Quotulatiousness

November 30, 2012

Republicans widely expected to trade “no tax” pledge for promise of future spending cuts PLUS some awesome magic beans

Filed under: Economics, Government, Media, USA — Tags: , , , , — Nicholas @ 11:45

Most of the conservative pundits seem to expect the Republicans to cave in almost immediately and give Obama the tax increases he’s asking for:

1. President Obama is convinced he will walk out of this crisis with an extremely sweet deal. [. . .]

2. Democrats are completely convinced that enough Republicans in Congress will cave and acquiesce to almost everything they want as the cliff approaches. They have some recent historical examples to provide encouragement in this belief.

3. Democrats are completely convinced that if no deal is reached, the Bush tax cuts expire, and sequestration takes effect, Republicans will get most of the blame. This is probably largely correct, but I think they’re whistling past the graveyard on the consequences to an Obama presidency if 2013 dawns with tax hikes, defense-spending cuts, and another recession.

[. . .]

4. For the GOP, a deal on Obama’s terms is probably worse than sequestration. The middle will not suddenly like the GOP a lot more because they embraced tax increases for the rich. Even if they did, it’s unlikely they would gain enough ground to offset the damage such a move will do among a betrayed and enraged party grassroots. As I said this morning, “Once the Republicans become the party of tax increases, why do we need them? They become indistinguishable from the Democrats.”

[. . .]

The biggest obstacle to all of the options for real deficit reduction and real entitlement reform is that the public doesn’t really think they’re necessary; they think a few tax hikes on the rich will do the trick. Perhaps it’s best to let taxes go up for everyone, from the highest earners to the lowest earners, and let the public see how little that changes the numbers.

November 28, 2012

70 years later, “don’t wish Beveridge a happy birthday”

Filed under: Britain, Government, History, WW2 — Tags: , , , — Nicholas @ 10:06

In sp!ked, Rob Lyons looks back at the 1942 Beveridge Report and what it led to:

On 2 December 1942, the UK government published the Report of the Inter-Departmental Committee on Social Insurance and Allied Services, usually referred to as the Beveridge Report after its chair, the social reformer (and eugenicist) William Beveridge. The report is commonly regarded as a watershed in the development of the welfare state in Britain, a sign that we were becoming a more civilised and humane society. But the seventieth anniversary of the report on Saturday will no doubt prompt much handwringing about the system that the report helped to create.

[. . .]

The fact that the report’s recommendations were largely implemented by a Labour government, elected after the Second World War ended in 1945, has led to the creation of a myth that these were somehow ‘radical’ or ‘socialist’ policies. In fact, the general assumption that the state had to step in to reorganise and manage large swathes of society had been broadly accepted both before and particularly during the war. Compulsory national insurance had been introduced in a limited way in 1911 and state pensions had been enacted, for the very few people who lived past the age of 70, in 1908. The first call for a national health service came from the distinctly un-radical think tank, Political and Economic Planning, in 1937 — a call which was backed by the British Medical Association a year later.

[. . .]

Beveridge also built his belief in social insurance on another idea: that it was the function of the state to ensure full employment. Beveridge was inspired by the establishment’s new ideologue-in-chief, John Maynard Keynes; ideas about planning and state management of the economy started to become all the rage. The welfare bill would never become too large, Beveridge assumed, because the government would never let unemployment get out of hand. Individuals suffering temporary unemployment would be covered by their insurance contributions. In any event, it was widely assumed that people would, by and large, be too proud and independent to abuse the system and would choose work over welfare.

Yet as the decades passed, the welfare state expanded. The notion of a connection between national-insurance contributions and entitlements has pretty much disappeared. Now there is an amorphous sense of entitlement to welfare, regardless of one’s contributions. The state has positively encouraged this sentiment even as politicians have attacked ‘scroungers’ rhetorically.

