Wednesday, September 30, 2009

Politicians Feather Their Own Nests

A story in Politico reveals that politicians are increasing the budget for Congress by 5.8 percent in the 2010 fiscal year. This is on top of a 10.9 percent funding increase from last year to this year. But the really disturbing number is that it will cost taxpayers $4.7 billion overall to keep the 535 politicians on Capitol Hill on the gravy train:
Congress is on the verge of giving itself a bump in its annual budget — even as local governments, families and businesses across the country are tightening their belts in the worst recession in decades. Under a House-Senate conference measure, approved by the House last week and poised for passage in the Senate on Wednesday, spending for the legislative branch will increase 5.8 percent this year, boosting Capitol Hill's annual budget to $4.7 billion. The measure includes a hodgepodge of new funding for lawmakers: a $500,000 pilot program for senators to send out postcards about their town hall meetings, $30,000 for receptions for foreign dignitaries and $4 million for consultants — with Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) getting up to nine each and Senate President Pro Tempore Robert Byrd (D-W.Va.) getting up to three more. ...Supporters of the bill argue that they were relatively frugal this year. Last year, Congress increased its funding 10.9 percent over the fiscal 2008 level — and the $4.7 it’s appropriating to itself this year is less than the $5 billion Obama set forth in his budget earlier this year. ...The Senate Appropriations Committee — where McConnell and 29 other appropriators sit — voted 30-0 in June to send the bill to the full Senate, which approved the bill in July by a 67-25 vote.

If the Choice is Bernanke or Geithner, Can I Pick "None of the Above"?

In this CNBC debate, I argue that more regulatory power for government is a bad idea. I need to learn to interrupt, though, since Christian is very effective using that tactic to get more air time.

Tuesday, September 29, 2009

The Difference Between Liberals, Conservatives, and Texans

You're walking down a deserted street with your wife and two small children. Suddenly, a dangerous looking man with a huge knife comes around the corner, locks eyes with you, screams obscenities, raises the knife, and charges. You are carrying a Glock 40 and you are an expert shot. You have mere seconds before he reaches you and your family. What do you do?

Liberal's Answer:

Well, that's not enough information to answer the question!

+ Does the man look poor or oppressed?
+ Have I ever done anything to him that would inspire him to attack?
+ Could we run away?
+ What does my wife think? What about the kids?
+ Could I possibly swing the gun like a club and knock the knife out of his hand?
+ What does the law say about this situation?
+ Does the Glock have an appropriate safety built into it?
+ Why am I carrying a loaded gun and what kind of message does this send to society and my children? Is it possible he'd be happy with just killing me?
+ Does he definitely want to kill me or would he just be content to wound me?
+ If I were to grab his knees and hold on, could my family get away while he was stabbing me?

This is all so confusing! I need to debate this with some friends for a few days to try to come to a conclusion.

Conservative's Answer:


Texan's Answer:

(sounds of reloading)

Wife: "Sweetheart, he looks like he's still moving. What do you kids think?"
Son: "Mom's right Dad, I saw it too..."


Daughter: "Nice grouping, Daddy! Were those the Winchester Silver Tips?"

How Dare the French Complain About Polanski's Detention

The French are upset that Roman Polanski, the fugitive child rapist, has been detained by Swiss authorities at the request of the U.S. government. The Justice Department wants Polanski extradited because he fled America for France to avoid jail time. Other people have properly condemned the French government for wanting to defend this sleazeball, who anally raped a 13-year old girl, but I have a different complaint. French politicians are the leading agitators for the OECD campaign against so-called tax havens. According to Sarkozy and company, low-tax jurisdictions should be obliged to enforce the punitive tax laws of OECD member nations. Yet France refused to send Polanski back to America because it did not feel any need to help enforce America's laws against molesting and raping children. I'm glad Polanski was dumb enough to travel to Switzerland. I'm glad the Swiss authorities had the moral decency to detain Polanski. And I'm overjoyed the French are getting a taste of the medicine their trying to impose on others.

P.S. The last sentence is a horribly flawed comparison on my part. It is a good thing when nations cooperate to investigate and prosecute criminals who violate the rules of all civilized societies. It is not a good thing, however, for high-tax nations to try to impose their tax laws on economic activity that takes place in low-tax jurisdictions. In other words, France is trying to coerce international cooperation where it is not appropriate, but is fighting international cooperation to protect child rape. Amazing.

P.P.S. The French also give protection to murderers who escape America. The French government position (shared by all European Union nations!) is that it will not extradite murderers to the United States if they might face the death penalty.

Who Elected Obama School Principal?

Politicians in Washington have a nasty habit of assuming that they should control every aspect of life, and education is a good example. Bush thought he could demonstrate "compassion" by spendinng a lot of money to centralize education policy in Washington, so we got saddled with the No-Bureaucrat-Left-Behind education bill. Now Obama is trying to be Bush on steroids, increasing spending even more and proposing to micro-manage local school districts by dictating school calendars. It may very well be the case that summer vacations should be shortened, but that is none of Obama's business. Moreover, the AP story on the issue notes that other nations get much better performance with less time in school - which is why decentralization and choice are the right ways of discovering the right way(s) of providing better education:
Students beware: The summer vacation you just enjoyed could be sharply curtailed if President Barack Obama gets his way. ...The president, who has a sixth-grader and a third-grader, wants schools to add time to classes, to stay open late and to let kids in on weekends so they have a safe place to go. ...While it is true that kids in many other countries have more school days, it's not true they all spend more time in school. Kids in the U.S. spend more hours in school (1,146 instructional hours per year) than do kids in the Asian countries that persistently outscore the U.S. on math and science tests — Singapore (903), Taiwan (1,050), Japan (1,005) and Hong Kong (1,013). That is despite the fact that Taiwan, Japan and Hong Kong have longer school years (190 to 201 days) than does the U.S. (180 days).

Monday, September 28, 2009

The English Are Also Nuts on the Babysitting Issue

A previous post poked fun at Michigan state bureaucrats for threatening a woman for the ostensible crime of keeping an eye on her neighbors' kids without a government permit. English bureaucrats are equally clueless, badgering two women who help care for each other's kids while they work. The common theme, of course, is that bureaucracts lack common sense - but the real lesson is that this is the inevitable consequence of government intervention (especially when politicians say they are "doing it for the children). The BBC reports:
England's Children's Minister wants a review of the case of two police officers told they were breaking the law, caring for each other's children. Ofsted said the arrangement contravened the Childcare Act because it lasted for longer than two hours a day, and constituted receiving "a reward". It said the women would have to be registered as childminders. ...The two detective constables, Leanne Shepherd, from Milton Keynes, and Lucy Jarrett, from Buckingham, told the BBC how Ofsted insisted they end their arrangement. ...Ms Shepherd, who serves with Thames Valley Police, recalled: "A lady came to the front door and she identified herself as being from Ofsted. She said a complaint had been made that I was illegally childminding. "I was just shocked - I thought they were a bit confused about the arrangement between us. So I invited her in and told her situation - the arrangement between Lucy and I - and I was shocked when she told me I was breaking the law." ..."To think that they would waste their time and effort on innocent people who are trying to provide for their families by returning to the workplace... Surely their time and effort would be better placed elsewhere." ...Minister for Children, Schools and Families Vernon Coaker insisted the Childcare Act 2006 was in place "to ensure the safety and wellbeing of all children".

