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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Cato Institute, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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Some terminally ill patients in Oregon who turned to their state for health care were denied treatment and offered doctor-assisted suicide instead, a proposal some experts have called a "chilling"
corruption of medical ethics. Since the spread of his prostate cancer, 53-year-old Randy Stroup of Dexter, Ore., has been in a fight for his life. Uninsured and unable to pay for expensive chemotherapy, he
applied to Oregon's state-run health plan for help. Lane Individual Practice Association (LIPA), which administers the Oregon Health Plan in Lane County, responded to Stroup's request with a letter saying the
state would not cover Stroup's pricey treatment, but would pay for the cost of physician-assisted suicide. "It dropped my chin to the floor," Stroup told FOX News. "[How could they] not pay for
medication that would help my life, and yet offer to pay to end my life?" Thursday, July 2, 2009 ~ 11:23 p.m., Dan Mitchell Wrote: The average citizen had to conclude that most big U.S. companies are tax cheats. Only a dedicated student of accounting would figure out that
the term "tax haven" as defined by the Treasury Department means any country with a lower corporate tax rate than America's, which is all
countries except Japan. The reality is that the administration is lashing out against perfectly legal behavior. A U.S. company that makes money
in Country X pays Country X's taxes on that money. If the company ever brings the money back to the United States, it must also pay the tax that
would be due under America's higher rate. The administration argues that because the United States has almost the world's highest corporate
tax rate (and even Japan's is only a fraction of a point higher), current rules create incentives for U.S. companies to operate anywhere but here,
at the cost of U.S. jobs. The White House therefore proposes charging all American companies full freight -- the whole difference between their
overseas taxes and the U.S. corporate rate -- on all their profits as soon as they're earned, no matter where. This measure, in their minds, would bring jobs home. If the logic eludes you, you're not alone. The
bottom-line effect of the change would be a steep tax hike -- more money vacuumed out of corporate coffers. Would that make U.S. companies competing in a global economy more inclined to hire additional workers
in the highly expensive United States? The answer is clear. It's why Microsoft chief executive Steve Ballmer said recently that if the change is
enacted, "we're better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S." ...Tax-wise, a
company is just a bunch of incorporation papers; all taxes are paid by people -- customers, shareholders and employees. And guess who would
bear most of the burden of these tax increases? It's the U.S. employees of the companies being taxed. Research has shown that when business taxes
are raised by a dollar, 70 to 92 cents comes out of employees' pay. When workers wake up to that fact, they may decide this is one time they don't want the White House beating up on business. Wednesday, July 1, 2009 ~ 5:09 p.m., Dan Mitchell Wrote: UBS AG and Credit Suisse Group AG, the country's biggest banks, have told Americans to move their money into specially created units registered in the U.S., or lose their accounts. Smaller private banks such
as Geneva-based Mirabaud & Cie. are closing all accounts held by U.S. taxpayers. While the banks declined to say how many people are affected, more than 5 million Americans live abroad, including about
30,000 in Switzerland, according to estimates from American Citizens Abroad in Geneva. Swiss banks must register with the Securities and Exchange Commission to provide services for those customers. "My
bank doesn't want to do that, so we wouldn't accept an investment account for a U.S. person," said Pierre Mirabaud, chairman of Mirabaud & Cie. and the Swiss Bankers Association, during a lunch at
the American International Club of Geneva. ...The U.S. has also proposed increasing reporting and oversight requirements for so-called qualified intermediaries -- foreign banks that withhold taxes on behalf of
the IRS. That may increase the cost of compliance and the risk of violating U.S. laws, said Charles C. Adams, managing partner at the law firm Hogan & Hartson LLP in Geneva. "American citizens are starting
to feel like they're Typhoid Mary," said Adams who hosted a 2008 fundraiser for Barack Obama that featured actor George Clooney. "The Swiss simply don't want American customers because it requires so much
infrastructure and hassle that they don't make any money." Sandra Dysli, an American who has lived in Geneva for 40 years, said Bank Zweiplus AG, the Zurich-based joint venture of Basel-based Bank
Sarasin & Cie. and AIG Private Bank, and a Geneva branch of Raiffeisen International Bank-Holding AG refused to open investment accounts for her. ...Two members of the U.S. Congress, Carolyn Maloney
and Joe Wilson, wrote a May 27 letter to Treasury Secretary Timothy Geithner saying that if the QI requirements are extended to cash or deposit accounts, "taxpaying Americans living abroad will have no place
to bank." "If neither foreign nor American banks will take American customers, how will the millions of citizens living abroad bank?" wrote Maloney, a New York Democrat, and Wilson, a South Carolina
Republican, who are co-chairmen of the Americans Abroad Caucus. ..."The presumption is that you're a bad person avoiding taxes if you live overseas," according to Andy Sundberg, who founded Geneva-based
American Citizens Abroad in 1978. "The IRS rhetoric is alienating and vindictive." Tuesday, June 30, 2009 ~ 6:12 p.m., Dan Mitchell Wrote: What state budget crisis? This year the hacks had $28.1 billion to squander. In the new fiscal year they'll have $27.4 billion. In other words, for every $39 they wasted in FY 2009, they'll have to get by on $38 in FY 2010. ...The real crisis is the tax bender they're on at the State House. To deal with this infinitesimal cut, the taxaholics are going to jack up the sales tax 25 percent. They're allowing local hacks to impose a new meals tax. They've invented a new tax for satellite TV. They're increasing the hotel-motel tax. Registry fees are going up. The tax-fattened hyenas are hitting us with a new 6.25 percent tax on alcohol, though they and their brain-dead enablers in what's left of the mainstream media refuse to call it a tax. They describe it as eliminating the exemption. There's an exemption on booze taxes because there's already an excise tax on alcohol. The tax is included in the cost of the bottle. By imposing the new, jacked-up sales tax, the solons are taxing a tax, just as they did with cigarettes a few years back. That's been great for sales - in New Hampshire. On a more serious note, he exposes the typical ploy of politicians, many of whom will deliberately try to cut the small handful of things voters actually like rather than the wasteful programs that fatten their friends and campaign contributors: Whenever a town wants to scare the voters into increasing their own property taxes, they begin to cut services, in the order in which taxpayers
care: fire, police, high school football, garbage, libraries. Now it's the state's turn to play Chicken Little. They're going to close a dozen
Registry of Motor Vehicles branches - places everyone has to visit at least occasionally. That'll teach a good lesson to those taxpaying bastards who actually have to work for a living! Whatever the state is
saving by closing the RMV branches, they could have saved five times as much by closing the sleepier district courts, and no citizen would have
noticed. But they'd never shut down those plush payroll patriot palaces, because that's where the solons have stashed all their unemployable friends and kinfolk. Monday, June 29, 2009 ~ 8:23 p.m., Dan Mitchell Wrote: The OECD's campaign against "harmful tax competition" and "tax havens" has overshadowed the essential issue, namely the important roles that both tax competition and "tax havens" play for capital
preservation and formation, leading to higher prosperity and better protection of individual rights throughout the OECD. The tax oppression index is based on 18 representative criteria measuring fiscal
attractiveness, public governance and financial privacy in the 30 member states of the OECD. Switzerland appears as the country with the lowest tax oppression – due to a relatively low tax burden and a more
[classical] liberal institutional order, including its citizens' right to veto legislation, political decentralization, and protection of financial privacy.
Germany and France, on the other hand, whose governments have supported the OECD's efforts, are among the most questionable states in terms of safeguarding their residents' individual rights. ...The tax
oppression index evaluates the 30 OECD member states on three complementary dimensions quantified by 18 representative criteria, on the basis of OECD and World Bank data. The index enables relevant
conclusions about the tax burden and individual rights among those countries. Switzerland earns the top ranking in the report, followed by Luxembourg, Austria, Canada, and Slovakia. Italy and Turkey have the worst systems, follwed by Poland, Mexico, and Germany. The United States is tied for 19th, behind even the welfare states of Scandinavia. With Obama promising the raise tax rates and increase the power of the IRS, it may just be a matter of time before the U.S. is competing for the world's most oppressive tax regime. Sunday, June 28, 2009 ~ 9:14 a.m., Dan Mitchell Wrote: This month the Democratic legislature and Governor John Baldacci broke with Obamanomics and enacted a sweeping tax reform that is almost, but not quite, a flat tax. The new law junks the state's graduated
income tax structure with a top rate of 8.5% and replaces it with a simple 6.5% flat rate tax on almost everyone. Those with earnings above $250,000 will pay a surtax rate of 0.35%, for a 6.85% rate. Maine's tax
rate will fall to 20th from seventh highest among the states. To offset the lower rates and a larger family deduction, the plan cuts the state budget
by some $300 million to $5.8 billion, closes tax loopholes and expands the 5% state sales tax to services that have been exempt, such as ski lift
tickets. This is a big income tax cut, especially given that so many other states in the Northeast and East -- Maryland, Massachusetts, New Jersey
and New York -- have been increasing rates. "We're definitely going against the grain here," Mr. Baldacci tells us. "We hope these lower tax
rates will encourage and reward work, and that the lower capital gains tax [of 6.85%] brings more investment into the state." ...One question is
how Democrats in Augusta were able to withstand the cries by interest groups of "tax cuts for the rich?" Mr. Baldacci's snappy reply: "Without
employers, you don't have employees." He adds: "The best social services program is a job." Wise and timely advice for both Democrats
and Republicans as the recession rolls on and budgets get squeezed. Saturday, June 27, 2009 ~ 8:44 p.m., Dan Mitchell Wrote: The federal government is spending $423,500 to find out why men don't like to wear condoms, a project government watchdogs say is a nearly-half-a-million-dollar waste of taxpayer money. Researchers at
Indiana University's Kinsey Institute, with funding from the National Institutes of Health, are investigating why "young, heterosexual adult
men" have problems using condoms. The study will include "skill-based intervention" to teach grown men how to use protection. ...it has
government watchdogs rolling their eyes at what they say is a clear waste of taxpayer money. "This government is so out of whack with what the priorities are that this actually makes sense that we'd be
wasting money on a condom study rather than the real problems facing the country," said David Williams, vice president for policy at Citizens Against Government Waste, which tracks wasteful spending in the
federal budget. For American men -- many of whom have already undergone years of awkward sex ed in the care of gym teachers -- the study might not offer much of a boost, Williams said. Friday, June 26, 2009 ~ 10:05 p.m., Dan Mitchell Wrote: Hedge funds should be required to register and disclose data to regulators to guard against their trading destabilizing financial markets, the International Organization of Securities Commissions said today.
Financial watchdogs worldwide should be able to demand information on funds' risk management and have authority to work together and share data to track "globally active" funds and managers, Madrid-based
IOSCO said in guidelines that seek to address gaps in oversight that contributed to the global financial crisis. ...The guidelines, which also encompass hedge-fund advisors and managers and banks that provide
funding, were written by regulators on IOSCO's task force on "unregulated entities." ...The Group of 20 leaders in April said for the first time they would extend oversight to all financial institutions
important to global financial health including "systemically important" hedge funds. The industry would be regulated by a proposed Financial Stability Board made up of members of the G- 20 and the European
Commission. Thursday, June 25, 2009 ~ 11:13 a.m., Dan Mitchell Wrote: Historically the unemployment rate in the USA was lower when compared to European countries due to the US economy being dynamic and vibrant. The policy of hire and fire by companies was accepted by
the society as a means of keeping the economy strong. However this situation is changing due to the continued rise in unemployment rates in the past couple of years. The US unemployment rate exceeded
Germany's rate in April and was very close to the rate in France. This is highly significant since these two German follow socialism and have always had high unemployment rates. For example, in France it is
normal to have unemployment levels above 8%. In the above chart, the US rate is higher than all countries except for France. While governments in Europe dole out liberal unemployment benefits, it is not
the case in the US where unemployment benefits are capped and stop after some weeks. Wednesday, June 24, 2009 ~ 9:57 a.m., Dan Mitchell Wrote: For much of the last decade, Massachusetts Democrat Richard Neal has banged away at proposals for vast tax increases on "offshore affiliated
reinsurance"--coverage that insurance companies purchase from their own non-U.S. subsidiaries. As arcane as the issue sounds, the tax hike
Neal wants could have vast negative consequences for the U.S. economy. If the proposal--introduced in the last Congress and likely to be reintroduced shortly--were to become law, it would create chaos in
American insurance markets, stick consumers with over $10 billion in insurance rate hikes, create demand for massive new government property insurance programs, and start a trade war with the European
Union. ...Most reinsurance comes from companies that have "domiciles" (official headquarters locations) outside of the United States. ...Today,
offshore companies pay federal excise taxes roughly equivalent to the corporate income tax, and although all reinsurers engage in strategies to
minimize tax liabilities, nobody has a permanent tax advantage. Neal's proposal, a protectionist tariff for all intents and purposes, would give U.S.-domiciled companies a big upper hand by imposing an enormous,
burdensome tax on supposedly excessive offshore affiliated reinsurance transactions. If it became law, hardly anybody would use offshore affiliated reinsurance. Although U.S.-based reinsurers would sell more
reinsurance much reinsurance would simply vanish. Primary insurers would have to raise rates and reduce coverage in order to rebuild the financial cushion they now get from affiliated offshore reinsurance. The
Brattle Group, an economic research and consulting firm, has estimated that under Neal's proposal, insurers would have to raise premiums by an
estimated $10 to $12 billion to replace the coverage they would lose. Total reinsurance capacity would also fall by about a fifth. The pain, however, would fall very heavily on certain industries and types of
people: Brattle estimates that coastal homeowners, airlines, and businesses that need complex liability insurance would get hit the hardest. ...Rather than letting prices rise, many states--particularly those
with high windstorm and earthquake risk--might try to prohibit primary insurers from passing higher costs to consumers and set up public programs to compete with the private market. That's what Florida did
after brutal 2004 and 2005 hurricane seasons sent reinsurance costs soaring. Today, a fifth of Florida's home-owners depend on a state-run entity to cover their homes, and taxpayers are on the hook for at least
$25 billion in unfunded insurance liabilities. Wednesday, June 24, 2009 ~ 9:31 a.m., Dan Mitchell Wrote: President Obama's choice as chief of protocol for the State Department, a position that carries the status of an ambassadorship, did not file tax
returns for 2005 and 2006, errors she corrected last November. The nominee, Capricia Penavic Marshall, has placed blame for the problem on the Postal Service and on miscommunication between her husband
and their accountant. ...Tax issues have bedeviled several high-level Obama appointees and cost the administration at least two of its picks.