For example, incapacity benefit has been expanded, so that millions of people who could work but are not currently employed are effectively told not to bother looking for jobs. This suited politicians when it became abundantly clear that full employment was gone, never to return. Taking those who might struggle to find work off the dole figures, and putting them on benefits that are not reliant upon them looking for work, might seem like a humane or generous thing to do. But in truth, the incapacity system effectively disabled them, by officially branding them ‘incapable’ — a label which many of these people have now internalised.

November 25, 2012

UK bureaucrat removes foster children from home of UKIP supporters

Filed under: Britain, Bureaucracy, Government, Liberty, Politics — Tags: , , , — Nicholas @ 10:30

I heard about this case yesterday, and I’d hoped that it was just a mangling of the report, not an appallingly bad exercise of municipal power:

The stunning decision by Rotherham Council to remove three children from a foster home (where they were happy) because the foster parents support UKIP shows that the “culture war” here in Britain is being waged not by the Right, but by the Left.

Joyce Thacker, the council’s director of children, who said her decision was influenced by UKIP’s sceptical take on multiculturalism, is the mirror image of those mad American right-wingers who want to outlaw abortion clinics and homosexuals. Unlike them, though, she is in a position of power. Hers is the latest in a series of increasingly chilling actions of this nature taken by bien-pensant officials.

[. . .]

The special interest of the Rotherham case — and no doubt why Ed Miliband was so quick to condemn it — is that in five days’ time the town has a parliamentary by-election. Labour is already in a bit of trouble here — about 80 of the 114 members present at the meeting to select its candidate walked out in protest after the favourite, local man Mahroof Hussain, was excluded from the shortlist. Many of them said they wouldn’t campaign for the woman Labour chose, Sarah Champion.

November 23, 2012

Google the latest whipping boy in Australia over taxation

Filed under: Australia, Business, Europe, Government, Law — Tags: , , , , — Nicholas @ 09:53

Even if you scrupulously obey the multiple jurisdictional laws to legally minimize the amount of tax you pay, politicians can’t resist the opportunity to pillory you for not paying your “fair share”:

The Minister’s explanation of Google’s tax affairs is as follows:

    “While the day-to-day dealings of Australian firms advertising on Google might be with Google Australia, under the fine print of contracts Australian firms sign with Google, they are actually buying their advertising from an Irish subsidiary of Google.

    It is then argued that the source of this income — and therefore the taxing rights under our tax treaty — would be with Ireland rather than Australia. Despite Ireland’s relatively low company tax rate of 12.5 per cent, we have just started to build the sandwich.

    The next step is to route a royalty payment from the Irish operating subsidiary of Google to a Dutch subsidiary of Google, which is then paid back to a second Irish holding company subsidiary of Google that is controlled in Bermuda, which has no corporate tax.

    The first Irish subsidiary receives a tax deduction for the royalty payment to the Dutch subsidiary, substantially reducing the income subject to the 12.5 per cent Irish company tax rate.

    Under Dutch law, and because EU member countries do not charge withholding taxes on transfers within the EU, the transfers to and from the Netherlands are essentially tax free.

    And under Irish tax law, the second Irish resident subsidiary is not taxed on the royalty payment because it is controlled by managers elsewhere.

    The profits from the sale of advertising to an Australian firm then sit in a tax-free jurisdiction — possibly indefinitely.”

Tax lawyers — especially those who work on multinational levels — don’t create these situations out of whole cloth: it’s the politicians and revenue ministries that set up and maintain the tax rules. Corporations are legally required to pay taxes (as are individuals), but corporations are also legally required to conduct themselves in ways that maximize the profits for their shareholders. Finding ways to legally pay tax at a lower rate is a requirement. That companies like Apple and Google are big enough to take advantage of the “loopholes” deliberately created by the tax authorities is not a reason to bash Apple or Google. They can only take advantage of “loopholes” because this or that government tried to rig the system in a particular way. Changing or threatening to change the rules retrospectively is a really good way to indicate to foreign business that you really don’t want them operating in your territory.