Another "Victory" in the War on Drugs

A grandmother in Indiana has been arrested for purchasing cold medicine. We can all sleep more safely now that this hardened criminal has been taught a lesson. The Terre Haute News reports:
When Sally Harpold bought cold medicine for her family back in March, she never dreamed that four months later she would end up in handcuffs. Now, Harpold is trying to clear her name of criminal charges, and she is speaking out in hopes that a law will change so others won’t endure the same embarrassment she still is facing. ...Harpold is a grandmother of triplets who bought one box of Zyrtec-D cold medicine for her husband at a Rockville pharmacy. Less than seven days later, she bought a box of Mucinex-D cold medicine for her adult daughter at a Clinton pharmacy, thereby purchasing 3.6 grams total of pseudoephedrine in a week’s time. Those two purchases put her in violation of Indiana law 35-48-4-14.7, which restricts the sale of ephedrine and pseudoephedrine, or PSE, products to no more than 3.0 grams within any seven-day period. When the police came knocking at the door of Harpold’s Parke County residence on July 30, she was arrested on a Vermillion County warrant for a class-C misdemeanor, which carries a sentence of up to 60 days in jail and up to a $500 fine.

Keeping Your Doctor Will Be as Easy as 1, 2, 3…1,788, 1789, 1,790

This simple little chart shows the steps needed to keep your doctor if the health care plan put forth by Senator Baucus becomes law. For a closer look, click this link.

Great Moments in Local Government

While the federal bureaucracy is more dangerous because it generates misguided regulations that are imposed on the entire nation, state and local governments certainly are capable of equally foolish actions. Here's a report about state bureaucrats in Michigan threatening a women for watching her neighbors' kids while they wait for a bus:
A West Michigan woman says the state is threatening her with fines and possibly jail time for babysitting her neighbors' children. Lisa Snyder of Middleville says her neighborhood school bus stop is right in front of her home. It arrives after her neighbors need to be at work, so she watches three of their children for 15-40 minutes until the bus comes. The Department of Human Services received a complaint that Snyder was operating an illegal child care home. DHS contacted Snyder and told her to get licensed, stop watching her neighbors' kids, or face the consequences. "It's ridiculous." says Snyder. "We are friends helping friends!" She added that she accepts no money for babysitting. ...State Representative Brian Calley is drafting legislation that would exempt people who agree to care for non-dependent children from daycare rules as long as they're not engaged in a business. "We have babysitting police running around this state violating people, threatening to put them in jail or fine them $1,000 for helping their neighbor (that) is truly outrageous" says Rep. Calley.

Sunday, September 27, 2009

With Two Seconds on the Clock, Georgia Lines Up to Attempt a Game-Winning Field Goal. The Ball is Snapped, and the Kick Is…

…Good! From the Atlanta Journal-Constitution, here’s a photo of Blair Walsh celebrating his kick. This was the first game that I watched on TV, so I missed a rainstorm. But it would have been nice to be there for yet another tense game. Next week, LSU.

A Funny (or Tragic) Look at Taxes

Penn and Teller analyze our wonderful and delightful federal income tax.

Insight from Thomas Sowell

Government did not help us in the 1930s, and it is not helping us today.

Saturday, September 26, 2009

The Value-Added Tax Threat

One reason America is more competitive than Europe is that politicians only have access to one big source of money. But if they can add a value-added tax (a European-style national sales tax) on top of the income tax, that will allow them to finance a big expansion in the burden of government. Unfortunately, that's exactly what they want, according to the co-chairman of President Obama's transition team. Bloomberg reports:
“There’s going to have to be revenue in this budget,” said Podesta, Clinton’s former chief of staff and co-chairman of President Barack Obama’s transition team, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing today. A so-called consumption tax would “create a balance” with European and Japanese economies and “could potentially have a substantial effect on competitiveness,” said Podesta. Value-added taxes in Europe and Japan encourage savings by taxing consumption. Podesta said such a tax may be regressive, but can be balanced by exempting some products and using “the money to support low-wage workers.”

Friday, September 25, 2009

Greetings from Liechtenstein

I am in Vaduz, Liechtenstein, where I will be giving a speech shortly on tax competition issues, at a conference entitled, "Can Capitalism Survive."

Regular readers already know my views on tax competition, so allow me to make a few observations instead about Liechtenstein.

It has a progressive income tax, which sounds bad, but the top tax rate is only 18 percent. The low rates, combined with a very simple system that generally does not penalize saving and investment, means that there is very little disincentive for people who want to make the economy more productive.

Government spending in Liechtenstein is far too high, consuming about 21 percent of GDP. But compared to the United States, where government outlays are approaching 40 percent of GDP (and Western Europe, where they someteimes exceed 50 percent of economic output), Liechtenstein is a small-government jurisdiction.

There are 36,000 people living in Liechtenstein and 32,000 jobs. Is this a sign of rampant child labor? No, there are 32,000 jobs because more than 15,000 foreigners come to Liechtenstein every day to work. Having low tax rates and small government is a good recipe for economic prosperity, and this is good news for workers in neighboring nations.

It goes without saying, of course, that the people and leaders of Liechtenstein correctly understand that financial privacy is a fundamental human right, one that respects the sanctity of the individual and recognizes the threat of government.

Last but not least, the seven villages that comprise Liechtenstein have an explicit right of secession. So if the Royal Family and/or Parliament ever get too greedy, all it takes to escape is a two-thirds vote.

Thursday, September 24, 2009

Weekly Economics Lesson

The White House is trying to claim that health care “reform” does not mean higher taxes. This is a two-pronged issue. First, there is a mandate to purchase health insurance. Second, there is a tax (the White House calls it a fee) on people who fail to purchase a policy.

The White House claims this mandate is akin to state-level requirements for the purchase of health insurance, and that the newly-insured people will be getting some value (a health insurance policy) in exchange for their money. These assertions are defensible, but that does not change the fact that a tax is being imposed.

It might be plausible to argue that the mandate is not a tax if the value of the insurance policy to the individual was equal to the cost. But since these are people who are not buying policies, their behavior reveals that this obviously cannot be true. So this means that they will be worse off under Obama’s plan and that at least some of the cost should be considered a tax.

The Social Security payroll tax allows a good analogy. Labor economists correctly argue that the payroll tax functions, in part, as a “premium” for what can be considered a government-provided annuity. As such, when we try to measure the disincentive effect of the payroll tax, it is appropriate to include the perceived value of future Social Security benefits (for most Americans, especially with average or above-average incomes, the “rate of return” is very low or negative, so a substantial share of the payroll tax is a tax both in the legal sense and economic-distortion sense). The same is true of a mandatory health insurance policy (even if the money does not go through the government’s hands).

On the broader issue of paying money and getting something of value in return, another analogy is helpful. A share of the gasoline excise tax is used for road construction and maintenance. We all benefit from roads, even if we don’t drive (let’s set aside issues such as whether the benefits equal the costs, whether the federal government should be involved, etc). Does that somehow mean the gasoline excise tax is not a tax? Of course not.

Turning now to the excise tax, the Administration’s argument that this is a fee is even less defensible. The Baucus legislation in the Senate Finance Committee explicitly references an excise tax. Equally revealing (and even more ominous), the IRS is charged with collecting the fee. The White House can argue that the tax – in the economic sense – is lower than the fee if something of value is exchanged. But the tax is still there.

Rather than play games, the White House should make an open argument for bigger government. The fact that the Administration prefers to be deceptive says a lot about the underlying merits of their proposal.

Wednesday, September 23, 2009

The Evolution of Math Lessons in Government Schools

Teaching Math in 1950:

A logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price. What is his profit?

Teaching Math in 1960:

A logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price, or $80. What is his profit?

Teaching Math in 1970:

A logger exchanges a set "L" of lumber for a set "M" of money. The cardinality of set "M" is 100. Each element is worth one dollar. Make 100 dots representing the elements of the set "M." The set 'C", the cost of production contains 20 fewer points than set "M." Represent the set "C" as a subset of set "M" and answer the following question: What is the cardinality of the set "P" of profits?

Teaching Math in 1980:

A logger sells a truckload of lumber for $100. His cost of production is $80 and his profit is $20. Your assignment: Underline the number 20.

