Canadian Boondoggles and Russia Is More Capitalist than the U.S. (Again)

The G-20 gab-fest is in Canada this weekend, but Canadian taxpayers are definitely not winners. In a display of waste that might even embarrass a French politician, the Canadian government somehow is going to squander $1 billion hosting the event. I can't even conceive of why such an event should even cost $10 million. Maybe hookers are very expensive up north. One interesting policy issue at the meeting is that the United States is siding with Euro-socialist nations in pushing a bank tax. Fortunately for taxpayers and financial consumers, the former communists in charge of Russia are helping to block this money-grab. This adds to the irony of Russia recently proposing to eliminate capital gains taxation while Obama (and the U.K.'s Cameron) are increasing the tax rate on entrepreneurship and investment. The world is upside down. The EU Observer reports:

With international eyes focusing on the potential 'stimulus versus austerity' scrap between different member states, Canadian citizens meanwhile have reacted in uproar at news that the weekend's bill is set to total over $1 billion. Although 90 percent of that cost comes under the 'security' heading, it is a artificial lake intended to impress journalists in the press area that has come in for the heaviest criticism. The controversy may not be helped by the forecast lack of tangible results set to emanate from the two sets of meetings... The need for a global bank levy provides one the more concrete topics for discussion, but there is no guarantee that participants around the table will come to an agreement. "In the G20, the idea of a bank levy is not supported by at least half of the members," Russian ambassador to the EU Vladimir Chizhov told a group of journalists on Friday morning in Brussels. "Neither is it acceptable to Russia," he continued, arguing that banks would merely pass on the extra costs to their clients.

Three Cheers for Canada

Sleazy politicians from France, Germany, England, and the United States want a bank taxes that would finance national piggy banks to bail out politically favored companies and industries. But they are not stupid, so they realize that nations that impose bank taxes will lose deposits to nations with more sensible policy. This is why the statists want to convince all nations to adopt the same policy. Fortunately, some nations are resisting harmonized bank taxes, and Canada is taking the lead. Canadian leaders rightfully explain that their banks never got in trouble, largely because Canada does not have foolish housing subsidies. Let us hope that Canada, as well as other nations such as Brazil and Australia, block the corrupt policies being pushed by statists such as Obama and Merkel.

Canada will "resist" a bank tax, Industry Minister Tony Clement said Tuesday as ministers fanned out across the world to raise opposition to the proposal for avoiding another financial crisis. "Canada is, and will remain, opposed to a tax that would penalize financial institutions that remained strong and prosperous while many of the world's banks failed," Clement told a press conference with Foreign Minister Lawrence Cannon. ...Attempts to reach international agreement on coordinated bank taxes at last month's G20 and IMF meetings ran aground. Nations including Canada and Brazil, whose banking sectors emerged largely unscathed from the financial crisis, objected to the plan, favoring higher capital reserve requirements instead. But it is expected to be revived at the next meeting of G20 leaders in Toronto next month, with Germany's Angela Merkel vowing to press for the proposal supported by many in Europe. Clement said the bank tax would "encourage risky behavior" if it is used to create a bank bailout fund and "reward bad behavior" of those institutions responsible for the recent financial crisis in the first place. ..."This tax would reach into consumers' pockets and punish our financial institutions which have taken precautions to avoid the very turmoil that is afflicting other parts of the globe," Clement lamented.

International Evidence Shows Spending Restraint Is Best Way to Address Red Ink

Tyler Cowen's recent New York Times column explains how nations as diverse as Ireland, Sweden, and Canada have successfully solved fiscal problems by limiting the growth of government spending:

America's long-run fiscal outlook is bleak, mostly because of an aging population and rising health care costs. To close the gap between expenditures and revenue, ...we’ll need to focus especially on reducing spending, largely because that taxes on the wealthy can be raised only so high. ...Higher income tax rates would discourage hard work and encourage tax avoidance, thereby defeating the purpose of the tax increases. ...Higher levels of government spending and taxation would also soak up resources that might otherwise foster innovation and new businesses. And sentiment would most likely turn ever stronger against those immigrants who consume public services and make the deficit higher in the short run. ...The macroeconomic evidence also suggests the wisdom of emphasizing spending cuts. In a recent paper, Alberto Alesina and Silvia Ardagna, economics professors at Harvard, found that in developed countries, spending cuts were the key to successful fiscal adjustments — and were generally better for the economy than tax increases. ...The received wisdom in the United States is that deep spending cuts are politically impossible. But a number of economically advanced countries, including Sweden, Finland, Canada and, most recently, Ireland, have cut their government budgets when needed. Most relevant, perhaps, is Canada, which cut federal government spending by about 20 percent from 1992 to 1997.