Ms. Marshall may fare better because, after ultimately filing the 2005 and 2006 federal and local paperwork, she was entitled to $37,259 in
refunds, according to data she provided to Mr. Lugar. ...No late fees or penalties were assessed when they later submitted the returns. Tuesday, June 23, 2009 ~ 6:21 p.m., Dan Mitchell Wrote: The Labor Department reported yesterday that Oregon's unemployment rate soared to 12.4% in May, the nation's second highest after Michigan's
14.1%. What to do? If you're the geniuses in the state legislature in Salem, you naturally raise taxes. Last week the legislature approved a $2
billion tax hike on personal income and small businesses that haven't already left the state. The highest tax rate on income above $500,000 would climb to 11% -- up from an already high 9%. Oregon will soon
boast the second highest income tax rate in the nation, moving ahead of California (10.55%), and only slightly behind New York City (12.6%). Corporations will pay a 7.9% tax on gross receipts, up from 6.6%. But
that isn't the worst of it. Another revenue raiser will tax hospitals and private health insurance premiums. That's a good way to encourage private employers to drop their health coverage for workers. In Oregon,
as in so many states this year, lawmakers had to choose between reducing the growth of spending and raising taxes. No contest. So government spending will climb by about $2 billion, or almost 4%, which
is on top of a 21% increase in the 2007-08 biennium budget. The sliver of good news is that taxpayer groups like Americans for Prosperity of Oregon are promising to put these taxes before the voters in a
referendum this year or next. Monday, June 22, 2009 ~ 11:10 a.m., Dan Mitchell Wrote: Once-proud companies like GE have become seduced by global warming schemes, because they recognize that there's more money to be made selling white elephants to Uncle Sam than there is selling competitive
products consumers want. Indeed, cap-and-trade taxes promise to deliver precisely the protectionist industrial policies the left has dreamed
of for decades, only under a "progressive" label. This week, Philip Morris, the biggest of the Big Tobacco companies, supported and won
passage of an "anti-tobacco" bill that will make it easier for Philip Morris (a subsidiary of Altria) to sell cigarettes by making it harder for
smaller, more innovative firms to compete. One way it will do that is by curtailing the First Amendment rights of tobacco companies, making it
harder to advertise their products (including healthier alternatives to normal cigarettes). Philip Morris, maker of Marlboro and other established brands, already controls 50 percent of the market. That's why
it lobbied government to keep it that way. Also this week, the White House announced its plan to deal with "systemic risk" in the financial
markets. The basic idea is that big firms -- giant banks, insurance companies, etc. -- cannot be allowed to fail if their failure threatens
something called "stability." The Obama administration is confident that with its new organizational flow charts and enhanced job description for
the Federal Reserve, bureaucrats will suddenly see clearly what they couldn't see before. These regulators will know exactly when bubbles get too big, when booms last too long, and when tens of thousands of
managers, investors, actuaries and bankers make bad or sub-optimal decisions. The problem, other than the shortage of Jedis and shamans to
fill these posts, is that big companies will understand the surest way to attain immortality is to become too big to fail. Once they've achieved
that privileged status, these companies will become de facto wards of the state, insured for life at taxpayer expense like Fannie Mae and Freddie
Mac, and in exchange they will do whatever Uncle Sam asks. ...While doctrinaire socialists might feel betrayed by liberalism's cozy embrace of
big business, their betrayal pales in comparison to the bitterness of free-marketers who defend big business's freedom to operate, only to see
these businesses use that freedom to hide behind the skirts of the nanny state. Real freedom means the freedom to fail as well as succeed. Big
business wants to be protected from the former and deny competitors the latter. Monday, June 22, 2009 ~ 10:22 a.m., Dan Mitchell Wrote: The White House's financial regulation proposal blames "gaps in regulation" for our financial crisis. Wrong. It was in fact government
misregulation and miscalculation that created our financial crisis — not private businesses. The record on this is quite clear. As economic
historian Lawrence White of the University of Missouri has written: "The expansion in risky mortgages to underqualified borrowers was encouraged by the federal government. The growth of 'creative'
nonprime lending followed Congress' strengthening of the Community Reinvestment Act, the Federal Housing Administration's loosening of down-payment standards, and the Department of Housing and Urban
Development's pressuring lenders to extend mortgages to borrowers who previously would not have qualified." Add to that Fannie Mae and Freddie Mac — created and regulated by acts of Congress — which
together at one point controlled nearly half of the nation's $12 trillion mortgage market. The two quasi-private entities served as the grand financial engine by which Congress would boost homeownership. It
worked well for a while. And we can't fault the intent to help people. But the failure was one of too much government — not too little, which is the
rationale for the new financial regulation regime sought for Wall Street and the banks. ...we don't think the Fed needs enhanced powers. Far
from it. It's too powerful already. Giving it virtually unbridled control over our financial system without having to directly answer to the people
is a danger to free market capitalism. Many have argued that the Fed's slashing of interest rates from 6.25% in 2001 to 1% in 2003 — following
a stock market meltdown, a recession, the 9/11 attacks and the start of the War on Terror — was too much and led to the housing market bubble. Now, strangely, many of the same people advocate giving the
Fed even more power. It makes no sense. Sunday, June 21, 2009 ~ 7:03 p.m., Dan Mitchell Wrote: I doubt whether there are many Americans who think Congress has either the right or competency to choose where they live, what clothes they wear or what cars they drive. Yet many Americans stand ready to
allow Congress to decide what doctors they go to and what treatments they receive. We forget that once we have government-sponsored health
care, it can be used to justify almost any restraint on liberty. That's the justification behind helmet and seatbelt laws. Britain is well along the
road toward totally controlling health care. Steyn says, "Under Britain's National Health Service, for example, smokers in Manchester have been
denied treatment for heart disease, and the obese in Suffolk are refused hip and knee replacements. Patricia Hewitt, the British Health Secretary,
says that it's appropriate to decline treatment on the basis of 'lifestyle choices.'" Steyn adds, "Smokers and the obese may look at their gay
neighbor having unprotected sex with multiple partners, and wonder why his 'lifestyle choices' get a pass while theirs don't. But that's the point: Tyranny is always whimsical." Saturday, June 20, 2009 ~ 11:50 p.m., Dan Mitchell Wrote: Although the president said in his speech that he supports free markets, these initiatives confirm that the administration fears the "creative
destruction" that free markets produce, preferring stability over innovation, competition and change. According to the administration white paper circulated prior to the president's speech, the Federal
Reserve would be authorized to create a special regulatory regime -- including requirements for capital, leverage and liquidity -- for any firm
"whose combination of size, leverage, and interconnectedness could pose a threat to financial stability if it failed." In addition, if a large financial
firm is failing, the Treasury is to be given the power -- in lieu of bankruptcy -- to appoint a conservator or receiver to "stabilize" it.Designating particular financial firms for this kind of special
regulatory treatment clearly signals to the markets that these institutions are too big to fail. It will reduce the perceived risk of lending to them,
enabling them to raise funds at lower cost than their smaller competitors.In other words, the administration's plan would create what are essentially government-sponsored enterprises like Fannie Mae and
Freddie Mac in every sector of the financial economy -- insurers, securities firms, finance companies, bank holding companies, and hedge funds -- where these specially regulated firms are to be designated. The
result will be devastating for competition. Larger firms will squeeze out smaller ones and aggressive small companies will have less opportunity
to overcome the government-backed winners. ...In AIG, GM, Chrysler, Fannie Mae and Freddie Mac we can see the future that the administration envisions for our economy -- a sclerotic and unchanging
structure of big companies working with, protected by, and relying on big government.
Friday, June 19, 2009 ~ 5:12 p.m., Dan Mitchell Wrote: As most of corporate America sits on the health-care sidelines -- issuing vague statements, trying not to offend a new U.S. president -- Mr. Burd
has charged into the political debate. "I'm here because health-care simply isn't a partisan issue," he says. There is what works, and what
doesn't. "I'm genuinely concerned someone might try to solve this by nationalizing health care, at the moment we at Safeway have proven that
it is the market that reins in costs." Prove it, he can. As recently as 2004, Safeway was suffocating under health-care costs growing at 10% a year.
Mr. Burd, who had long been intellectually and politically drawn to the health-care issue, decided it was time to hit the restart button. He blew
up the company's existing health-care structure and replaced it with one that embodied market principles -- choice, responsibility, competition
and price. Today, Safeway has accomplished what Washington claims is the goal: The company's per-capita health-care expenses have remained flat, compared to the near 40% increase experienced by the rest of
corporate America over the past four years. This has not been done by cutting care or shifting costs to employees. Nearly 80% of the 30,000 nonunion Safeway workers who take part in the program rate it good,
very good, or excellent. ...The Safeway plan has two main parts that work in tandem. The first involves giving employees a financial stake in the system. Safeway demolished the traditional PPOs and HMOs that
encourage consumers to be cavalier about costs. The company today fully pays for an array of primary and preventive visits and tests. But beyond that, employees have skin in the game. The company deposits
$1,000 each year into a "health reimbursement account," which workers can use to pay for care. The next $1,000 in expenses is the employee's
responsibility. After that, employees pay 20% of costs up to a $4,000 maximum. Safeway workers these days treat that first $1,000 carefully,
since anything beyond it comes out of their pockets. The company is alive with stories of people who no longer visit the emergency room for routine care but instead call around to doctors to ask prices, and swap
information with colleagues. Safeway is doing its part to improve price transparency, by having its care administrator, Cigna, analyze claims
information. One discovery was that within 30 minutes of its California headquarters routine colonoscopy prices ranged from $700 to $7,000.
...Critics of price incentives argue that they pressure consumers to forego necessary care. Mr. Burd counters that Healthy Measures and the
company's free preventive care -- designed to catch problems before they become expensive -- have in fact resulted in a healthier work force. Safeway's smoking and obesity rates are roughly 70% the national
average. The program has even been cautiously greeted by Safeway's union leaders, who understand that soaring health costs are eating into union wages. When I ask Mr. Burd what he hopes to accomplish here, he
is blunt that one goal is to prevent a "public option" that would only "piggyback on the experience of Medicare." It's a "Trojan Horse" that
will steer people to government and ultimately squeeze out innovative programs like his. ...As for his fellow CEOs, Mr. Burd is eager to debate
anyone who thinks he will escape costs by dumping health care on the government. Business will still be taxed to pay for the program, making the U.S. less competitive. Far better, says Mr. Burd, for companies to
control their destiny, and prove markets can also work for health care. Thursday, June 18, 2009 ~ 6:00 p.m., Dan Mitchell Wrote: President Barack Obama said he is "confident" that he won't have to raise taxes on most Americans to close the budget deficit as long as the economy picks up steam. "One of the biggest variables in this whole
thing is economic growth," the president said in an interview with Bloomberg News at the White House. "If we are growing at a robust rate, then we can pay for the government that we need without having to
raise taxes." Wednesday, June 17, 2009 ~ 1:27 p.m., Dan Mitchell Wrote: The overall tax rate will have to rise as well over the longer term. In some areas that can be done without much consultation between the countries. For example, property taxes or inheritance taxes can largely
be determined at the national level without adverse economic consequences. But such taxes will not raise significant amounts of revenue. Only changes in value added tax, various excise taxes or taxes
on earned and capital income can make a real difference. However, raising such taxes can have detrimental effects on economic activity. This is especially so when a country acts on its own: capital and people
can respond by migrating to jurisdictions with lower rates. Deeper co-operation is therefore necessary if tax revenues are to be increased in
a way that truly helps fiscal consolidation. ...It is important that different countries do not find themselves with very different tax solutions. We
should avoid tax competition and the damage this would cause to Europe's economic growth. ...member countries could agree, for example, to change the levels of certain taxes in parallel. Parallel
measures would help all of Europe: tax competition risk would be reduced and the public finances of individual countries would improve. Such co-ordinated tax changes could set also an important global
example. In particular, it might encourage the US – with lower tax levels in most areas – to do what has to be done to address its spiralling budget deficit. Tuesday, June 16, 2009 ~ 9:25 a.m., Andrew Quinlan Wrote:
The video analyzes the controversial issue of tax increases targeted at investors and entrepreneurs. CF&P Foundation's educational video provides five reasons to reject the Obama's Administration's soak-the-rich approach to tax policy.