Teaching Math in 1990:

By cutting down beautiful forest trees, the logger makes $20. What do you think of this way of making a living? Topic for class participation after answering the question: How did the forest birds and squirrels feel as the logger cut down the trees?

Teaching Math in 2000:

A logger sells a truckload of lumber for $100. His cost of production is $120. How does Arthur Andersen determine that his profit is $60

Teaching Math in 2010:

El hachero vende un camion carga por $100. La cuesta de production es.............

Tuesday, September 22, 2009

Time for Transparency at the Fed

Politicians and senior government officials routinely try to hide their backroom dealing from the public, but people have the right to know how their money is being (mis)used. A good example is the Federal Reserve, which has veered away from its proper job of protecting the dollar and now behaves as if should be able to secretly pick winners and losers in the financial system without appropriate oversight and public discussion. A column in the Wall Street Journal discusses the legal effort to force transparency on the Fed:
Facing a banking collapse that was unlike anything it had seen since the Great Depression, the Federal Reserve created $2 trillion of assets and debts during the past year to rescue the nation's financial institutions. But it did not make clear to taxpayers just where all of this money went. Taxpayers—involuntary investors in this case—have a right to know who received loans, in what amounts, for which collateral, and why specific loans were made. The Fed says taxpayers don't have the right to know these things. What's more, it went to court to resist giving an accounting of its actions under the Freedom of Information Act. ...Chief U.S. District Judge Loretta A. Preska in Manhattan disagreed with the Fed. In a 47-page ruling, she found that the facts and the law require the central bank to release its lending records. The Fed is now considering whether to appeal her ruling. ...Since its creation in 1913, the Fed has been the watchdog over our money. Now it is running interference for banks that borrowed our money, and went so far as to insist to a federal judge that the public shouldn't worry about what it does with our money. The law doesn't allow the government to get away with secrecy based on a mere claim that some sort of damage would result if it released the information in question. ...So far, there has been far too little accountability at the Fed for how it used taxpayer money to save banks that failed their shareholders and creditors by making bets that didn't pay off.

Obama's Make-Believe World Where Taxes Are Not Taxes

The Obama Administration is trying to make the absurd argument that higher taxes on companies are not paid for by workers, consumers, and shareholders. I discuss this issue on CNBC, though I'm a bit disgruntled that I was largely left out of the conversation after my opening explanation.

Is Obama Planning to Repeat the Mistakes of Hoover and Roosevelt?

Art Laffer has a compelling column in the today's Wall Street Journal discussing how higher tax rates under Presidents Hoover and Roosevelt played an important role in driving the economy into a ditch during the 1930s. The interesting question, of course, is the degree to which President Obama is going to repeat these mistakes. We already see that some of the mistakes that happened during the Great Depression are being replicated, including higher government spending (with a big help from Bush), more government regulation, and protectionism. The good news, so to speak, is that Obama is moving policy in the wrong direction in small steps, whereas Hoover and Roosevelt took giant leaps. So while it is likely that our long-term growth rate will be dampened, hopefully there will not be a lengthy period of economic stagnation:
While Fed policy was undoubtedly important, it was not the primary cause of the Great Depression or the economy's relapse in 1937. The Smoot-Hawley tariff of June 1930 was the catalyst that got the whole process going. It was the largest single increase in taxes on trade during peacetime and precipitated massive retaliation by foreign governments on U.S. products. Huge federal and state tax increases in 1932 followed the initial decline in the economy thus doubling down on the impact of Smoot-Hawley. There were additional large tax increases in 1936 and 1937 that were the proximate cause of the economy's relapse in 1937. In 1930-31, during the Hoover administration and in the midst of an economic collapse, there was a very slight increase in tax rates on personal income at both the lowest and highest brackets. The corporate tax rate was also slightly increased to 12% from 11%. But beginning in 1932 the lowest personal income tax rate was raised to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25%. (That's not a misprint!) The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%. But the tax hikes didn't stop there. In 1934, during the Roosevelt administration, the highest estate tax rate was raised to 60% from 45% and raised again to 70% in 1935. The highest gift tax rate was raised to 45% in 1934 from 33.5% in 1933 and raised again to 52.5% in 1935. The highest corporate tax rate was raised to 15% in 1936 with a surtax on undistributed profits up to 27%. In 1936 the highest personal income tax rate was raised yet again to 79% from 63%—a stifling 216% increase in four years. Finally, in 1937 a 1% employer and a 1% employee tax was placed on all wages up to $3,000. ...The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity. If there were one warning I'd give to all who will listen, it is that U.S. federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s. Net legislated state-tax increases as a percentage of previous year tax receipts are at 3.1%, their highest level since 1991; the Bush tax cuts are set to expire in 2011; and additional taxes to pay for health-care and the proposed cap-and-trade scheme are on the horizon.

Monday, September 21, 2009

Many Talented Foreigners No Longer See America as the Place that Rewards Achievement

While there is considerable disagreement regarding the value of low-skilled immigrants (especially with regards to whether illegals deserve amnesty), almost everybody agrees that the United States is a big beneficiary when highly skilled workers, investors, and entrepreneurs from around the world come to America. So it is a bit troubling that USA Today is reporting that many Indians and Chinese are deciding that they can achieve more by going back home. It is too soon to make sweeping pronouncements about the public policy implications of this demographic shift, but this preliminary evidence of a reverse "brain drain" certainly suggests that the big-government policies of Bush and Obama have made the American economy less vibrant and less dynamic:
More skilled immigrants are giving up their American dreams to pursue careers back home, raising concerns that the U.S. may lose its competitive edge in science, technology and other fields. "What was a trickle has become a flood," says Duke University's Vivek Wadhwa, who studies reverse immigration. ..."For the first time in American history, we are experiencing the brain drain that other countries experienced," he says. Suren Dutia, CEO of TiE Global, a worldwide network of professionals who promote entrepreneurship, says the U.S. economy will suffer without these skilled workers. "If the country is going to maintain the kind of economic well-being that we've enjoyed for many years, that requires having these incredibly gifted individuals who have been educated and trained by us," he says. ...Multinational companies that belong to the American Council on International Personnel tell Executive Director Lynn Shotwell that skilled immigrants are discouraged by the immigration process, she says. Some can wait up to a decade for permanent residency, she says. "They're frustrated with having an uncertain immigration status," she says. "They're giving up."

Senator Bayh is a Fiscal Fraud

With many Republicans having decided that the cesspool of Washington is actually a hot tub, it would be nice if Democrats seized the high ground and became the party of limited government. So it was very encouraging to see a column in the Wall Street Journal by Evan Bayh, a Democratic from Indiana. Senator Bayh makes a strong case for fiscal restraint:
America is on an unsustainable fiscal path that threatens our future. Changing course is imperative, and Democrats should lead the way. Last month the Office of Management and Budget predicted that the national debt will increase by $9 trillion over the next decade—$2 trillion more than forecast just four months earlier. Government net interest payments exceed $1 trillion in 2019, up from $382 billion this year. ...Congress's initial reaction to our fiscal peril has not been encouraging. The $410 billion omnibus spending bill passed in March increased domestic discretionary spending by 8% and included more than 8,000 earmarks. This year's budget contemplates domestic discretionary increases of nearly 9%, three times the rate of inflation. If the past is any guide, it will include thousands of new earmarks. Any serious effort to control the deficit must begin with spending restraint. Efficiency and frugality, common virtues in the private sector, must be incorporated into government. ...For the next fiscal year, assuming the economy has gathered sufficient momentum, we should freeze domestic discretionary spending, limit increases in defense spending to the rate of inflation, forgo pay raises for federal workers, and institute a federal hiring freeze.
Sounds great, right? The only problem is that Senator Bayh (like many of his Republican colleagues) is a fiscal fraud. When it doesn't matter, he beats his chest about fiscal responsibility. But when he is on the Senate floor, he votes for big government. According to the National Taxpayers Union, he voted to protect taxpayers only 15 percent of the time last year, earning an "F" for his profligacy (and his highest grade since getting elected is a "D"). I realize that there is a problem with grade inflation in America, but there is no way that a politician who votes for big government more than 80 pecent of the time should be allowed to get away with blatantly false rhetoric about fiscal responsibility.