Update: Snigger.

November 20, 2012

Undervaluing, denigrating the role of the family in a child’s life

Filed under: Britain, Government — Tags: , , , — Nicholas @ 11:11

In sp!ked, Tim Black takes issue with the blithe paternalistic comment by a British government minister that children should be more frequently removed from their homes and put into “care”:

Still, it is a dubious testament to Gove’s eloquence that he gave a striking expression to the state’s usurpation of the role traditionally played by adult family members. As he put it, ‘the rights of biological parents’ have for too long been treated as precious. It is time, Gove is saying, for these filial bonds, which have been central to society for centuries, to be demystified, disenchanted. After all, what is a mother or a father, or a daughter or a son, other than an arbitrary accident of nature? The words signify nothing more valuable than a set of random ‘biological’ outcomes. To privilege certain adult-child relationships on the basis of biology is to succumb to the allure of tradition, and to condemn many children to a lifetime of misery. ‘In all too many cases when we decide to leave children in need with their biological parents’, Gove concluded, ‘we are leaving them to endure a life of soiled nappies and scummy baths, chaos and hunger, hopelessness and despair’.

With the family blithely dismantled, and the roles of father and mother treated as little more than semiotic jetsam, Gove was able to propose his alternative to biology: the artifice of the state. ‘I firmly believe more children should be taken into care more quickly and that too many children are allowed to stay too long with parents whose behaviour is unacceptable. I want social workers to be more assertive with dysfunctional parents, courts to be less indulgent of poor parents, and the care system to expand to deal with the consequences.’

Gove’s is a frightening vision. As the meaning and value of being mum or dad is actively reduced by politicians to mere biological facts — in short, as tradition is wilfully disenchanted — so it becomes easier for the state, through its various agents, to assume the role of guardian. The result, complete with empowered or ‘more assertive’ social workers, and their correlative, impotent and less assertive parents, is a society with ever increasing numbers of children placed into Britain’s far from distinguished care system.

Quite why this scenario is considered progressive is not entirely clear. Living with a mum or a dad deemed ‘bad’ or ‘poor’ by a social worker would surely, in many cases, be far better for a child than surviving, parentless, even in a vastly improved care system. Besides, while Gove might not care to acknowledge it, the bond between parents and their children is not merely biological; it is possessed of considerable human and social value, too. Parents do not simply love their children; they help to socialise them, and act as a source of authority. To seek to erode this bond even further than it has been is deeply reckless.

November 17, 2012

Steve Landsburg says paying off the national debt would be a bad idea

Filed under: Government, USA — Tags: , , — Nicholas @ 10:41

Here’s an interesting argument:

How high should taxes be? High enough to cover expected outlays going forward — but no higher.

That’s because any additional revenue would be used to pay down the federal debt, which is a bad idea. It was almost surely a mistake to run up this much debt in the first place, but now that we’ve got it, the best thing to do is to keep it forever.

Here’s why:

Every $100 in outstanding debt commits the government to making payments with a present value of $100, and hence to collecting tax revenues with a present value of $100. In a world where the interest rate is 3%, the options include collecting (and paying off) $100 immediately, or $50 this year and $51.50 next year, or $11.38 a year for ten years running, or $3 a year forever. Because deadweight loss (i.e. the economic damage due to the disincentive effects of taxes) is roughly proportional to the square of the tax rate, it turns out that the latter — the policy of paying interest forever without ever making a principal payment — is (at least roughly) the policy that minimizes the present value of deadweight loss.