Link to Press Release: Web Links: Yahoo Capitol Hub Monday, June 15, 2009 ~ 1:52 p.m., Dan Mitchell Wrote: Latvia's government is to reduce old age pensions and state sector salaries but not raise taxes, it said on Thursday as it tries to win more
loans and avert crisis and possible currency devaluation. The five-party coalition government agreed with social partners such as unions and
employers on ways to find savings of 500 million lats ($1.01 billion) to win further loans from the International Monetary Fund and European
Union, which are seen as the only way to survive a deep economic slump. "It was a difficult decision and it will not be popular but it had to be
done," Prime Minister Valdis Dombrovskis told reporters after a marathon and sometimes chaotic government session of almost 12 hours.
"Our decision is sending a signal to the EU that we are serious," he added. Against expectations, the government decided against introducing a progressive income tax for the first time to replace the
current flat tax of 23 percent. The moves will include a cut in old age pensions of 10 percent, a whopping 70 percent cut in the pensions of those who still work, and a 20 percent cut in state sector salaries.
To be sure, this may not be the last word on this issue. Latvian politicians eventually may decide to undo the flat tax. Or perhaps Iceland's new left-wing government may
be the first nation to backslide to a so-called progressive tax system. Regular readers of the blog may recall that we have a theme song that we include every time there is an announcement of a new flat tax nation (http://www.youtube.com/watch?v Sunday, June 14, 2009 ~ 7:22 p.m., Dan Mitchell Wrote: Swindlers, con men, and thieves could siphon off as much as $50 billion of the government's planned stimulus package as the money begins flooding the economy in coming months, according to David Williams,
who runs Deloitte Financial Services Advisory and counsels clients on fraud prevention. ...Earlier this month, FBI Director Robert Mueller warned the nation to brace for a potential crime wave involving fraud
and corruption related to the economic stimulus package. "These funds are inherently vulnerable to bribery, fraud, conflicts of interest, and
collusion. There is an old adage, that where there is money to be made, fraud is not far behind, like bees to honey," Mueller said. Saturday, June 13, 2009 ~ 4:46 p.m., Dan Mitchell Wrote: The use of company-issued mobile phones could trigger new federal income taxes on millions of Americans as a "fringe benefit." The Internal
Revenue Service proposed employers assign 25% of an employee's annual phone expenses as a taxable benefit. Under that scenario, a worker in the 28% tax bracket, whose wireless device costs the company
$1,500 a year, could see $105 in additional federal income tax. ...The IRS move, which is spurring efforts by the wireless industry and others to kill
the idea, would mark a stricter enforcement of an existing rule that classifies employer-provided cellphones as a taxable benefit, rather than a 24-hour-a-day work tool. Under a 1989 law, workers who use
company-provided mobile phones for personal calls are supposed to count the value of those calls as income and pay federal income taxes accordingly. But businesses and workers have long ignored the
requirement, prompting the IRS to consider steps the agency said would make it easier for businesses and workers to comply. ..."The idea that
you should keep a log saying, 'I made a call saying I will be late for dinner again,' that's a totally cumbersome and burdensome requirement
that most employers and employees are not going to comply with," said Jot Carpenter, vice president of government affairs for CTIA-The Wireless Association, a trade group of cellphone-equipment
manufacturers and service providers. "It would be a nightmare for corporations to try to figure out what are work calls and what are
personal calls," said Gerry Coady, chief information officer at Frontier Airlines Holdings Inc., who manages about 100 BlackBerrys for workers
at the Denver-based airline. Some employees aren't so happy about the idea, either. "Your job gives you a phone to be in 24-hour contact. It's
only natural that you're going to use it personally," said Anthony Cecchini, an analyst at investment bank Oppenheimer & Co. "If I need
to get a personal email or call, it shouldn't be a big deal." ...Wireless companies also argue the IRS rule is outdated. Rates have declined so
dramatically in the past decade -- with night and weekend calls free under many plans -- that it makes little sense for the IRS to assess employee benefits by nickels and dimes. "This is a regulation from a
bygone time, dating back to the infancy of the cellphone business, and it is in desperate need of updating," said Howard Woolley, a senior vice
president with Verizon Wireless, a venture of Verizon Communications Inc. and Vodafone Group PLC. Friday, June 12, 2009 ~ 2:37 p.m., Dan Mitchell Wrote: I can understand why libertarians have no desire to listen to his advice, but I'm baffled why Republicans or conservatives would give him the time of day. Yet he is a constant presence on FOX News and has a
weekly column in the Wall Street Journal. With no apparent irony, his latest WSJ column is entitled "How to Stop Socialized Health Care." Too
bad he didn't follow his own advice in 2003 when pulling out all the stops to enact the biggest entitlement in four decades. Thursday, June 11, 2009 ~ 7:11 p.m., Dan Mitchell Wrote: McKinsey & Company, in releasing its report "The Economic Impact of the Achievement Gap in America's Schools" (April 2009) said, "Several
other facts paint a worrisome picture. First, the longer American children are in school, the worse they perform compared to their international peers. In recent cross-country comparisons of fourth grade
reading, math, and science, US students scored in the top quarter or top half of advanced nations. By age 15 these rankings drop to the bottom
half. In other words, American students are farthest behind just as they are about to enter higher education or the workforce." That's a sobering
thought. The longer kids are in school and the more money we spend on them, the further behind they get. ...The teaching establishment and politicians have hoodwinked taxpayers into believing that more money is
needed to improve education. The Washington, D.C., school budget is about the nation's costliest, spending about $15,000 per pupil. Its
student/teacher ratio, at 15.2 to 1, is lower than the nation's average. Yet student achievement is just about the lowest in the nation. What's so
callous about the Washington situation is about 1,700 children in kindergarten through 12th grade receive the $7,500 annual scholarships in order to escape rotten D.C. public schools, and four times as many
apply for the scholarships, yet Congress, beholden to the education establishment, will end funding the school voucher program. Any long-term solution to our education problems requires the
decentralization that can come from competition. Centralization has been massive. In 1930, there were 119,000 school districts across the U.S; today, there are less than 15,000. Control has moved from local
communities to the school district, to the state, and to the federal government. Public education has become a highly centralized government-backed monopoly and we shouldn't be surprised by the results. Wednesday, June 10, 2009 ~ 12:58 p.m., Dan Mitchell Wrote: Studebaker, Nash-Kelvinator, Packard, Hudson, Stutz, Pierce-Arrow, Stanley, Checker and American Motors were once household names of the U.S. auto industry. Unlike General Motors in our time, they were not
too big to fail. Despite mergers and rescue efforts by their owners, each was shut down. Their legacy lives on as classic cars, restored with erotic
affection by collectors. GM's end is different. In the spirit of the new age, General Motors, like Citigroup and AIG, will be kept alive in an industrial coma. ...After GM's bondholders last weekend refused to
answer the bell for another round with Uncle Sam, the White House put out a statement: "As a result, the President has deemed GM's plan viable
and will be making available about $30 billion of additional federal assistance to support GM's restructuring plan." Read that sentence again, slowly. It holds what look like the keywords of the American
future: the president, deems, viable, making available, federal assistance, support, restructuring plan. ...So far Mr. Obama has used his personally
exciting presidency for initiatives that are spending public money on a scale not seen since ancient Egypt. Besides Obama Motors ($60 billion to
$100 billion), there is Obama-Care for health insurance ($1.2 trillion over 10 years), the stimulus ($800 billion), a global-warming offensive
called cap and trade that hopes to siphon hundreds of billions of dollars from the economy, and a fiscal year 2010 budget of $3.59 trillion. Out of
these mists of federal "investment" they promise five million "green collar jobs." Only public-sector lifers could believe, or assert, anything so
fantastic. ...Many of Mr. Obama's supporters surely thought this young, dynamic generation of public leaders would elevate the hip, cutting edge
of the U.S. economy -- nanotechnology, genomics, robotics, even health and medicine technology. Instead, we've gotten the Old Economy on dialysis. General Motors has been commanded to restart aging UAW
factories to output product on behalf of the administration's hybrid-car obsession. Where's the New Economy in any of this? Or ObamaCare. How will a build-out of Medicare (b. 1965) to cover everyone and costing
$1.2 trillion over 10 years not kill innovation in medical and health technology by siphoning away growth capital and its potential financial rewards? Wednesday, June 10, 2009 ~ 12:35 p.m., Dan Mitchell Wrote: Policymakers have been desperately trying to tax retail Web sales since the 1990s. So far, their efforts have gone largely unrewarded. Taxes on Internet commerce are generally levied only when the seller has a
physical presence in the buyer's state. This wealth-creating tax-free zone has allowed Web sales to surge. From humble beginnings — about $28
billion in 2000 — they reached $130.1 billion last year, up 6% from 2007. Elected officials and the bureaucrats who run their programs have watched electronic commerce whiz by much like a tethered wolf would
watch raw meat repeatedly dragged by just outside its grasp: All they can think about is getting their claws on it. So it's no surprise they're at it
again. Sen. Mike Enzi, a Wyoming Republican, has joined Rep. William Delahunt, a Massachusetts Democrat, to write the Sales Tax Fairness and Simplification Act, which would give states the law they need to tax
sales between consumers and out-of-state sellers. ...The retail Web market won't crash if its sales are taxed. But it will soften the competition, which always benefits consumers, between Web retailers
and traditional retailers. Under those conditions, jobs will be lost, growth will suffer and entrepreneurship, which fuels the economy, will be
restrained. ...A country already liable for wild spending at the state and federal levels doesn't need another tax. An economy struggling to
recover doesn't need one of its growing sectors to be choked. Congress, as always, needs to think a lot more clearly. Tuesday, June 9, 2009 ~ 6:24 p.m., Dan Mitchell Wrote: The tax-friendly US states of Delaware, Nevada and Wyoming should figure on an international blacklist of offshore tax havens, Luxembourg
Prime Minister Jean-Claude Juncker said on Tuesday. ..."The G20 has no credibility as an undertaking if Delaware, Wyoming or Nevada or
far-flung islands from the United States are not on the blacklist," he told lawmakers at the European Parliament in Brussels. "If there must be a
blacklist then, America should have its place on it." The three US states are popular locations for incorporating businesses in large part because
of the tax advantages of doing so while the US Virgin Islands are also known for their tax benefits. "I don't hear any other prime minister than
myself ... raising this problem. Why doesn't (British Prime Minister) Brown say to (US President Barack) Obama to put an end to the tax havens on American territory. Tuesday, June 9, 2009 ~ 4:54 p.m., Dan Mitchell Wrote: Taxpayer victories are rare these days, so let's cheer the good news in Illinois, where earlier this week the state House in Springfield voted
74-42 against a plan to raise the income tax rate on individuals and businesses by 50%. When Governor Pat Quinn succeeded Rod Blagojevich in January, he immediately proposed raising the personal
income tax to 4.5% from 3%, the business tax rate to 7.2% from 4.8%, and expanding the sales tax to services ranging from dry cleaners to
Internet hookup. The Democrat says the income tax hike is "based on a principle as old as the Bible. Taxes should be based on the ability to
pay." But voters can distinguish between rendering unto God and unto Quinn, and public dismay was so widespread that even 26 Democrats
voted to kill this tax grab. Just as surprising, not a single Republican voted for the tax increase. In recent times the ideological distinction between the GOP and Democrats has been as murky as the Chicago
River. Former Governors "Big Jim" Thompson, Jim Edgar and George Ryan transformed Republicans into the tax-and-spend party. Solidarity has given Republicans new leverage in the budget debates because
majority Democrats are terrified to pass a tax hike on their own. Mr. Quinn may call for a new tax vote, but the GOP can now instead demand spending and ethics reforms in a state where political corruption
is at New Jersey proportions. One reason Mr. Quinn's tax plan failed is because there was little effort to slow down spending that has increased 45% (to $4,700 from $3,250 per person after inflation) in the past
decade. Monday, June 8, 2009 ~ 3:27 p.m., Dan Mitchell Wrote: ...rich countries will be asked to accept a compulsory levy on international flight tickets and shipping fuel to raise billions of dollars to
help the world's poorest countries adapt to combat climate change. The suggestions come at the start of the second week in the latest round of
UN climate talks in Bonn, where 192 countries are starting to negotiate a global agreement to limit and then reduce greenhouse gas emissions.