Saturday, September 19, 2009

Another Track-Meet Victory for the Bulldogs

Greetings from Arkansas. My Bulldogs won, 52-41, but we gave up almost 500 yards. I would say that former Coach Vince Dooley is spinning in his grave about that defensive performance, but he's still alive.

However, a win is a win is a win. Next week, back to Athens to face Arizona State.

Switzerland Winning the Battle for Company Investment

Switzerland Winning the Battle for Company Investment. Business Week reports on how low taxes are helping to attract jobs and investment - a lesson that increasingly seems too complex for politicians in the United States and United Kingdom:
As governments around the globe struggle to contain huge deficits, companies and executives are bracing for higher taxes. And increasingly they are turning to Switzerland for relief. ...Swiss cantons are openly and legally urging multinationals to relocate. This fall, U.S. fast-food giant McDonald's (MCD) will move its European headquarters to Geneva from London, joining Kraft Foods (KFT), Yahoo! (YHOO), and Nissan. They've all relocated their main Europe offices to Switzerland in the last two years to take advantage of low corporate taxes. ..."There is a lot of interest from companies looking to shift their taxable profit to countries with lower rates," says Andreas Müller, an international corporate tax partner at KPMG in Zurich. Meanwhile, Britain and Ireland are increasing personal income tax rates for top earners. In the U.S., tax hikes seem inevitable. Switzerland has no such plans, says Stéphane Garelli, professor of competitiveness at IMD Business School in Lausanne. The 26 Swiss cantons are free to set their own rates, so Swiss-based companies' effective average tax rates range from 10.8% to 24% of net income (those effective rates include federal taxes, which are the same throughout the country). Ten cantons even cut rates in 2008 to lure investment. After slashing its corporate rate to 6.6% in 2006, the canton of Obwalden lowered rates to 6% last year, just after the nearby canton of Appenzell Ausserrhoden did the same. "A company might pay 50% less tax just by moving 30 miles down the road," says Martin Naville, CEO of the Swiss-American Chamber of Commerce in Zurich. ...While the Swiss court companies, the British unwittingly help the Swiss out. As of last year, foreigners living in the U.K. for seven years or more must pay tax on income and capital gains earned outside Britain or fork over an annual $49,000 on top of what they ordinarily owe the government. And starting next April, the top income tax rate will jump to 51.5%, including social security payments. That's up from 40% for anyone, citizen or foreign resident, earning more than $245,000. The hikes have prompted some hedge funds and private equity firms to head to Switzerland, analysts say. Krom River, a commodities fund with $750 million under management, moved to the canton of Zug last year. The lure: Swiss stability. "Companies can be sure that once they invest, there won't be any surprises," says Naville.

Friday, September 18, 2009

President Obama's "Betrayal"

The left has now resorted to the sleazy tactic of asserting that critics of the President's policies are racists. So one can only wonder how they will respond to the latest column by Walter Williams, the famous black economist. Professor Williams savages the White House for killing a school choice program in Washington, which was helping students escape the city's utterly awful government schools. Williams concludes that Obama's actions are a betrayal of fellow African-Americans - especially since the President sends his own kids to an expensive private school. But this has nothing to do with race. White Democrats also fight against school choice for poor blacks while sending their own kids to private school:
The American Legislative Exchange Council recently came out with their 15th edition of "Report Card on American Education: A State-by-State Analysis." Academic achievement in no state is much to write home about but in Washington, D.C., by any measure, it approaches criminal fraud. Let's look at the numbers. Only 14 percent of Washington's fourth-graders score at or above proficiency in the reading and math portions of the National Assessment of Educational Progress (NAEP) test. Their national rank of 51 makes them the nation's worst. Eighth-graders are even further behind with only 12 percent scoring at or above proficiency in reading and 8 percent in math and again the worst performance in the nation. ...They have an average composite SAT score of 925 and ACT score of 19.1, compared to the national average respectively of 1017 and 21.1. In terms of national ranking, their SAT and ACT rankings are identical to their fourth- and eighth-grade rankings -- dead last. Washington's political and education establishment might excuse these outcomes by arguing that because most students are black, the schools are underfunded and overcrowded. Let's look at such a claim. During the 2006-07 academic year, expenditures per pupil averaged $13,848 compared to a national average of $9,389. That made Washington's per pupil expenditures the third highest in the nation coming in behind New Jersey ($14,998) and New York ($14,747). Washington's teacher-student ratio is 13.9 compared with the national average of 15.3 students per teacher, ranking 18th in the nation. What about teacher salaries? Washington's teachers are the highest paid in the nation, having an average annual salary of $61,195 compared with the nation's average $46,593. ...Currently, Washington, D.C. has an Opportunity Scholarship Program, which allows qualified low-income families to claim up to $7,500 per student toward a private education of their choice. Obama's Democratic Congress, acting on the behalf of the education establishment, has killed the program and there's the possibility that the 1,700 students currently enrolled will have to return to D.C. public schools. The staunchest opponents of school choice are hypocrites. They want, demand and can afford school choice for themselves but for others not so affluent school choice it is a different matter. President and Mrs. Barack Obama enrolled their two daughters in Washington's most prestigious Sidwell Friends School, forking over $28,000 a year for each girl. Whilst senator from Illinois, the Obama's enrolled their girls in the University of Chicago's Laboratory School, a private school in Chicago charging almost $20,000 for each girl. ...For people in power to tolerate the Washington, D.C. school system is despicable. For a black president to do so might qualify as betrayal.

Thursday, September 17, 2009

Weekly Economics Lesson: Consumer Spending Is a Symptom of Prosperity, not the Cause.

One of the (many) frustrations of my job is dealing with the confusion about economic growth. It should go without saying that economic growth occurs when there is an inflation-adjusted increase in national income. Many policy makers (and journalists) presumably understand this elementary observation. Yet those same people usually attach great importance to monthly data on consumer spending. There is nothing wrong with that data, to be sure, but there is something wrong with how it is analyzed. Many people assume that consumer spending drives growth because it is roughly two thirds of the economy. But this puts the cart before the horse. Higher levels of consumer spending do not cause prosperity. Instead, more consumer spending is best understood as a symptom of prosperity.

Consider an example: Would it be a positive sign if national income fell by 1 percent (and assume that this translated into a 1 percent fall in disposable income), but people increased consumer spending by 2 percent by borrowing lots of money and utilizing their credit cards? Retails stores might be happy, but clearly this pattern would not be sustainable.

This is why "Keynesian" policies are misguided. The goal of Keynesianism is to have the government borrow money and then to distribute that money to consumers. Yes, that may bolster consumer spending, but only at the expense of investment spending. After all, the government had to borrow the money out of private credit markets.

Wednesday, September 16, 2009

If Noah Had to Build an Ark Today

.....And the Lord spoke to Noah and said:

“ In one year, I am going to make it rain and cover the whole earth with water until all flesh is destroyed, but I want you to save the righteous people and two of every kind of living thing on earth. Therefore, I am commanding you to build an Ark.”

In a flash of lightning God delivered the specifications for an Ark. In fear and trembling, Noah took the plans and agreed to build the ark.

Remember,” said the Lord: “You must complete the Ark and bring everything aboard in one year”.