Hypocrite of the Year Award

The Premier of Newfoundland and Labrador (akin to a state governor in the U.S.) defended his decision to get surgery in America with the statement that it was "my heart, my choice, and my health." This is an admirably libertarian statement, and the "my choice, and my health" part could be the rallying cry for those of us who don't want government-run healthcare. The only problem is that the Premier is a reprehensible hypocrite who wants to keep Canadian citizens trapped in a statist system even though he was able to escape the system using his personal wealth. To add insult to injury, he is going to try and get taxpayers to reimburse him for his US-based treatment:

An unapologetic Danny Williams says he was aware his trip to the United States for heart surgery earlier this month would spark outcry, but he concluded his personal health trumped any public fallout over the controversial decision. ..."This was my heart, my choice and my health," Williams said late Monday from his condominium in Sarasota, Fla. "I did not sign away my right to get the best possible health care for myself when I entered politics." ...Williams said he didn't announce his departure south of the border because he didn't want to create "a media gong show," but added that criticism would've followed him had he chose to have surgery in Canada. "I would've been criticized if I had stayed in Canada and had been perceived as jumping a line or a wait list. ... I accept that. That's public life," he said. ...Williams said his decision to go to the U.S. did not reflect any lack of faith in his own province's health care system. ...Williams also said he paid for the treatment, but added he would seek any refunds he would be eligible for in Canada. "If I'm entitled to any reimbursement from any Canadian health care system or any provincial health care system, then obviously I will apply for that as anybody else would," he said.

Greetings from Canada

I'm finishing up a swing through Canada, giving speeches for the Fraser Institute to audiences in Vancouver, Calgary, and Toronto. I've been talking about the size of government and the future of capitalism. As you might imagine, several people have asked about the battle in America over government-run healthcare and how the sysetm in the United States today compares to the Canadian system. I make two points. First, I tell tham that America's health care system already is largely run by government. Obama's proposal simply increases the level of control from perhaps 70 percent to 80 percent. Second, I tell them that the surviving remnants of a free market in the United States are worth preserving. Politicians have made the American system very cumbersome and expensive, but it is nonetheless the place where people want to be when their lives are on the line. So it's quite appropriate that this bit of news was just unveiled:

Newfoundland and Labrador Premier Danny Williams is set to undergo heart surgery this week in the United States. CBC News confirmed Monday that Williams, 59, left the province earlier in the day and will have surgery later in the week. The premier's office provided few details, beyond confirming that he would have heart surgery and saying that it was not necessarily a routine procedure.

Why is it that Canadian politicians come to the United States, but the medical traffic never heads in the other direction? Somebody should ask Obama to provide an answer.

American Companies Escaping for Lower Taxes...in Canada?!?

There has been considerable publicity in recent years about U.S. firms re-domilciling in the Cayman Islands and Bermuda to escape America's punitive corporate tax regime. The combination of a high tax rate and the self-destructive practice of worldwide taxation (imposing American tax on U.S. companies competing abroad, even though foreign governments already get to tax the income) has made America the least attractive place in the world to operate a multinational according to a former Chairman of the President's Council of Economic Advisers. Re-chartering abroad does not enable a company to escape taxes to the IRS on its U.S.-source income, but it does enable it to effectively compete in other nations without being saddled by the internal revenue code. Now the situation has become so bad in America that some companies are escaping to - I kid you not - Canada. Bloomberg reports:

Tim Hortons Inc, the largest fast- food chain in Canada, filed to reorganize as a Canadian company to lower its tax rate. Tim Hortons, which presently operates out of Oakville, Ontario, will become a unit of a Canadian-based parent with the same name, the company said today in a statement. Its current parent is based in Delaware. The coffee and doughnut seller began looking at moving its registration in the fourth quarter of 2008 as a way to cut its tax rate.

This may be the beginning of a trend. Reuters reports that Canadian lawamkers are advertising the fact that they have a more market-friendly system, and they hope to lure more firms north of the border:

Other companies are likely to follow Tim Hortons Inc in moving their corporate structures to Canada to take advantage of a falling corporate tax rate, Finance Minister Jim Flaherty said on Friday. The coffee shop chain said last month it applied with U.S. regulators to return to its Canadian corporate roots through a reorganization to benefit from lower taxes. Flaherty told reporters on a conference call from Chile, that he hoped the provinces would follow in the footsteps of the Conservative federal government and commit to reducing their tax rates to 10 percent by 2012. The federal government has pledged to reduce its corporate tax rate to 15 percent by that year, for a combined rate of 25 percent. "I'm optimistic that we're going to get to that 25 percent (corporate) tax rate, federal and provincial, by 2013 or so," he said. "That gives us an opportunity to brand Canada at a corporate tax rate of 25 percent globally. So that's the goal."