The issue of funding for adaptation is critical to success but the hardest to agree. ...It has been proposed by the world's 50 least developed countries. It could be matched by a compulsory surcharge on all
international shipping fuel, said Connie Hedegaard, the Danish environment and energy minister who will host the final UN climate summit in December. ...In Bonn last week, a separate Mexican proposal
to raise billions of dollars was gaining ground. The idea, known as the "green fund" plan, would oblige all countries to pay amounts according
to a formula reflecting the size of their economy, their greenhouse gas emissions and the country's population. That could ensure that rich
countries, which have the longest history of using of fossil fuels, pay the most to the fund. Recently, the proposal won praise from 17 major-economy countries meeting in Paris as a possible mechanism to
help finance a UN pact. The US special envoy for climate change, Todd Stern, called it "highly constructive". ...Last week, a US negotiator,
Jonathan Pershing, said that the US had budgeted $400m to help poor countries adapt to climate change as an interim measure. But that amount was dismissed as inadequate by Bernarditas Muller of the
Philippines, who is the co-ordinator of the G77 and China group of countries. Monday, June 8, 2009 ~ 3:12 p.m., Dan Mitchell Wrote: Microsoft Corp. Chief Executive Officer Steven Ballmer said the world's largest software company would move some employees offshore if Congress enacts President Barack Obama's plans to impose higher taxes
on U.S. companies' foreign profits. "It makes U.S. jobs more expensive," Ballmer said in an interview. "We're better off taking lots of people and moving them out of the U.S. as opposed to keeping them
inside the U.S." ...Ballmer is one of 10 U.S. software company executives pushing back against the tax proposals in meetings today with White
House officials including Jason Furman, deputy director of the National Economic Council, and the heads of congressional committees such as House Ways and Means Committee Chairman Charles Rangel, a New
York Democrat. ...In a roundtable discussion today, Ballmer, Symantec Corp. Chairman John Thompson and the heads of smaller companies such as privately held Bentley Systems, an Exton, Pennsylvania-based
maker of engineering software, said such policies would hurt domestic investment, reduce shareholder value and increase the cost of employing
U.S. workers. ...Ballmer said...[f]iduciary responsibility to shareholders would require Microsoft to cut costs, he said, meaning many jobs would
be moved out of the country. ...Ballmer estimated that higher taxes under the proposal would reduce profits for companies that comprise the Dow
Jones Industrial Average by between 10 and 15 percentage points. "It's just a question of how much will the Dow come down," Ballmer said. "It's not about companies anyway; we're talking about shareholders."
...Thompson called the Obama proposals "counterintuitive" to the administration's other stated goals of fostering an innovation-oriented
economy. "It is a little bit ironic that most of our most significant trading partners and partners globally have taken the tack that they'll reduce corporate tax rates to stimulate economic growth and not raise
corporate tax rates," Thompson said. CF&P Foundation: President Obamas Deferral Proposal: Sunday, June 7, 2009 ~ 8:23 p.m., Dan Mitchell Wrote: Could the flat tax come to California? Gov. Arnold Schwarzenegger said today that he would like to see such "radical" proposals come out of a commission now studying an overhaul of the state's tax system. The
governor told the editorial board of the Sacramento Bee that he hoped the commission would not be afraid ... The current system, based on highly unstable income tax revenue that fluctuates with the economy,
"doesn't work," Schwarzenegger said. Advocates of a flat tax, which applies a single tax rate to all income, say it increases compliance with the tax codes because it is so simple and easy to understand. But
opponents dislike that it taxes the wealthy at the same rates as the poor. Saturday, June 6, 2009 ~ 5:50 p.m., Dan Mitchell Wrote: Venezuela's President Hugo Chavez said on Tuesday that he and Cuban ally Fidel Castro risk being more conservative than U.S. President Barack Obama as Washington prepares to take control of General
Motors Corp. During one of Chavez's customary lectures on the "curse" of capitalism and the bonanzas of socialism, the Venezuelan leader made
reference to GM's bankruptcy filing, which is expected to give the U.S. government a 60 percent stake in the 100-year-old former symbol of American might. "Hey, Obama has just nationalized nothing more and
nothing less than General Motors. Comrade Obama! Fidel, careful or we are going to end up to his right," Chavez joked on a live television broadcast. During a decade in government, Chavez has nationalized
most of Venezuela's key economic sectors, including multibillion dollar oil projects, often via joint ventures with the private sector that give the state a 60 percent controlling stake. Friday, June 5, 2009 ~ 8:22 p.m., Dan Mitchell Wrote: U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and
reaffirmed his faith in a strong U.S. currency. A major goal of Geithner's maiden visit to China as Treasury chief is to allay concerns that
Washington's bulging budget deficit and ultra-loose monetary policy will fan inflation, undermining both the dollar and U.S. bonds. China is the
biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China's total U.S. dollar-denominated investments could be twice as
high. "Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese
as a student in the 1980s. His answer drew loud laughter from his student audience. Thursday, June 4, 2009 ~ 12:30 p.m., Andrew Quinlan Wrote: President Barack Obama is already looking at a wide range of other potential tax increases, including higher income tax rates, restrictions on
itemized deductions, an energy tax, and higher payroll tax rates. Even if they all became law, the revenues would not come close to satisfying his and Congress's appetite for bigger government, particularly a
government-run health-care scheme. ...Simply stated, there's no way to finance all this new spending without an additional, broad-based tax.
That's exactly why a VAT -- which is like a national sales tax collected at each stage of the production process, rather than at the final point of
sale -- should be resisted. ...VATs are associated with both higher overall tax burdens and more government spending. In 1965, before the VAT swept across Europe, the average tax burden for advanced European
economies (the EU-15) was 27.7% of economic output, roughly comparable to the U.S., where taxes were 24.7% of GDP, according to data from the Organization for Economic Cooperation and Development
OECD). European nations began to impose VATs in the late 1960s, and now the European Union requires all members to have a VAT of at least 15%. Results? By 2006, the OECD reports that the average tax burden
for EU-15 nations had climbed to 39.8% of GDP. The tax burden also has increased in the U.S., but at a much slower rate, rising to 28% for
that year. The spending side of the fiscal equation is equally dismal. In 1965, according to European Commission figures, government spending in EU-15 nations averaged 30.1% of GDP, not much higher than the
28.3% of economic output consumed by U.S. government spending. According to 2007 data, government spending now consumes 47.1% of GDP in the EU-15, significantly higher than the 35.3% burden of
government in the U.S. Another argument for the VAT concedes it will increase the overall tax burden but preclude higher taxes on personal income and corporate income. The evidence from Europe says otherwise.
Taxes on income and profits consumed 8.8% of GDP in Europe in 1965, giving Europe a competitive advantage over the U.S., where they consumed 11.9%. By 2006, OECD data show that the tax burden on
income and profits climbed to 13.8% of GDP in Europe, slightly higher than the 13.5% figure for the U.S. ...The income tax system we have today is a nightmarish combination of class warfare and corrupt
loopholes. Adding a VAT does not undo any of the damage it imposes. All that happens is that politicians get more money to spend and a chance to
auction off a new set of tax breaks to interest groups. That's good for Washington, but bad for America. CF&P Video: Flat Tax vs. National Sales Tax
Thursday, June 4, 2009 ~ 11:41 p.m., Dan Mitchell Wrote: With...President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a
money-making idea long considered politically taboo: a national sales tax. Common around the world, including in Europe, such a tax -- called a value-added tax, or VAT -- has not been seriously considered in the
United States. But advocates say few other options can generate the kind of money the nation will need... At a White House conference earlier this
year on the government's budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine,
if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama's policies, the chairman of the Senate Budget Committee declared that a VAT
should be part of the debate. "There is a growing awareness of the need for fundamental tax reform," Sen. Kent Conrad (D-N.D.) said in an
interview. "I think a VAT and a high-end income tax have got to be on the table." ..."While we do not want to rule any credible idea in or out as
we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers,"
said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag. Still, Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff
Rahm Emanuel and author of the 2008 book "Health Care, Guaranteed." Meanwhile, former Federal Reserve chairman Paul A. Volcker, chairman of a task force Obama assigned to study the tax
system, has expressed at least tentative support for a VAT. "Everybody who understands our long-term budget problems understands we're going to need a new source of revenue, and a VAT is an obvious
candidate," said Leonard Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, who testified on Capitol Hill this month about his own VAT plan.
Not surprisingly, the Washington Post did not bother to quote any free-market people who oppose giving politicians a new source of money. For what it is worth, I wrote a piece for National Review in 2005 that explains why a VAT is a terrible idea. The core arguments are just as relevant today as they were then: A VAT might have some theoretically attractive features, but it is a perniciously effective way of raising revenues and inevitably leads to bigger government. The best evidence comes from Europe. Back in the
mid-1960s, the burden of government in Europe wasn't that much higher than it was in the United States. Tax revenues consumed about 30 percent of gross domestic product in Europe. The U.S. had a small
advantage: The tax burden, including state and local governments, was about 27 percent of GDP. But then European governments started adopting the VAT. Denmark was the first to do so in 1967. France and
Germany followed, with many other European nations imposing the tax within 5 years. For politicians, the VAT was great news. Besides being a new source of revenue, the VAT has been a disturbingly easy tax to
increase since it's built into the price of products and hidden from consumers. Moreover, even small increases generate a big pile of revenue because the tax base is so broad. The tax has become so easy to
raise that VAT rates in Europe average more than 20 percent. For taxpayers, however, the news has been disastrous. Thanks to this levy, the burden of government in Europe today is much higher than it is in
the U.S. On average, taxes consume about 41 percent of Europe's economic output. While other taxes have also climbed, the VAT certainly has helped finance the explosion of social welfare spending that creates
such a drag on European economies. In the U.S., by contrast, the total tax burden as a share of GDP is about where it was 40 years ago — 27 percent... Many European governments...claimed that more destructive
taxes would be reduced or repealed once the VAT was implemented. In the short term, this was true: As late as 1975, taxes on income and profits were lower in the EU than they were in the U.S. But this was a
transitory phenomenon. Income-tax rates quickly began climbing and almost immediately jumped above U.S. levels. Ironically, the VAT facilitated higher tax rates on income since politicians often argued that
a higher VAT had to be accompanied by higher income-tax burdens to ensure the tax burden wasn't being shifted to lower-income taxpayers. There is only one scenario that would make a VAT acceptable. If U.S.
lawmakers were willing to repeal the 16th Amendment and abolish all taxes on income, a VAT would be an acceptable risk. But until that happens, taxpayers should vigorously resist the Europeanization of America.