Exactly one year later, fierce storm clouds covered the earth and all the seas of the earth went into a tumult. The Lord saw that Noah was sitting in his front yard weeping

“Noah,” He shouted

“Where is the Ark?”

“Lord, please forgive me,” cried Noah. “I did my best, but there were big problems: First, I had to get a permit for construction, and your plans did not meet the codes. I had to hire an engineering firm and redraw the plans.

Then I got into a fight with OSHA over whether or not the Ark needed a sprinkler system and approved floatation devices. Then, my neighbor objected, claiming I was violating zoning ordinances by building the Ark in my front yard, so I had to get a variance from the city planning commission. Then, I had problems getting enough wood for the Ark because there was a ban on cutting trees to protect the Spotted Owl...and finally convinced the U. S. Forest Service that I really needed the wood to save the owls. However, the Fish and Wildlife Service won’t let me catch any owls, so, no owls.” The carpenters formed a union and went on strike. I had to negotiate a settlement with the National Labor Relations Board before anyone would pick up a saw or hammer. Now, I have 16 carpenters on the Ark, but still no owls. When I started rounding up the other animals, an animal rights group sued me. They objected to me taking only two of each kind aboard.

Just when I got the suit dismissed, the EPA notified me that I could not complete the Ark without filing an environmental impact statement on your proposed flood. They didn’t take very kindly to the idea that they had no jurisdiction over the conduct of the Creator of the Universe. Then, the Army Corps of Engineers demanded a map of the proposed new flood plain.... I sent them a globe.

Right now, I am trying to resolve a complaint filed with the Equal Employment Opportunity Commission that I am practicing discrimination by not taking godless, unbelieving people aboard. The IRS has seized my assets, claiming that I’m building the Ark in preparation to flee the country and not pay taxes. I just got a notice from the state that I owe them some kind of user tax and failed to register the Ark as a “recreational water craft.” And finally, the ACLU got the courts to issue an injunction against further construction of the Ark, saying that since God is flooding the earth, it’s a religious event, and, therefore, UNCONSTITUTIONAL. I really don’t think I can finish the Ark for another five or six years.

Noah waited...

The sky began to clear, the sun began to shine, and the seas began to calm. A rainbow arched across the sky. Noah looked up hopefully.

“You mean you’re not going to destroy the earth, Lord?”

“No,” He said sadly.”

“I don’t have to. The government already has.”

Tuesday, September 15, 2009

New Video Reviews Evidence Against Big Government

The burden of government spending has skyrocketed during the Bush-Obama years. Many politicians claim that all this new spending represents necessary "investments" to boost economic growth. But as this new video explains, both cross-country comparisons and empirical analysis suggest government is far too big - not only in Europe, but also in America.

This is the second of a two-part series. The first installment, which focuses on eight theoretical reasons why excessive government undermines growth, can be viewed here.

Monday, September 14, 2009

Using Gasoline to Douse a Fire? OECD Thinks Higher Tax Rates Will Help Iceland's Faltering Economy.

Republicans made many big mistakes when they controlled Washington earlier this decade, so picking the most egregious error would be a challenge. But continued American involvement with the Organization for Economic Cooperation and Development would be high on the list. Instead of withdrawing from the OECD, Republicans actually increased the subsidy from American taxpayers to the Paris-based bureaucracy. So what do taxpayers get in return for shipping $100 million to the bureaucrats in Paris? Another international organization advocating for big government. The OECD, for example, is infamous for trying to undermine tax competition. It also has recommended higher taxes in America on countless occasions. And now it is suggesting that Iceland impose big tax increases - even though Iceland's economy is in big trouble and the burden of government spending already is about 50 percent of GDP:
Both tax increases and spending cuts will be needed, although the former are easier to introduce immediately. The starting point for the tax increases should be to reverse tax cuts implemented over the boom years, which Iceland can no longer afford. This would involve increases in the personal income tax... Just undoing the past tax cuts is unlikely to yield enough revenue. In choosing other measures, priority should be given to those that are less harmful to economic growth, such as broadening tax bases, or that promote sustainable development, such as introducing a carbon tax.

The Amazing Tea-Party Movement

Congratulations to FreedomWorks and other organizers of this past Saturday's protest in Washington. The establishment media did its best to ignore the huge crowd, but it is a remarkable achievement when so many Americans come together to defend their nation. The U.K.'s Daily Mail almost certainly overstated the numbers, but they had a very good summary:
As many as one million people flooded into Washington for a massive rally organised by conservatives claiming that President Obama is driving America towards socialism. The size of the crowd - by far the biggest protest since the president took office in January - shocked the White House. ...protester Richard Brigle, 57, a Vietnam veteran, said: 'It's going to cost too much money we don't have.' Another marcher shouted: 'You want socialism? Go to Russia!' Terri Hall, 45, of Florida, said she felt compelled to become political for the first time this year because she was upset by government spending.

Sunday, September 13, 2009

Nail-Biting Victory for the Bulldogs

After a disappointing outing in Stillwater, Oklahoma, that perhaps could be attributed to a horrible (but game changing) blown call by the refs, my beloved Bulldogs bounced back to beat South Carolina in a wild game.

I give a speech this Friday in Corpus Christi, Texas, but I'm doing that event primarily so I can return to DC via Arkansas and see the Dawgs (hopefully) climb to 2-1 on the season.

Saturday, September 12, 2009

Resisting the Global Tax Schemes of International Bureaucracies

For those who followed my adventures at the OECD conference in Mexico, you have some idea of the dangers posed by bureaucrats trying to create a global tax cartel. For further information, I have an article in the latest issue of Offshore Investment. The whole article is worth reading, but the concluding paragraph is a good summary:
Politicians from high-tax nations – and the international bureaucracies that represent those governments – will continuously push schemes to restrict tax competition, and they have the advantages of time and (other people’s) money on their side. Although tax competition has been a liberalising force throughout the world, encouraging governments to lower tax rates, even leading a number of jurisdictions to adopt simple and fair flat tax systems, this liberalising process is being threatened by a number of policies mostly stemming from Europe. This is bad for low-tax jurisdictions and bad for taxpayers (especially those from high-tax nations). Tax harmonisation means higher tax rates and a more onerous burden of government. This inevitably translates into slower economic growth and stagnating living standards.

The article was co-authored by my summer intern, Hiwa Alaghebandian, who is back in school at William & Mary. Now, I have an intern from the utterly despicable University of Florida (which, sadly, has dominated my beloved Georgia Bulldogs in recent years). As you can see from this photo from a post-softball celebration, I've obviously traded down.

Friday, September 11, 2009

A Consumer's Look at Health Care

My Cato Institute colleagues, Michael Tanner and Michael Cannon, have been doing an excellent job exposing the fallacies and misconceptions of Obama's proposal to further expand government intervention in the health-care sector. One of their challenges is explaining to people that many of the problems that currently exist are the fault of government.

For instance, I went for my annual checkup today (though "annual" is a slight exaggeration since I went 35 years without a checkup and this is just my second visit in the past 3.5 years). As I dealt with a blizzard of paperwork at the doctor's office, I realized that this was just the beginning of a tedious process. At some point in the next few weeks, I'll receive incomprehensible statements from my insurance company, followed by similarly indecipherable bills from the doctor. And since I also went down to the hall to a different office for my blood test, I suspect I'll have two statements and two bills - neither of which I'll have the energy to figure out (though I shouldn't complain too much since I once went to a local clinic after spraining my ankle playing basketball and somehow had to deal with three separate bills).

I'm guessing that this type of experience is one of the reasons why Americans express some degree of unhappiness with our current system - especially when they wind up having to write a check and suspect that their insurance company is squeezing them in some unknown way.

