionate." But how do they compare in their private giving behaviors? According to the General Social Survey in
2002, the proponents of government spending are six percentage points less likely to give money to charity each year than the opponents, and a
third less likely to give money away each month. ...who exhibits greater compassion by donating more blood? Once again, it is those opposed to government aid. These supposedly uncompassionate folks are 25% of
the population, but donate more than 30% of the blood each year. Meanwhile, supporters of government spending to the poor are 28% of the population, but donate just 20% of the blood. If the whole
population gave blood like opponents of social spending do, the blood supply would increase by more than a quarter. But if everyone in the population gave like government aid advocates, the supply would drop
by about 30%.
Thursday, January 19, 2006 ~ 9:17 a.m., Dan Mitchell Wrote: Several of the world's most talented and best paid footballers, including FIFA World Player of the Year, Ronaldinho, are said to have been
deterred from joining British soccer clubs because of the UK's unfavourable tax regime for those on high incomes. This is the conclusion drawn by Roy Saunders, chairman of International Fiscal
Services, the international tax consultancy, who is urging Chancellor of the Exchequer Gordon Brown to relax taxation rules for sports stars in
order to attract the best talent to Britain. Mr. Saunders argues that the Treasury would benefit from a review of tax laws relating to high-income sport stars by ultimately taking more in tax receipts if the
rules were changed. ...Under the UK's tax laws, income over GBP32,400 is taxed at 40%, but because of social security contributions British clubs would have to pay a footballer GBP100,000 in gross
income for him to earn GBP50,000 in net income. In Spain, a club would have to pay just GBP66,000 gross income for a player to earn GBP50,000 after tax. Furthermore, certain other European countries
are more attractive to the well-paid from a tax perspective because their governments allow more income to be held offshore.
Thursday, January 19, 2006 ~ 8:20 a.m., Dan Mitchell Wrote: Low-skilled workers cannot receive more in compensation than the value of their labor. If Wal-Mart is forced to increase the share of
compensation that comes in the form of health benefits, then it will have to decrease take-home pay. If it cannot decrease take-home pay, then it
will have to reduce its reliance on low-skilled labor or cut back on operations altogether. The Wal-Mart law injects politics into the process
of setting benefits for Wal-Mart workers. Once the Wal-Mart law takes hold, various suppliers of health care services will have an incentive to
apply pressure. Dentists and optometrists will lobby for laws that force Wal-Mart to pay for its workers' dental care and eyeglasses. The biggest
beneficiaries of the Wal-Mart law are likely to be people who are better off than Wal-Mart workers. For example, owners of other businesses will be able to charge higher prices and earn higher profits.
Wednesday, January 18, 2006 ~ 11:48 a.m., Dan Mitchell Wrote: The European Commission on Tuesday announced that it has adopted a Communication that presents a possible solution to the compliance
costs and other company tax difficulties that Small and Medium Enterprises (SMEs) face when doing business across borders. The Commission suggests that Member States allow SMEs to compute their
company tax profits according to the tax rules of the home state of the parent company or head office. An SME wishing to establish a subsidiary or branch in another Member State would as a result be able
to use tax rules and file tax returns in a country with which it is familiar. ...The Home State Taxation scheme would...mean that an SME's tax base (i.e. taxable profits) would be calculated in accordance
with the rules of the Home State. Each participating Member State would then tax at its own corporate tax rate its share of the profits determined according to its share of the total payroll and/or turnover.
Wednesday, January 18, 2006 ~ 11:21 a.m., Dan Mitchell Wrote: Hungary's liberal SZDSZ party, a junior partner in the country's governing coalition, wants to follow the example set by many other
countries in Central and Eastern Europe by introducing a flat tax following elections which are due to be held in later in the Spring. Speaking at a business conference on Monday, Hungary's youthful
Economy and Transport Minister Janos Koka proposed a 20% flat tax system, including personal income tax, value-added tax and corporate tax. ...The Socialists have rejected flat taxes on the grounds that it
would mean that "the head of a successful business would pay the same tax rate as a low-income worker." In June of last year, a proposal to
introduce a single 21% flat-rate corporate, personal income and value added tax was rejected by the government, which has instead committed itself to a five-year programme of tax reforms designed to
reduce the total burden of taxation as a percentage of the country's economy... At present, Hungary's personal income tax rates range from 18% to 36%, while corporate tax rate is levied at 16%. ...Flat taxes
have become a much used tool by the former members of the Warsaw pact to raise levels of investment and attract foreign business, a trend which began in 1994 when Estonia introduced a flat tax rate of 26% for
all personal income and corporate profits (which it plans to reduce to 20% this year). Since then, a number of countries in the region have followed Estonia's lead: in 1997 Russia introduced a flat tax of 13%;
the Polish government has announced that it will be putting in place a single 18% rate of corporate tax, income tax, and VAT by 2008; while Hungary's neighbours in Slovakia and Romania have also forged ahead
with flat taxes.
Wednesday, January 18, 2006 ~ 9:15 a.m., Dan Mitchell Wrote: Not counting foreign immigrants, Massachusetts has been losing more people than it attracts every year since 1990, according to MassINC, a
Boston-based research institute. The net outflow during the 12 years from 1990 to 2002 -- the excess of people leaving Massachusetts over those entering -- was 213,000, and the hemorrhaging has only gotten
worse since then. MassINC reported in 2003 that one-fourth of Bay State residents would leave if they had the opportunity to do so. ...a hatred of cold winters doesn't explain New Hampshire's net gain of
78,000 transplanted Massachusetts residents between 1990 and 2002... What is it about Massachusetts that keeps employers -- or potential employers -- from braving the risk involved in launching a new
enterprise or expanding an old one? ...This is a state in which a tax cut can be decisively approved by the voters yet never go into effect. In
which grocers can be prosecuted for pricing milk too low. ...In which local officials have been known to heatedly object to opening town meetings with the Pledge of Allegiance. In which a $2 billion Big Dig
ends up costing $14 billion. In which Ted Kennedy keeps getting reelected. Is it really any wonder so many people are fleeing Massachusetts? Maybe the real mystery is why so many of us stay.