Wednesday, June 3, 2009 ~ 3:17 p.m., Dan Mitchell Wrote: City finance professionals are so worried about the future that nearly 30 per cent are planning to leave London, according to a survey by eFinancialCareers, a jobs website. ...Many observers believe employment
in the City will recover gradually from next year and hope London can hang on to its position as a leading financial centre if the regulatory
response to the crisis is not too heavy-handed. Of those surveyed, 45 per cent thought London's leading position was under threat, while a third
felt it was not. Increased taxes were seen as the main threat, followed by the potential impact of heavier European regulation. "Concerns about
the relative competitiveness of the City in the face of impending changes to the regulatory framework coupled to upheavals in the tax system are
having an immediate impact on the desirability of London as a location in which to work," said John Benson, chief executive of eFinancialCareers. Wednesday, June 3, 2009 ~ 2:23 p.m., Dan Mitchell Wrote: Dealing Quinn the biggest legislative defeat of his 17-week governorship, the House voted 42-74 against his push to temporarily raise the income
tax rate for individuals from 3 percent to 4.5 percent. Sixty votes were needed for passage. ...Unable to nail down the income tax increase, Quinn is in an epic bind. If he can't convert 29 Republican and
Democratic income tax opponents to "yes" votes in the coming weeks, Quinn must cut billions of dollars in vital state services as he gears up for
a 2010 gubernatorial run later this year. The top House Republican pinned blame for the tax plan's failure on Springfield's ruling Democrats, who could not put together a balanced budget despite having
comfortable House and Senate majorities and a governor with whom they can finally work after ousting ex-Gov. Rod Blagojevich. ..."People
say 'just stop the spending,' and I agree with them. I claim a victory here for those folks," said Rep. Randy Ramey (R-Carol Stream). ...Quinn's
two-year tax hike wasn't the only legislative money-maker pushed to the side Sunday night. The House opted against voting on a permanent, larger income tax increase pushed by Senate President John Cullerton
(D-Chicago) and Sen. James Meeks (D-Chicago). That proposal, which narrowly passed the Senate late Saturday, would have boosted the income tax from 3 percent to 5 percent and imposed $1 billion in sales
taxes for the first time on an array of services, ranging from movie tickets and dry cleaning to cable and Internet providers. But House Democrats were polled in a closed-door meeting Sunday about the
Cullerton-Meeks plan, and only 35 offered support, and no Republicans were on board, leaving it 25 votes shy of passage leading up to the midnight Sunday deadline. Tuesday, June 2, 2009 ~ 7:53 p.m., Dan Mitchell Wrote: Today this black Democrat says the new civil-rights struggle is about the quality of instruction in public schools, and that to receive a decent education African-Americans need school choice. He wants the
president's help. "We need choice like Obama has. He can send his kids to any school he wants." Mr. Ford was once like many Democrats on
education -- a reliable vote against reforms that would upend the system. But over the past three and a half years he's studied how school choice
works and he's now advocating tax credits and scholarships that parents can spend on public or private schools. He's not alone. Three other prominent black Democrats in South Carolina have publicly challenged
party orthodoxy. In 2006 State Rep. Harold Mitchell Jr. crossed party lines to endorse Republican Karen Floyd for state education superintendent. "We have to try something different," he told me at the
time. ...These men are the most visible part of a movement joining black Democrats and political conservatives in a common cause. In recent
years, school-choice candidates (black and white) have taken the seats of more than half a dozen antichoice legislators, and there have been two
mass rallies for school choice at the state capitol that included black leaders. Charter and private schools geared toward impoverished black children also are cropping up, and no wonder. There are about 700,000
students in public schools in South Carolina, more than a third of whom -- 247,000 -- are in schools considered to be failing based on test scores.
Nearly 60% of the kids in these failing schools -- about 146,000 -- are African-American. Blacks make up about 39% of public-school students. In March, a Pulse Opinion Research poll of 1,000 black voters in the
state reported that 53% agreed that school choice would improve public education (28% disagreed). Support for school-choice legislation increased to 61% when Mr. Ford's name was attached to it. Monday, June 1, 2009 ~ 4:23 p.m., Dan Mitchell Wrote: Compliance costs from thousands of regulations — pouring out from over 60 departments, agencies and commissions — amounted to $1.17 trillion in 2008. The federal government spends an additional $49.1
billion just to administer and enforce its rules. This figure is on par with federal income tax revenue ($1.2 trillion) and Canada's entire 2006 GDP
($1.265 trillion). When doing business becomes so expensive, there tends to be a lot less of it. Of course, businesses pass on their costs, so
regulation becomes a hidden trillion-dollar tax on consumers. This is bad policy at any time. ...The numbers are up as well as the costs. The 2008 Federal Register reached a record 79,435 pages, up 10% from the
previous year. Even as the economy dipped into recession, agencies issued 3,830 new final rules. As you read this, 4,004 new federal regulations fill the pipeline, 753 of which affect small businesses.
"Economically significant" is the bureau-speak description for rules costing at least $100 million per year. There are 180 of them in the 2008
Register, up 13% from 2007 — which was itself up 14% from 2006. ...What the economy needs instead is a deregulatory stimulus. There are three fronts in the battle to achieve it. The first is disclosure. The more
that policymakers and the public know about overregulation, the more likely they are to do something about it. To that end, our organization, the Competitive Enterprise Institute, issues the annual Ten Thousand
Commandments report. Official Washington needs its own such report card. Each year's federal budget, or the annual Economic Report of the President, should include in-depth chapters exploring the regulatory
state. The second front is installing sunset provisions. Like a carton of milk, every newly created regulation should have an expiration date, beyond which it gets discarded unless renewed by Congress. Obsolete
rules should not be on the books at all. The third front involves Congress reasserting its lawmaking authority. Article I, Section 1 of the
Constitution says, "All legislative powers herein granted shall be vested in a Congress." Much of that power has been given away to federal
agencies. Congress passed 285 laws last year, compared with 3,830 final rules from agencies. The alphabet soup of agencies should answer to Congress for the regulatory burdens they impose. Sunday, May 31, 2009 ~ 12:48 p.m., Dan Mitchell Wrote: In addition to kicking up taxes on the so-called wealthy, various members of the current administration seem to have lots of new ideas for separating Americans from their money. Ezekiel Emanuel, brother of
Rahm Emanuel, President Obama's top aide, is health care adviser to Obama's budget director, Peter Orszag. He wants a 10% value-added
tax (VAT), similar to the European Union's, to "pay" for health care reform. It's called value-added, but it's really value subtracted — a tax
imposed on each level of production, from raw goods to consumers. In Congress, meanwhile, Democrats are pushing for an Internet tax and a cap-and-trade tax on energy use. They want more money. What better
way than to tax something people now use for free? No question, if current spending plans remain in place, the federal government will need
a lot more money. Over the last 40 years, federal spending as a share of GDP has averaged about 20%. The current Democratic leadership will push that to at least 22% of GDP — and likely much higher. That will
mark a permanent expansion in the size of federal government with a concomitant shrinking of your wallet. Taxes are already budgeted to rise by $1.1 trillion by 2019. But they want more. ...A VAT...would be a
political and economic disaster. In Europe, it has been used as a piggy bank by profligate politicians, who keep raising the VAT whenever they run short of cash. It also has made the cost of living in Europe
extraordinarily high when compared with the U.S. Is that what Americans really want? As our own IBD/TIPP Poll shows, the VAT is already highly unpopular with voters. Of those queried, 73% said they
would oppose a VAT to boost federal revenues. And it's opposed by Democrats, Republicans and independents alike. Saturday, May 30, 2009 ~ 11:29 a.m., Dan Mitchell Wrote: Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a
millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor
Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The
Baltimore Sun predicted the rich would "grin and bear it." One year later, nobody's grinning. One-third of the millionaires have disappeared
from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which
the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead
of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last
year -- even at higher rates. ...The Maryland state revenue office says it's "way too early" to tell how many millionaires moved out of the state
when the tax rates rose. But no one disputes that some rich filers did leave. It's easier than the redistributionists think. Christopher Summers,
president of the Maryland Public Policy Institute, notes: "Marylanders with high incomes typically own second homes in tax friendlier states like
Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency." Friday, May 29, 2009 ~ 10:22 p.m., Dan Mitchell Wrote: The Pregnancy Discrimination Act makes it illegal to fire, or not hire, a woman because she is pregnant. The law even restricts workplace speech. Employers are warned that in a job interview they must never
ask questions like, "Might you start a family?" If Congress thought the law would end claims of workplace discrimination, it was wrong, as
usual. Companied are increasingly being sued. Even a maternity-clothing chain was sued. ...But Carrie Lukas says such lawsuits do more harm than good. Lukas is also a working mom, vice president of the
Independent Women's Forum. "If my employer decides they no longer want me as an employee, then it should be their right to fire me." she
told me. "I understand the desire for people to have government step in and try to protect women, but there's real costs to government
intervention." These costs are rarely talked about publicly. But once Congress creates protected groups, some employers avoid hiring members of those groups. After the Americans with Disabilities Act
became law, it was assumed more disabled people would enter the workplace. But a study by economists at MIT found employment actually
"dropped sharply." ..."Sometimes laws that are intended to help women like me actually end up hurting women like me," Lukas said. "All of a
sudden, a potential employer is looking at me and thinking, 'She just might turn around and sue us.' That makes it less likely that I'm going to get hired. You raise the cost of hiring a woman like me." Thursday, May 28, 2009 ~ 8:23 p.m., Dan Mitchell Wrote: Just days after Colin Powell informed us that the American people were willing to pay higher taxes in order to get government services-- and that
Republicans therefore needed to stop their opposition to taxes-- California voters resoundingly defeated a bill to raise taxes in order to pay for the many government services in that liberal state. Wednesday, May 27, 2009 ~ 11:00 p.m., Dan Mitchell Wrote: The Obama administration is bent on becoming a major player in -- if not taking over entirely -- America's health-care, automobile and banking industries. Before that happens, it might be a good idea to look
at the government's track record in running economic enterprises. It is terrible. In 1913, for instance, thinking it was being overcharged by the
steel companies for armor plate for warships, the federal government decided to build its own plant. It estimated that a plant with a 10,000-ton annual capacity could produce armor plate for only 70% of what the
steel companies charged. When the plant was finally finished, however -- three years after World War I had ended -- it was millions over budget
and able to produce armor plate only at twice what the steel companies charged. It produced one batch and then shut down, never to reopen. Or take Medicare. Other than the source of its premiums, Medicare is no
different, economically, than a regular health-insurance company. But unlike, say, UnitedHealthcare, it is a bureaucracy-beclotted nightmare, riven with waste and fraud. Last year the Government Accountability
Office estimated that no less than one-third of all Medicare disbursements for durable medical equipment, such as wheelchairs and hospital beds, were improper or fraudulent. Medicare was so lax in its
oversight that it was approving orthopedic shoes for amputees. ...Corporations play with their own money. They are wealth-creating machines in which various people (investors, managers and labor) come
together under a defined set of rules in hopes of creating more wealth collectively than they can create separately. So a labor negotiation in a
corporation is a negotiation over how to divide the wealth that is created between stockholders and workers. Each side knows that if they drive
too hard a bargain they risk killing the goose that lays golden eggs for both sides. Just ask General Motors and the United Auto Workers. But
when, say, a school board sits down to negotiate with a teachers union or decide how many administrators are needed, the goose is the taxpayer. That's why public-service employees now often have much more
generous benefits than their private-sector counterparts. And that's why the New York City public school system had an administrator-to-student
ratio 10 times as high as the city's Catholic school system... When the federal government nationalized the phone system in 1917, justifying it
as a wartime measure that would lower costs, it turned it over to the Post Office to run. (The process was called "postalization," a word that
should send shivers down the back of any believer in free markets.) But despite the promise of lower prices, practically the first thing the Post Office did when it took over was . . . raise prices. Tuesday, May 26, 2009 ~ 3:10 p.m., Dan Mitchell Wrote: Michigan would be better off with a graduated income tax. Depending on where the levels are set, the state would significantly reduce severe
public education funding shortfalls as well as the business tax burden. A graduated income tax is as important to Michigan's economic recovery
as retaining college graduates to fuel our knowledge-based economy. A majority of Michigan taxpayers will benefit from a graduated income
tax. At 4.35 percent, Michigan's flat tax rate is among the lowest top tax rates in the nation. If the state used a graduated model ranging from 2.9
percent for the lowest wage earners to 5.9 percent for the wealthiest, 85 percent of taxpayers would receive a tax cut, and only 15 percent would
receive a tax increase. ...Good news for high-income earners: They will get back much of the state tax increase through federal offsets. High-income earners who itemize their federal income tax returns can
deduct their state income taxes. They will increase their federal tax refunds and keep at least $500 million in Michigan every year. Adopting a graduated tax in Michigan requires a ballot measure to amend the
state Constitution. Michigan voters rejected the graduated tax three times -- in 1968, 1972 and 1976. ...the governor has proposed a deal to Republican and business leaders: Support a graduated income tax in
exchange for eliminating an unpopular surcharge on the state's main business tax. But Senate Majority Leader Mike Bishop immediately
slammed the idea as "anti-taxpayer" and promoting "class warfare." Monday, May 25, 2009 ~ 5:50 p.m., Dan Mitchell Wrote: If Republicans are looking to get back their conservative groove, they could do worse than study Minnesota's budget brawl. Mr. Pawlenty deftly (and amusingly) outmaneuvered his Democratic opposition, not
only saving his state from huge tax increases but clearing the way to cut government spending. ...To fill in the hole they'd blown in the upcoming
fiscal budget the DFL then proceeded to float every tax hike known to Garrison Keillor. A short list: A new top income tax rate of 9% (the fourth highest in the nation); across-the-board income tax increases;
sales taxes on Internet downloads; the end of the local property tax cap (enacted only last year); alcohol taxes; cigarette taxes; eliminating the deduction for an organ donation (no joke); and killing the home
mortgage interest deduction. Throughout this spectacle, Mr. Pawlenty kept voicing three simple principles. "Number one, we must have [because of the constitution] and should have a balanced budget," he
told me. "Number two, the state government needs to live within its means, just like everybody else. Number three, we shouldn't raise taxes
in the worst recession in 60 years." Minnesota already has one of the highest tax burdens in the nation. ...Upon receiving the last spending bill,
he announced that he would exercise the power of "unallotment," which has been on the books since 1939 and which has been used four times.