But how many people realize that this bureaucratic process is the result of government interference? For all intents and purposes, social engineering in the tax code created this mess. Specifically, most of us get some of our compensation in the form of health insurance policies from our employers. And because that type of income is exempt from taxation, this encourages so-called Cadillac health plans. This seems great, at least on the surface, but now let's consider the unintended consequences.

We have replaced (or at least agumented) insurance with pre-paid health care. Insurance is supposed to be for unforseen major expenses, such as a heart attack. But our gold-plated health plans now mean we use insurance for routine medical costs. This means, of course, we have the paperwork issues discussed above, but that's just a small part of the problem. Even more problematic, our pre-paid health care system is somewhat akin to going to an all-you-can-eat restaurant. We have an incentive to over-consume since we've already paid. Except this analogy is insufficient. When we go to all-you-can-eat restaurants, at least we know we're paying a certain amount of money for an unlimited amount of food. Many Americans, by contrast, have no idea how much of their compensation is being diverted to purchase health plans. Last but not least, we need to consider how this messed-up approach causes inefficiency and higher costs. We consumers don't feel any need to be careful shoppers since we perceive that our health care is being paid by someone else. Should we be surprised, then, that normal market forces don't seem to be working? (though it is worth noting that costs keep falling and quality keeps rising in the few areas - such as laser-eye surgery and cosmetic surgery - that are not covered by insurance)

Imagine if auto insurance worked this way? Or homeowner's insurance? Would it make sense to file insurance forms to get an oil change? Or to buy a new couch? That sounds crazy. The system would be needlessly bureaucratic, and costs would rise because we would act like we were spending other people's money. But that's what would probably happen if government intervened in the same way it does in the health-care sector.

So what does all of this mean? We have a problem caused by government (this little rant of mine doesn't even touch on other problems caused by government, such as Medicare and Medicaid). People are unhappy because they have to deal with the unintended consequences of the government intervention. Clever politicians then say the only way to make people happy is to have even more government. I'd like to try to explain why this makes sense, but I have to fill out some forms.

Overpaid Bureaucrats

While perusing Don Boudreaux's superb blog, I read a letter-to-the-editor he noticed in the Washington Post. A Virginia woman was upset about the bloated salaries of the parasites who work for the federal government. She said:
If you drive through Northern Virginia, you will find nearly entire neighborhoods of $500,000 to $900,000 homes owned by government workers or contractors. Then you can drive five streets over and find $200,000 to $400,000 homes owned by those who pay the salaries for those government employees. It's a fascinating distribution of wealth. Most government employees and contractors could not earn more than $60,000 on the free market. Their only chance to make that kind of money comes from having an employer that not only never has to make a profit but can forcibly take money through taxation.

Just in case you think this woman doesn't know what she's talking about, here is an increasingly famous chart put together by my Cato colleague, Chris Edwards:

Thursday, September 10, 2009

Hypocrisy Alert: International Bureaucrats Seek to Create Global Tax Cartel - Yet They Get Tax-Free Salaries

Richard Rahn has an excellent column in the Washington Times, discussing how the Organization for Economic Cooperation and Development is working with high-tax nations to bully low-tax jurisdictions into adopting bad policy. Yet these bureuacrats rather conveniently don't have to pay any income tax. No wonder they are oblivious to the real-world destructive impact of punitive tax rates. The column also explains that this bullying campaign is backfiring against America since some foreign financial institutions have decided to pull money out of America in order to avoid being turned into stooges for the IRS:
The high-tax countries are using the OECD to threaten low-tax jurisdictions to sign this agreement. It is worth noting that the tax bullies at the OECD and at other international organizations, such as the United Nations, International Monetary Fund and World Bank, who demand that others pay higher taxes, enjoy tax-free personal income courtesy of the world's taxpayers. Freedom House, an organization that keeps its eye on human rights abuses and anti-democratic activities by countries, lists a number of the countries on the OECD list of cooperating jurisdictions as "not free" or only "partly free" -- including Russia, China and the United Arab Emirates. Yet some democratic and free jurisdictions have been listed as noncooperating by the OECD. According to the OECD, the U.S. should be sharing tax information with nondemocratic and/or corrupt countries on its list. Worse yet, the Obama administration is supporting the OECD in this wholesale violation of basic rights. ...The good news is that some in low-tax jurisdictions are beginning to fight back. Last week, the head of the oldest bank in Switzerland (who holds a doctorate in economics from a leading U.S. university) said he was no longer going to invest in the United States because he found the new IRS regulations -- which foreign banks must follow -- so vague, onerous and incomprehensible that he could never be sure his bank was not at risk. In addition, he argued that the economic path the U.S. is taking can only lead to slower growth, and his bank sees better opportunities elsewhere. From the time of the Reagan economic reforms a quarter of a century ago until last year, the United States had the highest average rate of growth of the major developed countries. A substantial part of this growth was fueled by foreign investment in our nation. Those in the Obama administration's Treasury Department (including the IRS) who are working with the tax bullies at the OECD are driving away much of the foreign investment at a time when it is most needed.

Wednesday, September 9, 2009

Maybe the Collectivists Will (Un)Breed Themselves Out of Existence

The UK-based Telegraph reports that some outfit called the Optimal Population Trust is suggesting that people should have fewer babies to fight supposed global warming (or climate change, or whatever they're calling it now). This is a reflection of the people-are-bad mentality that seems disturbingly common among enviro-statists:
The report, Fewer Emitter, Lower Emissions, Less Cost, concludes that family planning should be seen as one of the primary methods of emissions reduction. The UN estimates that 40 per cent of all pregnancies worldwide are unintended. ...Roger Martin, chairman of the Optimum Population Trust at the LSE, said: “It’s always been obviously that total emissions depend on the number of emitters as well as their individual emissions.

Reading this article, though, reminded me of another article from a British paper. As this story from the Daily Mail explains, some radical environmentalists are deliberately choosing to sterlilize themselves to avoid having kids:
Had Toni Vernelli gone ahead with her pregnancy ten years ago, she would know at first hand what it is like to cradle her own baby, to have a pair of innocent eyes gazing up at her with unconditional love, to feel a little hand slipping into hers - and a voice calling her Mummy. But the very thought makes her shudder with horror. Because when Toni terminated her pregnancy, she did so in the firm belief she was helping to save the planet. ...Incredibly, so determined was she that the terrible "mistake" of pregnancy should never happen again, that she begged the doctor who performed the abortion to sterilise her at the same time. He refused, but Toni - who works for an environmental charity - "relentlessly hunted down a doctor who would perform the irreversible surgery. ..."Having children is selfish. It's all about maintaining your genetic line at the expense of the planet," says Toni, 35. "Every person who is born uses more food, more water, more land, more fossil fuels, more trees and produces more rubbish, more pollution, more greenhouse gases, and adds to the problem of over-population." ...Toni is far from alone. When Sarah Irving, 31, was a teenager she sat down and wrote a wish-list for the future. ...Most young girls dream of marriage and babies. But Sarah dreamed of helping the environment - and as she agonised over the perils of climate change, the loss of animal species and destruction of wilderness, she came to the extraordinary decision never to have a child. "I realised then that a baby would pollute the planet - and that never having a child was the most environmentally friendly thing I could do." ...Mark adds: "Sarah and I live as green a life a possible. We don't have a car, cycle everywhere instead, and we never fly. "We recycle, use low-energy light bulbs and eat only organic, locally produced food. "In short, we do everything we can to reduce our carbon footprint. But all this would be undone if we had a child.

Think about what this means. If the nut-job environmentalists persist in not having kids, that almost surely means the world's population will gradually become more sensible about these issue since mommy and daddy enviro-statist won't be raising little interventionists to plague future generations. Sounds like a win-win situation for everyone.

Weekly Political Humor

Should It Be a Tax Offense to Get a Mortgage or Quit Smoking?