Wednesday, January 18, 2006 ~ 7:56 a.m., Dan Mitchell Wrote: The beauty of capitalism is that deals must always be win-win, or they don't happen. You work for an employer if you think you're better off
working for him than not doing so; he employs you if he thinks you're worth what you demand. A strike is simply an organized refusal to work
for less than the strikers think they're worth. The principle is the same whether one individual or a union walks off the job: It's the principle of
self-ownership, the underlying principle of the whole capitalist system, the principle that we are all free individuals dealing voluntarily to
mutual advantage. As John Locke taught in the "Second Treatise of Government," "every Man has a Property in his own Person. This no
Body has any Right to but himself. The Labour of his Body, and the Work of his Hands, we may say, are properly his." Of course, just as
workers have a right to strike, employers -- morally, at least -- have a right to fire them. Under President Reagan, the federal government dismissed striking air-traffic controllers and let eager new employees
take the jobs.
Tuesday, January 17, 2006 ~ 10:10 a.m., Dan Mitchell Wrote: A report submitted to Congress this week by National Taxpayer Advocate Nina E. Olson urged lawmakers to enact fundamental
simplification of the the US tax system to ease the tax reporting burden for legitimate taxpayers... Olson went on to observe that: "As taxpayers become confused and make mistakes, or deliberately 'push the
envelope,' the IRS understandably responds with increased enforcement actions. The exploitation of 'loopholes' leads to calls for new legislation to crack down on abuses, which in turn makes the tax law more
complex. ...Thus begins an endless cycle - complexity drives inadvertent error and fraud, which drive increased enforcement or new legislation,
which drives additional complexity. In short, complexity begets more complexity. This cycle can only be broken by true tax simplification, followed by ongoing legislative and administrative discipline to avoid
'complexity creep.'" In 2005, taxpayers will pay roughly $1.2 trillion in federal income taxes. But America's tax burden is more than just the amount of tax paid. It
also includes the cost of complying with federal taxes, including tax planning, paperwork and other hassles caused by tax complexity. In the last century the cost of tax compliance has grown tremendously. ...In
2005 individuals, businesses and nonprofits will spend an estimated 6 billion hours complying with the federal income tax code, with an estimated compliance cost of over $265.1 billion. This amounts to
imposing a 22-cent tax compliance surcharge for every dollar the income tax system collects. Projections show that by 2015 the compliance cost will grow to $482.7 billion.
Tuesday, January 17, 2006 ~ 9:45 a.m., Dan Mitchell Wrote: The politics of education reform typically features Republicans pushing for more choice and Democrats defending the status quo. But not
always. In Connecticut, Democrats in the legislature are eager to expand the state's successful charter school model while GOP Governor Jodi Rell refuses to lift a finger to help. ...Connecticut boasts some of
the finest charter schools in the country. In June, the Hartford Courant reported that at "New Haven's Amistad Academy, where 98 percent of students are African American or Hispanic, math and reading scores
have risen to triple those of neighboring public schools and equal to scores in [wealthier and predominantly white] Greenwich." ...when Ms.
Rell presents her new budget next month, she's expected once again to ignore the education reformers. That's because she is running for re-election in November and is seeking the support of the teachers
union -- the Connecticut Education Association -- which is dead set against charters and any other education reform that threatens its monopoly. With a job-approval rating that's remained well over 70%
since she took office, Ms. Rell has the political capital to take on an entrenched interest that hurts poor kids. But she apparently lacks the political will.
Monday, January 16, 2006 ~ 12:39 p.m., Dan Mitchell Wrote: Suburbia, the preferred way of life across the advanced capitalist world, is under an unprecedented attack -- one that seeks to replace
single-family residences and shopping centers with an "anti-sprawl" model beloved of planners and environmental activists. ...All this reflects a widespread prejudice endemic at planning departments in
universities, within city bureaucracies, and in much of the media. Across a broad spectrum of planning schools and practitioners, suburbs and single-family neighborhoods are linked to everything from obesity,
rampant consumerism, environmental degradation, the current energy crisis -- and even the predominance of conservative political tendencies. ...Planners in Albuquerque have suggested banning backyards --
despised as wasteful and "anti-social" by new urbanists and environmentalists, although it is near-impossible to find a family that doesn't want one. ...It is time politicians recognized how their
constituents actually want to live. If not, they will only hurt their communities, and force aspiring middle-class families to migrate ever further out to the periphery for the privacy, personal space and
ownership that constitutes the basis of their common dreams.
Monday, January 16, 2006 ~ 10:45 a.m., Dan Mitchell Wrote: What should a woman do when attacked by a criminal? Should she behave passively? Use pepper spray? A gun? ...It turns out that pepper
spray may not do you a lot of good when it is raining or snowing. A woman is just as likely to disable herself as the attacker when it's windy or when using the spray indoors. Knives and baseball bats are
particularly problematic, because women have to get very close to their attackers to use them, and male criminals--that is, most criminals--tend
to be much stronger physically than their female victims. ...women who used a gun to resist an attack were 2.5 times more likely to escape uninjured than those who behaved passively. | ||||||||||