Under it, the governor is allowed to "unallot" (take away) any state spending for which there is no money to pay. Panicked, the DFL passed
tax legislation to cover its blowout spending bills, 10 minutes before the session's end. Too late. The governor said he'd veto the bill and would
not be calling back the legislature to do any more mischief. Mr. Pawlenty is now free to strip $2.7 billion from state spending to balance the
budget. Tax hikes are dead. He tells me this will be one of the first times in modern Minnesota history that the state will reduce the size of government in real terms, not just slow its rate of growth. ...Mr.
Pawlenty's hardball has earned him glowing praise from the state's job creators, in particular small businesses, who are relieved to be spared additional tax burdens in today's economy. The governor's message --
that it is simply "inappropriate" for state legislators to keep spending like lunatics and raise taxes in a recession -- has resonated with
cash-strapped voters. That sort of tax-and-spend governance is precisely what has now pushed California to the brink of insolvency. Sunday, May 24, 2009 ~ 6:22 p.m., Dan Mitchell Wrote: British banks and stockbrokers may refuse to take on American clients if new international tax proposals outlined by President Obama are passed.
The decision, which would make it hard for Americans in London to open bank accounts and trade shares, is being discussed by executives at Britain's banks and brokers who say it could become too expensive to
service American clients. The proposals, which were unveiled as part of the president's first budget, are designed to clamp-down on American tax
evaders abroad. However bank bosses say they are being asked to take on the task of collecting American taxes at a cost and legal liability that
are inexpedient. ...One executive at a top UK bank who didn't want to be named for fear of angering the IRS said: "It's just about manageable
under the current system - and that's because we're big. The danger to us is suddenly being hauled over the coals by the IRS for a client that hasn't
paid proper taxes. The audit costs will soar. We'll have to pay it but I know plenty of smaller players won't." The British Bankers Association
(BBA) and APCIMS had a meeting with European counterparts 10 days ago to discuss the crisis. A delegation is set to meet the US Treasury's Internal Revenue Service on 16th June to demand they drop the reforms.
...President Obama's proposals are built on the so-called Qualified Intermediary system which was intended to ensure Americans paid the correct tax wherever they were domiciled. Foreign financial institutions
that handle American money have to fill in a US tax form on behalf of the client that has to be audited too. Saturday, May 23, 2009 ~ 9:51 p.m., Dan Mitchell Wrote: Politicians like to talk about incentives -- for businesses to relocate, for example, or to get folks to buy local. After reviewing the new budget, I
have identified the most compelling incentive of all: a major tax break immedi ately available to all New Yorkers. To be eligible, you need do only one thing: move out of New York state. Last week I spent 90
minutes doing a couple of simple things -- registering to vote, changing my driver's license, filling out a domicile certificate and signing a
homestead certificate -- in Florida. Combined with spending 184 days a year outside New York, these simple procedures will save me over $5 million in New York taxes annually. ...One thing's certain: That money
won't continue to fund Albany's bloated bureaucracy, corrupt politicians and regular special-interest handouts. How did the state get to this point? By spending, spending and spending some more. New York's
budget was $72.7 billion in 1999. Ten years later it ballooned to $131.8 billion. Each year, on average, the budget has risen at an astounding 6 percent compounded annual rate -- more than double inflation (2.8
percent). ...This problem didn't begin with the current recession. New York faced a $6 billion shortfall before the economic downturn. However, in the face of economic turmoil, Gov. Paterson, Assembly
Speaker Sheldon Silver and Senate Majority Leader Malcolm Smith looked to the unions and special interests, who answered with one voice: raise taxes. That was irresponsible -- and may just prove to be
counterproductive, since the top 1 percent of earners account for about 50 percent of state revenue and are the ones who can and will leave.
Among other hikes in taxes and fees, they raised the marginal tax rate on the most successful (and most mobile) New Yorkers to 8.97 percent, the
second-highest rate in the nation. Bottom line? By domiciling in Florida, which has no personal-income tax, I will save $13,800 every day. That's
a pretty strong incentive. Like I said, I love New York. But I'm not going to pay any more for the waste, corruption and inefficiency that is New York state government. Friday, May 22, 2009 ~ 5:22 p.m., Dan Mitchell Wrote: Tax authorities in Germany are poised to claim 50 per cent of the money that a teenage student earned for 'auctioning' her virginity... Romanian-born Alina Percea, who is a student in Germany, was paid
£8,800 in cash for a weekend of sex with the Italian businessman after she auctioned her virginity online. But tax officials in Berlin regard the
18-year-old's act as 'nothing more than prostitution'. Prostitution is legal in Germany - but it is heavily taxed. ...It also emerged that, because
Alina earned so much in such a short time, she may even be liable for a hefty VAT bill too. VAT in Germany works out to 19 per cent, meaning
the sale of her virginity could land her with just over £3,000 in the end. Link to this Blog Entry Thursday, May 21, 2009 ~ 12:02 p.m., Dan Mitchell Wrote: Internal Revenue Service Commissioner Douglas Shulman said projections that the US loses $US100 billion annually to offshore tax havens are "wild estimates" that "don't have much basis". …"Those
numbers are pretty broad numbers," Shulman said. The $US100 billion figure, a compilation of private-sector estimates, is often cited by Michigan Senator Carl Levin… North Dakota Senator Byron Dorgan
also frequently cites the $US100 billion figure. This, of course, raises an interesting question. If politicians are willing to use dishonest numbers to push a certain policy, what does that suggest about the merits of the policy? CF&P Video: Tax Havens: Myths vs. Facts Wednesday, May 20, 2009 ~ 5:00 p.m., Dan Mitchell Wrote:
Wednesday, May 20, 2009 ~ 2:51 p.m., Dan Mitchell Wrote: By far the most consequential initiative is Proposition 1A, which is favored by most of the Sacramento political class. Prop 1A creates a rainy day fund of up to 12.5% of the budget and imposes a new annual
spending cap. It would divert 3% of revenues during economic boom years into the rainy day fund that can only be spent during recessions. Mr. Schwarzenegger is correct that this is a sensible reform, because for
40 years the state has endured revenue booms and busts. Alas, the cap is far weaker than the Gann Amendment that passed with 74% of the vote
in 1979, as the sister initiative to Proposition 13, and helped usher in a decade of budget surpluses. The Gann Amendment -- until public unions
neutered it in the early 1990s -- imposed a ceiling on spending at the level of population growth plus inflation; when revenues exceeded that
limit, the money was returned to taxpayers. By contrast, Prop 1A allows revenues and thus spending to grow each year at the average rate of growth of tax receipts over the previous decade, or at the rate of
population growth plus inflation, whichever is greater. Revenues above that amount are pushed into the reserve fund to be spent at a later date.
This gives incentives to legislators to raise taxes whenever possible, because the spending cap rises along with revenues. Prop 1A also allows
the legislature to raid the rainy day fund to pay for "capital outlay purposes" -- roads, bridges, schools and even pork projects. Even to get
this minimal spending cap, voters must also approve a two-year $16 billion extension of this year's tax hikes. The 0.25% income-tax surcharge (to 10.55%) and the near doubling of the car tax would be
extended through 2013, and the one percentage point sales tax hike (to 9%) would be extended through 2012. Even worse is Prop 1B, which would divert $9.3 billion from the rainy day fund to the education
spenders in Sacramento and thus exempt half the general fund budget from any belt tightening. This would refortify the teachers unions, which
have spent $2.7 million to pass the measure and are the very group most responsible for California's fiscal mess. Teacher pay and benefits are already 35% above the national average. Then there are the gimmick
Propositions 1C, 1D and 1E, which would raid trust funds and use any surpluses to pay current general fund bills. The preposterous 1C would
raise $5 billion today by securitizing future lottery revenues. That would add more than $350 million of new debt payments annually for at least
the next 20 years. What's next, selling the silverware in the Governor's mansion? Given all of this trickery, it is no wonder polls show Props 1A-E are likely to lose. Link to this Blog Entry Tuesday, May 19, 2009 ~ 11:48 a.m., Dan Mitchell Wrote: Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the "fair" way to close his state's gaping deficit. ...Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states. ...Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts. Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses. ...Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found "a significant negative impact of higher marginal tax rates on state economic growth." In other words, soaking the rich doesn't work. To the contrary, middle-class workers end up taking the hit. Finally, there is the issue of whether high-income people move away from states that have high income-tax rates. Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the "soak the rich" tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average. Amazingly, these three states ranked 46th, 49th and 50th among all states in the percentage increase in wealthy tax filers in the years after they tried to soak the rich. This result was all the more remarkable given that these were years when the stock market boomed and Wall Street gains were in the trillions of dollars. Examining data from a 2008 Princeton study on the New Jersey tax hike on the wealthy, we found that there were 4,000 missing half-millionaires in New Jersey after that tax took effect. Moore and Laffer also show that zero-income tax states not only are friendlier to taxpayers, but also that they deliver better results for key indices such as education: Those who disapprove of tax competition complain that lower state taxes only create a zero-sum competition where states "race to the
bottom" and cut services to the poor as taxes fall to zero. They say that tax cutting inevitably means lower quality schools and police protection
as lower tax rates mean starvation of public services. They're wrong, and New Hampshire is our favorite illustration. The Live Free or Die State
has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the
fourth-highest test scores in the nation -- even though the state spends about $1,000 a year less per resident on state and local government than
the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State
had the second-lowest test scores. Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales
tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and
its schools rank among the worst in the nation -- much worse than those in New Hampshire. Interestingly, the Baltimore Sun last week published a news article noting that the soak-the-rich tax imposed last year is backfiring. There are fewer rich people, less taxable income, and lower tax revenue. To be sure, some of this is the result of a nationwide downturn, but the research cited by Moore and Laffer certainly suggest that the state revenue shortfall will continue even after than national economy recovers: A year ago, Maryland became one of the first states in the nation to create a higher tax bracket for millionaires as part of a broader package
of maneuvers intended to help balance the state's finances and make the tax code more progressive. But as the state comptroller's office sifts
through this year's returns, it is finding that the number of Marylanders with more than $1 million in taxable income who filed by the end of April
has fallen by one-third, to about 2,000. Taxes collected from those returns as of last month have declined by roughly $100 million. ...Karen Syrylo, a tax expert with the Maryland Chamber of Commerce, which
lobbied against the millionaire bracket, said she has heard from colleagues who are attorneys and accountants that their clients moved out of state to avoid the new tax rate. She said that some Maryland
jurisdictions boast some of the highest combined state and local income tax burdens in the country. "Maryland is such a small state, and it is so
easy to move a few miles south to Virginia or a few miles north to Pennsylvania," Syrylo said. "So there are millionaires who are no longer going to be filing Maryland tax returns." The bad results in Maryland are not a surprise for those who have watched the Center's three-part video series on the Laffer Curve. If you have not yet had a chance, the videos are embedded here for your viewing pleasure:
Link to this Blog Entry Tuesday, May 19, 2009 ~ 10:33 a.m., Dan Mitchell Wrote: A compromise deal between the EU's 'Anglo-Saxon' and 'social market' economies is the best way to secure Europe's future economic strength and social stability, says former EU competition commissioner Mario
Monti. ...countries that provide greater social benefits often begrudge the low-tax, low-spend countries for their long-standing opposition to any
form of tax co-ordination. They argue that low corporate tax regimes such as that seen in Ireland constitute little more than a race to the bottom, promoting companies to base themselves where taxes are lowest
and subsequently denying other governments the vital tax revenues necessary to support their social objectives. To reconcile the two sides says Mr Monti, the EU should propose a strategic pact... The second
measure would consist of a limited system of tax co-ordination between member states. French Socialist MEP Pervenche Beres, chair of the parliament's influential economic affairs committee, later told
EUobserver that the current discussion was reminiscent of the debate surrounding the Bolkestein services directive leading up to the European
elections in 2004. "If nothing is done [to harmonise member state tax regimes], the sustainability of internal market logic as it is currently built will be less and less," she said. Link to this Blog Entry Monday, May 18, 2009 ~ 12:17 p.m., Dan Mitchell Wrote: President Barack Obama's plan to limit tax breaks for multinational companies will include an amendment that affects alleged tax havens at home, including Nevada and Delaware, a knowledgeable source in
Washington, D.C., said. ...The yet-to-be-announced amendment will make sure that U.S. states do not replace offshore countries like Switzerland, Luxembourg and the Cayman Islands as tax havens for
wealthy individuals and businesses, the source explained. To prevent the corporations from turning to the Silver State and others, the Treasury
Department will propose a legislative requirement that state officials obtain the identity of corporate owners and their tax identification numbers of any company registering in their states. The documents
would be available to the Internal Revenue Service but not to the public. A spokeswoman for the Treasury Department did not respond to calls for comment. However, in May 2008, then-Sen. Obama joined two senators
in sponsoring a bill that would require states to maintain ownership records on corporations and make them available to law enforcement through subpoena or summons. Under current law, Nevada Secretary of
State Ross Miller has the authority to demand a list of owners from any corporation within three days or Miller's office may suspend or revoke