The title of this post is a joke, but not really. As mentioned in an earlier post, the Organization for Economic Cooperation and Development (OECD) tried to categorize tax avoidance as something to be fought as part of its anti-tax competition project. This implies, of course, that any decision we make to lower our taxes is suspect, even if we are following the law! For those who care about tax competition, fiscal sovereignty, and financial privacy, I explore the implications of what happened in Mexico City in this Strategic Memorandum.

Tuesday, September 8, 2009

Not a Good Year for Pets

Not a great day. The last of the family pets had to be put down today because of lung cancer. This is only one month after our cat was run over, and just a few months after the oldest dog passed away in his sleep. This is a policy blog, but I hope you won't mind this short remembrance of Biggles, Phronsie, and Mondale.

America Falls from Top Spot in Global Competitiveness Report.

There are several international rankings that measure competitiveness and economic freedom. The United States generally does well in these rankings, though often that is a reflection of bad policy in other nations rather than a ringing endorsement of America. The best ranking is probably Economic Freedom of the World, published by the Fraser Institute. The best known ranking, by contrast, might be the Global Competitiveness Report, put out by the World Economic Forum. While I am not completely happy with the methodology in this report (it is probably too oriented toward the interests of big business rather than free markets), it is generally a good measure. So it is interesting to see that the United States has dropped from the top spot and now ranks second behind Switzerland. I'll be very curious to see what happens to the U.S. position when the new Economic Freedom of the World is released. America dropped from 2nd in 2000 to 8th in 2006 under the big-government policies of the Bush Administration (rankings are always two years behind because of lags in data availability). Presumably, the U.S. fell even further during the last two years of the Bush Administration - and will continue falling under Obama because he is continuing Bush's policies of big-government interventionism.

Monday, September 7, 2009

United Nations Wants Global Currency

Bloomberg reports that a key division of the United Nations wants a global currency (presumably under the contrrol of the U.N.). Somehow, we are supposed to believe that a global monopoly central bank will produce better monetary policy than national monopoly central banks. That is theoretically possible, to be sure. After all, the Italians are better off with the euro than they were with the lira, but that is because the Germans dominate the European Central Bank. One can only imagine what sort of kleptocrats would be in charge of a "global reserve bank." Moreover, since the same bureaucracy also is promoting restrictions on capital mobility, there is good reason to suspect they are either clueless or malignant. Bloomberg reports:
The dollar’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation, the United Nations said. UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said today in a report. China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II. ...“The most important lesson of the global crisis is that financial markets don’t get prices right,” [German Deputy Finance Minister] Flassbeck said. “Governments are being tempted by the resulting confidence game catering to financial-market participants who have shown they’re inept at assessing risk.” The 45-year-old UN group, run by former World Trade Organization chief Supachai Panitchpakdi, “promotes integration of developing countries in the world economy,” according to its Web site. Emerging-market nations should consider restricting capital mobility until a new system is in place, the group said.

Sunday, September 6, 2009

Nanny-State Politicians Forcing Us to Use Inferior Light Bulbs

First, the politicians forced us to buy low-volume toilets that require multiple flushes. Then they mandated that we use front-loading washing machines that don't clean as well. Now, the parasites in Washington want to compel us to use light bulbs that don't illuminate properly. A lighting expert explains in the Wall Street Journal - and also suggests that maybe the politicians should live under these rules before they impose them on the rest of us:
The Energy Independence and Security Act of 2007 will effectively phase out incandescent light bulbs by 2012-2014 in favor of compact fluorescent lamps, or CFLs. Other countries around the world have passed similar legislation to ban most incandescents. Will some energy be saved? Probably. The problem is this benefit will be more than offset by rampant dissatisfaction with lighting. We are not talking about giving up a small luxury for the greater good. We are talking about compromising light. Light is fundamental. And light is obviously for people, not buildings. The primary objective in the design of any space is to make it comfortable and habitable. This is most critical in homes, where this law will impact our lives the most. ...CFLs, which can be an excellent choice for some applications, are simply not an equivalent technology to incandescents in all applications. For example, if you have dimmers used for home theater or general ambience, you must buy a compatible dimmable CFL, which costs more, and even then it may not work as desired on your dimmers. How environmental will it be for frustrated homeowners to remove and dispose of thousands of dimmers? What's more, CFLs work best in light fixtures designed for CFLs, and may not fit, provide desired service life, or distribute light in the same pleasing pattern as incandescents. How environmental will it be for homeowners to tear out and install new light fixtures? ...Here's my modest proposal to determine whether the legislation actually serves people. Satisfy the proposed power limits in all public buildings, from museums, houses of worship and hospitals to the White House and the homes of all elected officials. Of course, this will include replacing all incandescents with CFLs. At the end of 18 months, we would check to be certain that the former lighting had not been reinstalled, and survey all users to determine satisfaction with the resulting lighting.

Saturday, September 5, 2009

Another Sleazy and Hypocritical Politician (Pardon the Redundancy)

A story from the Boston Herald is a classic example of how the parasitical political class imposes rules on ordinary people, but the politicians routinely think they should not abide by the same rules. In this case, a politician who raised alcohol taxes was caught sneaking into New Hampshire to buy booze where the taxes are much lower:
A Westport lawmaker who voted to hike the state sales and alcohol taxes was spotted brazenly piling booze in his car - adorned with his State House license plate - in the parking lot of a tax-free New Hampshire liquor store, the Herald has learned. Michael J. Rodrigues’ blue Ford Crown Victoria, emblazoned with his “House 29” Massachusetts license plate, was parked outside a Granite State liquor store on Interstate-95 South over the weekend, according to a witness who provided pictures to the Herald. ...The Westport Democrat, whose family owns a rug business, was among the lawmakers who voted in an unpopular 25 percent sales tax hike for Bay Staters. The increase pushed the sales tax to 6.25 percent and slapped that same levy on booze - the first time alcohol has been subject to retail sales tax. The hike has been blasted by business owners, especially those on the New Hampshire border, who say the increase has driven business north. Mike Cimini, owner of Yankee Spirits liquor stores in Sturbridge, Attleboro and Swansea, said he’s lost about 10 percent of his business since the booze tax went into effect Aug. 1. “It’s absolutely unbelievable that a Massachusetts state representative would be that hypocritical, let alone be that bold to actually drive his car with political plates to a New Hampshire liquor store,” said Cimini, noting Rodrigues represents communities close to his stores. “He’s up in New Hampshire to avoid the very taxes he approved.”

Thursday, September 3, 2009

Weekly Political Humor

Got this in an email from a Repbulican pal. I don't think any comment is necessary, but I will briefly note that I am not a fan of Bush (I never voted for him, and I'm glad I didn't). Nonetheless, this is clever.