the corporation's state charter. Critics, however, say that doing that would only drive corporations to incorporate elsewhere to avoid disclosing the identity of their owners. ...The secretary of state's office
estimates it will receive $74 million in total fees for commercial recordings in the fiscal year ending July 1, a large sum given the
difficulty the Legislature is having balancing the budget. "Additionally, we recently enacted legislation which should address all of the
transparency concerns," Miller said, referring to measures adopted in Nevada two years ago. "The model legislation gives law enforcement
access to the information they need to carry out investigations," he said, "and therefore I believe sweeping federal legislation is unnecessary." Link to this Blog Entry Monday, May 18, 2009 ~ 11:31 a.m., Dan Mitchell Wrote: Does anybody really believe that adding 50 million people to the public health-care rolls will not cost the government more money? About $1.5
trillion to $2 trillion more? At least. So let's be serious when evaluating President Obama's goal of universal health care, and the idea that it's a
cost-cutter. Can't happen. Won't happen. Costs are going to explode. Think of it: Can anyone name a federal program that ever cut costs for anything? Let's not forget that the existing Medicare system is roughly
$80 trillion in the hole. ...And even if you put aside the demerits of a government-run health system, Obama's health-care "funding" plans are completely falling apart. Not only will Obama's health program cost
at least twice as much as his $650 billion estimate, but his original plan to fund the program by auctioning off carbon-emissions warrants (through the misbegotten cap-and-trade system) has fallen through. In an
attempt to buy off hundreds of energy, industrial, and other companies, the White House is now going to give away those carbon-cap-emissions
trading warrants. So all those revenues are out the window. Fictitious. Link to this Blog Entry Sunday, May 17, 2009 ~ 9:34 p.m., Dan Mitchell Wrote: The always thoughtful David Brooks complains in his New York Times column that Republicans learned the wrong lessons from John Ford's classic Western movies. They should not be "the party of untrammeled
freedom and maximum individual choice," but rather "once again the party of community and civic order." They should not celebrate the
lonely hero that saves the town, but the everyday people who build the voluntary associations that Alexis de Tocqueville identified as the chief
strength of America back in the 1830s. But Brooks errs when he suggests that in opposing administration policies Republicans are betraying community and civic order. For the policies of the Obama administration
are not designed to shelter and nourish what Edmund Burke called the "little platoons." They are designed to subject them to what Tocqueville
called "soft despotism," which he identified as the natural tendency and potentially fatal weakness of American democracy. ...Which brings to
mind Tocqueville's warning: "Every measure which establishes legal charity on a permanent basis and gives to it an administrative form
creates thereby a class unproductive and idle, living at the expense of the class which is industrious and given to work." The Obama
administration is assiduous in the protection of this administrative class. It offers $6,800,000,000 to the state of California on one hand, and then
threatens to take it back because the state cut the pay of public employee union members by $74,000,000. The government gives JPMorgan Chase $25,000,000,000, and then insists that it give up in the Chrysler deal
what it would ordinarily receive in bankruptcy proceedings and turn it over to fund the health care benefits of United Auto Worker retirees. Link to this Blog Entry Saturday, May 16, 2009 ~ 11:03 a.m., Dan Mitchell Wrote: ...thanks to a profligate federal government, which will double the national debt to $11.5 trillion in just four years, and a recession that has
weakened federal tax revenues, we can no longer ignore the problem. The day of reckoning is at hand. The Social Security Board of Trustees reported Tuesday that costs will exceed revenues in 2016 — a full year
sooner than expected just last year. And total assets — including more than 70 years of "surpluses" built up in the "trust fund" — will be
completely gone by 2037 — four years earlier than in last year's report. The deficit over the next 50 years is expected to be about 2% of taxable
payrolls — up from 1.7% last year. By the way, changes in the last year alone have added $5.3 trillion in costs to the program. Long-term, unfunded liabilities for Social Security and Medicare top $53 trillion —
about four times the size of current GDP. Taxes must either rise or benefits shrink by that amount to close that gap. ...Social Security should have been reformed a long time ago. When President Bush put private
accounts on the agenda in a very minor way in 2004, he was roundly criticized. Congress did nothing — on either side of the aisle. ...The
financial meltdown and recession, we've heard repeatedly, "prove" that private accounts are a bad idea. This is flatly false. ...On average,
someone retiring this year can draw a Social Security benefit of about $15,700. If that same worker had a personal retirement account, based
on historical returns in the stock market, he'd get $2,300 more than that. That, after two of the worst stock-market downturns in history. Link to this Blog Entry Friday, May 15, 2009 ~ 5:11 p.m., Dan Mitchell Wrote: Mr. Issa's suspicions...are also typical of the conservative movement. The government and its bureaucrats are, to the right, ever a malign force --
jealous, power-hungry and greedy. But it's hard to blame someone for failing after you've worked so hard to make them fail. The world knows about the Republican Party's problems these days -- its purges,
denunciations and defections. On the other hand, reconstituting itself as a more uniformly conservative organization might let the GOP free itself
from the taint of the Bush years and fight big government in the Reagan manner. But I doubt it. Even when conservatism is made pure, it won't be
able to govern. Its bottomless suspicion toward federal workers is part of the reason. ...back in 2008, [Issa] insisted that "the problem starts and
ends with the federal government." Among other things, he charged, its regulators "weren't just asleep at the switch but in many ways . . . gave
the green light for these practices," meaning the trading of mortgage-backed securities. On this point, at least, Mr. Issa got it right. The regulators did fail us. They were too cozy with industry and too
blinkered by the free-market faith to see the reality unfolding under their noses. But what ought to make conservatives choke is the fact that those
failing agencies were also the product of years of conservative governance, with its well-known hostility to bureaucrats and its apparent determination to make federal work unattractive. What do government
agencies look like when they're run this way? We get a glimpse from a report on the Securities and Exchange Commission (SEC) written in March and released by the Government Accountability Office last week.
Thanks to a lack of support staff, lawyers at the SEC's enforcement division say they spent much of their time filing, photocopying, sorting mail, and other routine office chores. They also say they were not
consulted when the SEC's leaders decided on enforcement policies that effectively stifled their efforts, and some "came to see the Commission as
less of an ally . . . and more of a barrier." So this is how it works with conservatives at the helm: We starve government agencies of resources, we keep their employees' pay well below their private-sector
counterparts, we make sure they know what we think of them as they wait their turn at the photocopier. Then we demand they protect us when there's a problem with extremely complex financial instruments, whose
designers are defended by some of the best-paid lawyers in the world. And when the regulators inevitably fail? We declare indignantly that the problem begins and ends with them. We stoke bizarre fears about how
they might go on child-adopting sprees if we give them the chance. One can almost conclude that they only exist to take, you know, the blame. Thursday, May 14, 2009 ~ 7:23 p.m., Dan Mitchell Wrote: After virtually every disaster created by Beltway politicians you can hear the sound of feet scurrying for cover in Washington, see fingers pointing
in every direction away from Washington, and watch all sorts of scapegoats hauled up before Congressional committees to be denounced on television for the disasters created by members of the committee who
are lecturing them. The word repeated endlessly in these political charades is "deregulation." The idea is that it was a lack of government
supervision which allowed "greed" in the private sector to lead the nation into crises that only our Beltway saviors can solve. What utter rubbish this all is can be found by checking the record of how
government regulators were precisely the ones who imposed lower mortgage lending standards-- and it was members of Congress (of both parties) and who pushed the regulators, the banks and the
mortgage-buying giants Fannie Mae and Freddie Mac into accepting risky mortgages, in the name of "affordable housing" and more home ownership. Presidents of both parties also jumped on the bandwagon.
...When the housing boom was going along merrily, Congressman Barney Frank was proud to be one of those who were pushing Fannie Mae and Freddie Mac into more adventurous financial practices, in the name of
"affordable housing." In 2003 he said: "I believe that we, as the Federal Government, have probably done too little rather than too much to push
them to meet the goals of affordable housing and to set reasonable goals." He added: "I want to roll the dice a little bit more in this
situation towards subsidized housing." In other words, when things were looking good, he was happy to acknowledge the role of the federal government in pushing the housing market in a direction it would not
have taken on its own. But, after the risky mortgage-lending practices fostered by government intervention led to massive defaults and foreclosures that caused financial institutions to collapse or be bailed
out, Congressman Frank changed his tune completely. By 2007, his line was now that "the subprime crisis demonstrates the serious negative
economic and social consequences that result from too little regulation." By 2008, his line was that the financial crisis was caused by "bad
decisions that were made by people in the private sector." When television financial reporter Maria Bartiromo reminded Congressman Frank of his statements in earlier years, he simply denied making the
statements she quoted and blamed "right-wing Republicans who took the position that regulation was always bad." ...Don't politicians ever learn?
Why should they? What they have learned all too well is how easy it is to get credit for promoting home ownership and how easy it is to escape
blame for the later foreclosures and other economic disasters that follow. Link to this Blog Entry Wednesday, May 13, 2009 ~ 10:10 p.m., Dan Mitchell Wrote: Prof Maria Joao Rodrigues said that Ireland's use of competitive tax policies was in conflict with the concept of European solidarity. Prof Rodrigues, who has acted as an adviser to the European Commission
and to EU presidencies in relation to the Lisbon strategy for growth and jobs, presented a paper, A Progressive Recovery Plan for the European Union, to a seminar organised by the Irish think-tank Tasc, and the
Brussels-based Foundation for European Progressive Studies. ...She said a European stimulus package could target energy, the creation of a smart economy, and climate change-related issues. ....The general
secretary of Ictu, David Begg, said it can never be "business as usual" for Ireland in the future, yet so much of the debate in Ireland was based
on that idea. ...She said the crisis was a systemic one and the first real global crisis. A systemic crisis needed progressive reform of the system.
...The stimulation of the European economy would not work if credit did not begin to flow again. There also needed to be work on executive pay and on tax havens, as well as reform of the pension system, which
needed to shift to more reliable products. ...TCD academic James Stewart said that if the crisis was a systemic one, then the solution being
proposed by the paper was not sufficient. He also said Ireland could not tackle its difficulties by itself. It needed to end its "arrogant" attitude
towards the European project and the European project needed to abandon its "neo-liberal" tendencies so it would mean something again for the European people. Link to this Blog Entry Tuesday, May 12, 2009 ~ 5:15 p.m., Dan Mitchell Wrote: Some of the best-known figures in the City of London are planning to abandon Britain as dissent grows over the Government's decision to raise the top rate of income tax to 50 per cent. Over the weekend, it
emerged that Guy Hands, chief executive of the private equity company Terra Firma Capital Partners, which owns the giant EMI music group, has relocated to Guernsey. The hedge fund grandee Crispin Odey is
likewise understood to be considering taking his Odey Asset Management group, which controls more than £3bn, to a different tax jurisdiction. Mr
Hands's decision to move to the Channel Islands is understood to be entirely for tax reasons. ...A number of leading City figures have suggested they may leave the UK in direct protest at what many consider
is the Government's use of the financial services industry as a political punchbag. Several have sharply criticised the Government's decision to
increase the top rate of income tax to 50 per cent for those earning more than £150,000 a year. The move was announced in last month's Budget by the Chancellor, Alistair Darling, but critics have accused the
Government of endangering the City's pre-eminence as a leading financial centre, and warn that there could be a brain drain of talent away from London. ...Mr Hands and Mr Odey join a chorus of
businessmen and bankers who have publicly criticised the Government's tax policies. Last month, John Moulton, the chairman of the private
equity group Alchemy, said of the increase in the top tax rate: "This is an ill-judged political gesture that will have a bad impact. The rise in the
highest personal tax rate will lead to people leaving the country and deter others that had considered coming. I have spoken to several people
who are now considering whether or not to stay." ...Peter Hargreaves, the co-founder of the financial advisory group Hargreaves Landsdown,
has been quoted in recent weeks as considering a move to either Monaco or the Isle of Man, while Hugh Osmond, an entrepreneur who floated the
Pizza Express restaurant chain, said last week that he was considering moving his financial services group, Pearl Assurance, out of the UK. The
income-tax increase is not the only one of Labour's fiscal policies to have provoked anger in the City. Several companies, including Sir Martin
Sorrell's advertising group WPP, have relocated to Ireland in protest at the UK's corporate tax charges. Last month, Sir Martin said he believed
the impact of the 50 per cent income-tax rate on established high earners would be limited, but those graduating from business schools would feel more inclined to pursue careers overseas. Link to this Blog Entry Monday, May 11, 2009 ~ 7:48 p.m., Dan Mitchell Wrote: Listen to President Obama, and the status quo seems a cesspool. Pervasive "loopholes" engineered by "well-connected lobbyists" allow
U.S. multinationals to skirt American taxes and outsource jobs to low-tax countries. So the president proposes plugging loopholes. Some jobs will return to the United States, he said, and U.S. tax coffers will
grow by $210 billion over the next decade. Sounds great... [but] the president's accusatory rhetoric perpetuates many myths. ...Most countries don't tax the foreign profits of their multinational firms at all.