Supply-Side Economics 1 - Gordon Brown's Class-Warfare Tax Policy 0

For the first time in my life, I enjoyed reading a story about soccer. But not because of the sport, but rather because it is very amusing to read about the exodus of top-flight players from England's Premier League as they escape Prime Minister Brown's spiteful increase in the top tax rate. The Weekly Standard has the amusing details:
The English Premier League has dominated European soccer in recent years. Nine of the last 12 Champions League semifinalists have come from the Premier League, and an English team has been in the final for each of the last five years (two played each other for the trophy in 2008). The Premiership's top teams--Manchester United, -Arsenal, Chelsea, and Liverpool--are four of the sport's ten glamour franchises, and the league is easily soccer's richest. Yet over the last few months, star players have been rejecting offers from the Premier League hand over fist....Why have players been rejecting hefty fees to play in the world's most celebrated soccer league? It's all Gordon Brown's fault. In April, the British government passed a measure that increases Britain's top tax rate from 40 percent to 50 percent. The enormous hike applies not just to wealthy soccer stars (the average base salary for a Premier League player is £1.1 million a year) but to anyone making over £150,000. When the tax increase first passed Arsenal striker Andrei Arshavin demanded that the team renegotiate his contract, calling the hike an "unpleasant surprise." Ronaldo's agent noted that it would mean an extra £670,000 a year in taxes for the star (who was then still with Manchester United). Arsène Wenger, the manager of Arsenal, matter-of-factly explained that the higher taxes would decimate British professional soccer. "[W]ith the new taxation system, with the collapse of sterling, the domination of the Premier League on that front will go," Wenger told the Times of London. "That is for sure." The move is part of Brown's effort to soak the rich in order to make up for revenues lost in the recession. Three-hundred thousand Britons will be affected by the increase, which is expected to raise an extra £2.1 billion. Which hardly seems worth the bother, because Brown's plan also involves borrowing some £600 billion over the next five years and bringing Britain's public debt to 79 percent of GDP by 2013. The result is that Britain's tax rate is now the highest in the professional soccer world. In Italy, players pay 43 percent on income. In Germany, 45 percent. In France, 40 percent. In Russia, only 13 percent. But the real winner is Spain. Spain's top tax rate is 43 percent. In 2005, however, Spain amended the law to include a provision for high-earning "foreign executives," which would require them to pay only 24 percent. ...Deloitte Sports Business Group estimates that between the falling pound, the higher British tax rate, and the Spanish tax break, U.K. clubs would have to pay 70 percent more in order to match a player's take-home pay in Spain. Predictably, no one is happy with the situation. British papers are full of stories lamenting the demise of the Premier League. Also predictably, Britons seem more outraged by Spain's lower tax rate than by the increase in their own. ...the purveyors of goo-goo pan-Europeanism have been affronted, too. Michel Platini, president of the Union of European Football Associations, claimed that there was something "abnormal" about the influx of talent to the Spanish league. "These transfers are a serious challenge to the idea of fair play and the concept of financial balance in our competitions," Platini told reporters.

Wednesday, September 2, 2009

Final Report from Mexico

I managed to stay out of jail, and was even able to sneak past security at the closing press conference in order to get headphones for the Spanish and French translations. But that's the only positive thing to report.

Here are some preliminary thoughts (and here is a press release issued by the Center for Freedom and Prosperity):

The most noteworthy development to report is that the OECD (with lots of support from Brazil) tried to officially expand its mission so that it could fight tax avoidance. This is remarkable since tax avoidance, by definition, is completely legal. For all intents and purposes, this effort indicates that the OECD wants to restrict tax planning by multinational companies. The good news is that the OECD was forced to back down - at least in the sense that they were unable to include language in the final report. The bad news is that the OECD is an unaccountable international bureaucracy and will pursue this anti-business agenda anyhow.

The other development worth noting is that the bureaucrats at the OECD have perfected the bait-and-switch maneuver. Every time the so-called tax havens would raise good points and begin to press the OECD to live up to previous statements and commitments, the bureaucrats would assert that it was time for a new subject. Then, when the time came to publish the final report of the conference (which none of the delegates were allowed to see, much less vote on), the OECD wrote its interpretation of events. If it wasn't for the fact that the OECD is pursuing an agenda that will reduce living standards and cause misery, one would almost have to admire their cleverness.

Connecticut's Fiscal Suicide.

It's hard to imagine, but just twenty years ago, there was no income tax in my home state of Connecticut (yes, we all have embarrassing things in our past). The Wall Street Journal opines about a new effort to hike the top tax rate in the Nutmeg State and explores how the income tax has led to a fiscal disaster - something that should be required reading for politicians in the nine states that so far have avoided the mistake of taxing income:
Connecticut grabs $7,007 in state and local taxes per man, woman and child resident, according to the Tax Foundation, more per capita than every state but New York and New Jersey. That's hardly the company any state would want to keep these days, but the politicians in Hartford seem intent on following Trenton and Albany off the tax-and-spend cliff. This week Republican Governor Jodi Rell proposed a $1-billion-plus income tax hike, raising the top tax rate to 6.5% from 5%... The tax hike would be retroactive to January 1, meaning the government would snatch money that residents have already earned. Perhaps she aspires to the nether-world approval ratings of New Jersey Governor Jon Corzine. Given the size of its deficit, it's hard to believe that for 200 years Connecticut balanced its budget without any income tax and became the richest state in the bargain. That changed in 1991 when then-Governor Lowell Weicker pushed the state's first-ever personal income tax with a promise that the rate would remain flat at 4.5%. But the next time the state couldn't pay its bills, in 2001, the legislature raised Mr. Weicker's tax to 5%. ...Since the income tax became law, Connecticut has experienced a long, slow exodus of jobs and people. The Yankee Institute notes the astounding fact that since 1992, the year the income tax went into effect, businesses in Connecticut have hired a grand total of zero net new workers. ...What the income tax did stimulate was a spending binge and big pay raises for the state's unionized government workers. The year before the income tax was enacted, Connecticut's government expenditures per capita ranked right in the middle of all states; now it ranks in the top 10. Per capita real spending has nearly doubled since the income tax was enacted. ...We'd suggest that Ms. Rell give Governor Martin O'Malley of Maryland a call. Two years ago he passed a similar income tax hike dressed up as tax "fairness." Today, a third of the millionaires have vanished from the tax rolls—and the state is still in deficit. To revive growth and boost family incomes in Connecticut, Ms. Rell should be working to repeal the income tax, not expand it. It's a failed experiment that has mostly benefited the likes of Florida and Texas.

Tuesday, September 1, 2009

Who Will Bail Me Out of a Mexican Jail?

Greetings from the OECD Global Tax Forum in Mexico City.

Our erstwhile friends at the OECD are not very tolerant of dissent, and this trip is a good example. First, they bullied the hotel in Cabo into canceling my reservation. Apparently, my mere presence would create a disturbance to their plans for one-size-fits-all taxation. But then the conference got moved to Mexico City because of the hurricane and the bureaucrats did not have the ability - at least on short notice - into coercing the new hotel into denying me the ability to get a room (not that it would have been a big deal to register someplace else, but it is somewhat galling that petty bureaucrats seem so intent of throwing roadblocks in the way of the folks who pay their bloated - and tax free - salaries).

Today, however, the OECD upped the ante. I have been hanging out in the public lobby outside of the OECD's conference room. This location makes it easy to communicate with the delegates from low-tax nations. This apparently irritates the bureaucrats, so they sent one of their security officials to ask me to leave. I asked what right he had to make such a request, especially since I was in a public area. He claimed that the lobby - which also serves as the entrance to a restaurant and the business center - was reserved for the conference. I said that was absurd and would like to see the hotel management. Perhaps more important, I turned to the reporter next to me and started explaining that this was a typical example of the OECD's reprehensible strong-arm tactics. This flustererd the security guy and he backed down.

But I suspect that this is not the end of the story. And since I'm not overly confident that the Mexican government respects the rule of law, I do have visions of getting carted off to an unpleasant jail. If you don't see anything in this space tomorrow morning, that won't be a good sign.

No Longer Battling Hurricanes, Now Just Fighting Pro-Tax Governments

The good news is that the hurricane caused the OECD to pull the plug on its Global Tax Forum in Cabo. The bad news is that the Paris-based bureaucracy packed all the delegates onto Mexican government jets and moved the conference to Mexico City.

Not surprisingly, I was not offered a ride, which left me in the unenviable position of scrambling to get a ticket from Cabo to Mexico City - a task that was complicated by an airport full of people looking to escape the hurricane. I vaguely felt like I was an extra in the John Candy-Steve Martin 1987 comedy, Planes, Trains, and Automobiles, but eventually I shoe-horned myself onto a flight.

Today, I'll be spending my time offering assistance and advice to the low-tax jurisdictions being persecuted by the OECD. For those interested in learning more, this three-page memo has all the details.