Take a Swiss multinational with operations in South Korea. It pays a 27.5 percent Korean corporate tax on its profits and can bring home the
rest tax-free. By contrast, a U.S. firm in Korea pays the Korean tax and, if it returns the profits to the United States, faces the 35 percent U.S.
corporate tax rate. American companies can defer the U.S. tax by keeping the profits abroad (naturally, many do), and when repatriated, companies get a credit for foreign taxes paid. In this case, they'd pay the
difference between the Korean rate (27.5 percent) and the U.S. rate (35 percent). ...most overseas investments by U.S. multinationals serve local
markets. Only 10 percent of their foreign output is exported back to the United States, says Harvard economist Fritz Foley. When Wal-Mart
opens a store in China, it doesn't close one in California. On balance, all the extra foreign sales create U.S. jobs for management, research and
development (almost 90 percent of American multinationals' R&D occurs in the United States), and the export of components. A study by Foley and economists Mihir Desai of Harvard and James Hines of the
University of Michigan estimates that for every 10 percent increase in U.S. multinationals' overseas payrolls, their American payrolls increase
almost 4 percent. ...many experts believe his proposals would actually destroy U.S. jobs. Being more heavily taxed, American multinational firms would have more trouble competing with European and Asian
rivals. Some U.S. foreign operations might be sold to tax-advantaged foreign firms. Either way, supporting operations in the United States would suffer. "You lose some of those good management and
professional jobs in places like Chicago and New York," says Gary Hufbauer of the Peterson Institute. Including state taxes, America's top corporate tax rate exceeds 39 percent; among wealthy nations, only
Japan's is higher (slightly). However, the effective U.S. tax rate is reduced by preferences -- mostly domestic, not foreign -- that also make the system complex and expensive. As Hufbauer suggests, Obama would
have been better advised to cut the top rate and pay for it by simultaneously ending many preferences. That would lower compliance costs and involve fewer distortions. But this sort of proposal would have
been harder to sell. Obama sacrificed substance for grandstanding. CF&P Foundation Video: President Obamas Deferral Proposal: Hamstringing American Companies, Reducing American Jobs Link to this Blog Entry
Sunday, May 10, 2009 ~ 9:21 p.m., Dan Mitchell Wrote: Douglas Elmendorf, director of the Congressional Budget Office, told members of the Senate Finance Committee Thursday that "Under a
cap-and-trade program, consumers" — not demonized corporations, we might add — "would ultimately bear most of the costs of emission
reductions." This is because industry and other groups (hospitals, schools, any institution that discharges carbon), forced under a federal
cap-and-trade regime to buy government permits to release CO2, would pass on their costs to consumers. Cutting carbon emissions by 15% through this method would cost each American household an average of
$1,600 a year, the CBO found. In a worst-case scenario, the cost is $2,200 per household. Link to this Blog Entry
Saturday, May 9, 2009 ~ 4:44 p.m., Dan Mitchell Wrote: "Obama Targets Overseas Tax Dodge," headlined the Washington Post. But the reality is murkier; the president's accusatory rhetoric perpetuates
many myths. ...Most countries don't tax the foreign profits of their multinational firms at all. Take a Swiss multinational with operations in South Korea. It pays a 27.5% Korean corporate tax on its profits and
can bring home the rest tax-free. By contrast, a U.S. firm in Korea pays the Korean tax and, if it returns the profits to the United States, faces
the 35% U.S. corporate tax rate. American companies can defer the U.S. tax by keeping the profits abroad, and when repatriated, companies get
a credit for foreign taxes paid. In this case, they'd pay the difference between the Korean rate (27.5%) and the U.S. rate (35%). ...most overseas investments by multinationals serve local markets. Only 10% of
their foreign output is exported back to the U.S. When Wal-Mart opens a store in China, it doesn't close one in California. On balance, all the extra foreign sales create U.S. jobs for management, research and
development (almost 90% of American multinationals' R&D occurs in the U.S.), and the export of components. One study estimates that for every
10% increase in U.S. multinationals' overseas payrolls, their American payrolls increase almost 4%. ...many experts believe his proposals would
destroy jobs. More heavily taxed, multinational firms would have more trouble competing with European and Asian rivals. Some U.S. foreign operations might be sold to tax-advantaged foreign firms. Either way,
supporting operations in the U.S. would suffer. "You lose some of those good management and professional jobs in places like Chicago and New
York," says Gary Hufbauer of the Peterson Institute. ...Obama would have been better advised to cut the top rate by ending many preferences.
That would lower compliance costs and involve fewer distortions. But this sort of proposal would have been harder to sell. Obama sacrificed substance for grandstanding. Link to this Blog Entry
Friday, May 8, 2009 ~ 11:55 p.m., Dan Mitchell Wrote: "One of my clients," Lauria told host Frank Beckmann, "was directly threatened by the White House and in essence compelled to withdraw its
opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight." Lauria
represented one of the bondholder firms, Perella Weinberg, which initially rejected the Obama deal that would give the bondholders about 33 cents on the dollar for their secured debts while giving the United
Auto Workers retirees about 50 cents on the dollar for their unsecured debts. This, of course, is a violation of one of the basic principles of bankruptcy law, which is that secured creditors — those who loaned
money only on the contractual promise that if the debt was unpaid they'd get specific property back — get paid off in full before unsecured creditors get anything. Perella Weinberg withdrew its objection to the
settlement, but other bondholders did not, which triggered the bankruptcy filing. After that came a denunciation of the objecting bondholders as "speculators" by Barack Obama in his press conference
last Thursday. And then death threats to bondholders from parties unknown. The White House denied that it strong-armed Perella Weinberg. The firm issued a statement saying it decided to accept the
settlement, but it pointedly did not deny that it had been threatened by the White House. Which is to say, the threat worked. The same goes for
big banks that have received billions in government TARP money. Many of them want to give back the money, but the government won't let them.
They also voted to accept the Chrysler settlement. Nice little bank ya got there, wouldn't want anything to happen to it. ...Think carefully about
what's happening here. The White House, presumably car czar Steven Rattner and deputy Ron Bloom, is seeking to transfer the property of one group of people to another group that is politically favored. In the
process it is setting aside basic property rights in favor of rewarding the United Auto Workers for the support the union has given the Democratic
Party. ...In the meantime, who is going to buy bonds from unionized companies if the government is going to take their money away and give it to the union? We have just seen an episode of Gangster Government.
It is likely to be part of a continuing series. Link to this Blog Entry
Thursday, May 7, 2009 ~ 8:15 p.m., Andrew Quinlan Wrote:
Link to this Blog Entry
Wednesday, May 6, 2009 ~ 9:34 p.m., Andrew Quinlan Wrote:
Link to this Blog Entry
Tuesday, May 5, 2009 ~11:11 p.m., Andrew Quinlan Wrote:
Link to this Blog Entry
Monday, May 4, 2009 ~ 6:06 p.m., Andrew Quinlan Wrote: . . . Jack had the remarkable ability to take economic truths and make them understandable to everyone - "You cannot hate the employer and
love the employee." No one was better than Jack in explaining how all benefit from a bigger economic pie. In his own words, he was "a
bleeding-heart conservative," and he understood that without rapid job creation the poor and many minorities would not have a chance for better lives. Link to this Blog Entry
Sunday, May 3, 2009 ~ 7:12 p.m., Dan Mitchell Wrote: In order to raise women's pay, feminists have long espoused the discredited theory of comparable worth, under which employers pay
workers based on the supposed "worth" of their job rather than by supply and demand. ...New York Congresswoman Carolyn Maloney, chair of the Joint Economic Committee, held hearings on pay differences
between men and women. ...According to Mrs. Maloney, "we have considerable work left to do before women earn equal pay for equal work." Yet a GAO report, released at the hearing, found only a
seven-cent pay gap between men and women working in the federal government. This seven cent gap was calculated even without accounting for work experience outside the federal government—surely
a significant determinant of income. ...The latest figures show that comparing men and women who work 40 hours weekly yields a wage ratio of 87 percent, even before accounting for different education, jobs,
or experience, which brings the wage ratio closer to 95 percent. Many studies, such as those by Professor June O'Neill of Baruch College and Professor Marianne Bernard of the University of Chicago, show that
when women work at the same jobs as men, with the same accumulated lifetime work experience, they earn essentially the same salary. ...Mrs. Maloney...is a cosponsor of the Paycheck Fairness Act, which would
allow women to sue for unlimited compensatory and punitive damages. It would encourage class actions by requiring workers who do not want to participate to opt out, rather than opt in, a radical change from
conventional law and practice. ...Lisa Maatz, a former Maloney staffer, testified "It's not that we don't want women to be nurses. But why aren't
we paying them what they're worth?" She added, "We need to look at how we pay people, what we value and what we don't." What these witnesses are saying is that the government needs to be setting wages,
rather than leaving this valuable function to the private sector, because the private sector does not do the right job. It's not fair, said Ms. Maatz,
that secondary school biology teachers earn less than scientists—even though high school biology teachers get more vacation, finish their days earlier, and do not have to produce lengthy research papers as a
condition of promotion. Consider a large firm such as Chevron. Would it have to pay clerical workers, mostly women, as much as it pays refinery
hands, mostly men? With such "equality," who would be willing to work at the distant, more dangerous jobs in the refinery? Link to this Blog Entry
Saturday, May 2, 2009 ~ 8:23 p.m., Dan Mitchell Wrote: Spurred on by the G20, governments and financial centres around the world have come forward with pledges to open up bank records to
foreign tax investigators. .....growing intolerance of tax evasion is good news for developing countries desperate to raise tax revenues to pay for...services that can be financed by the tax dollars of the rich.
....governments....have concluded, more can be done to boost development by helping developing countries collect taxes than can be achieved through foreign aid. ....Governments need to be able to prevent
money due to them being siphoned offshore. Every year, billions of dollars are transferred from developing countries to foreign tax havens. If more of that money stayed at home, it could finance bigger
development budgets. Link to this Blog Entry
Friday, May 1, 2009 ~ 4:40 p.m., Dan Mitchell Wrote: Gail Johnson doesn't think of herself as wealthy. The former pediatric nurse has spent 20 years building a chain of preschools and after-school
programs that accommodate sick children so working parents can keep their jobs. But, like most small-business owners, Johnson reports her
profit on her personal tax return. In a typical year, she and her husband make more than $500,000, according to her accountant, a figure that throws them squarely into the ranks of the richest Americans -- and
makes them a prime target for the Obama administration's tax policy. ....If Obama's tax plans are enacted, her accountant estimates that her
federal tax bill -- typically, around $120,000 a year -- would rise by at least $23,000, a 19 percent increase. ....Across the nation, many business
owners are watching anxiously as the president undertakes expensive initiatives to overhaul health care and expand educational opportunities, while also reining in runaway budget deficits. Already, Obama has
proposed an extra $1.3 trillion in taxes for business and high earners over the next decade. They include new limits on the ability of corporations to automatically defer U.S. taxes on income earned
overseas, repeal of a form of inventory accounting that tends to reduce business taxes, and a mandate that investment partnerships pay the regular income tax rate instead of the lower capital gains rate.
....Republicans and business groups argue that Obama's plan to tax the rich would strike some of the nation's most productive businesses. Though certain very large companies must organize as separate entities
that are taxed twice -- on profits and shareholder dividends -- most smaller businesses opt to be taxed only once by reporting their profits on
the personal tax returns of their shareholders. ....Johnson's tax bill stands to grow dramatically if Obama were to revive a plan to apply
Social Security tax to income over $250,000 instead of capping it at the current $106,800. Because Johnson is an employee and an employer, she
would have to pay both portions of the tax, Hurst said, tacking another $30,000 onto her bill. Other business owners are also nervous. Jim Murphy, president of EST Analytical in Fairfield, Ohio, which sells
analytical instruments to environmental testing labs and pharmaceuticals, said his company is struggling in the sluggish economy. But if profit returns to pre-recession levels -- about $455,000 -- Murphy
said his accountant estimates that Obama's proposals could add $60,000 to his $120,000 tax bill. "The misconception is that guys like me take
[our profits] and put it into our pockets," said Murphy, who employs 47 people. "But the money the company earns in a given year is used to buy
additional inventory so we can grow and hire." A 50 percent tax increase, he said, would be "really painful." Not all business owners are
complaining. Marc Friedman, who earns about $350,000 a year operating Ace Hardware stores in the District and Baltimore, said he wouldn't mind the extra $35,000 to $50,000 he stands to lose to the IRS.
"The small-business community feels there's a disproportionate amount of tax placed on us, and it's true," Friedman said. But government
services "can't be paid for equally by everyone," he said. "It's a big burden, but we're fortunate to be successful." Link to this Blog Entry
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