The argument for a guaranteed annual income program

Filed under: Cancon, Economics, Government — Tags: , — Nicholas @ 10:16

In the National Post, Andrew Coyne lays out the benefits of instituting a GAI to replace existing poverty programs:

The basic idea behind the GAI is sound: to consolidate a number of federal and provincial programs, some in cash and some in kind, into a single, universal, unconditional cash benefit, delivered through the tax system. The base amount would be modest: perhaps $10,000-$12,000 per person. Critically, it would be taxed back only gradually, say at 25 cents on the dollar, as earned income rises. Compare that to current practice, where benefits are often withdrawn dollar-for-dollar, or in the case of benefits in kind like free dental care or prescription drugs, are denied altogether to those who leave social assistance: an effective marginal tax rate of 100% or more.

You can see why the people who design and administer these systems do this. They’re trying to save money; they want to target assistance only to those who “need” it; they worry what people would do if given the cash to buy what they want, rather than the services government thinks they should have. But the result of all this careful selection and monitoring is not just condescending and intrusive: it effectively punishes people for taking a job, or working longer hours. This is the key insight of the GAI: dependence is created not so much by giving people money when they don’t work — certainly not at $10,000 a year — as by taking it away from them when they do.

So if all of this makes sense, why hasn’t it been done? One barrier is cost. The more gradually you reduce the transfer as income rises, the more paltry the base amount must be to stay within a given limit; conversely, set a more generous minimum, and you have to impose a steeper clawback. Of course, the arithmetic becomes less stark if you include the revenues saved from the programs the GAI would replace. But here you run into other obstacles.

November 16, 2012

Reason.tv: Ladies, We’re Screwed: Why Obama’s Re-election is Bad for Choice

Filed under: Economics, Government, Health, USA — Tags: , , , — Nicholas @ 10:03

Obama’s re-election is great for moms, right? Aren’t we just a bunch of mindless free spenders, so in love with humanity we want to support every cause and child as though they were each our own? Oh, hells no.

From jobs to health care to education, let’s face it ladies, we’re screwed…and not in the much needed 50 Shades of Grey way.

This election all boils down to choice. Because ours are now sadly limited. To make a simplistic sexist argument, how would you like it if you waltzed into the shoe department at Nordstrom’s or Bloomingdale’s and instead of ankle booties and wedges you found one or two styles of sensible, comfortable clogs? To borrow a term from Joe Biden, malarkey!

With the employer mandate, small businesses are now compelled by law to provide health care for their full-time employees. What will this do? Will it bolster families and working moms by offering free medical care to those in need? Hardly!

SEC employee stress levels must be down because they’re not surfing for porn during “98% of the workday”

Filed under: Bureaucracy, Government, USA — Tags: , , , — Nicholas @ 09:49

Ah, the hard life of the SEC employee must have gotten a bit less stressful recently. Tim Cushing has the, um, sordid details:

An internal investigative report of the SEC’s Trading and Markets division has been recently been reviewed by Reuters. After reading its rundown of the misdeeds and abuses uncovered, I’m left with the urge to laugh maniacally in the manner of someone having just cleared the tipping point and now sliding irretrievably into insanity. The sheer irresponsibility on display here springs from the sort of irredeemable carelessness that comes with spending other people’s money (taxes) and operating without any credible oversight or accountability (a large percentage of government entities).

Bess Levin at Dealbreaker points out that while the SEC’s internal investigation may have turned up several misdeeds, ranging from the merely stupid to the positively horrendous, it is quite a step up from the insatiable pornhounds that used to populate the Commission:

    If you had asked us two years or two months or two days ago if we thought that there would be a time in the near future when Securities and Exchange employees would not be regularly reprimanded for watching porn on their work-issued computers for 98 percent of the workday, we would have said absolutely not. No judgment, but in our professional opinion, people do not go from, among other things:

    * Receiving “over 16,000 access denials for Internet websites classified by the Commission’s Internet filter as either “Sex” or “Pornography” in a one-month period”

    * Accessing “Internet pornography and downloading pornographic images to his SEC computer during work hours so frequently that, on some days, he spent eight hours accessing Internet pornography…downloading so much pornography to his government computer that he exhausted the available space on the computer hard drive and downloaded pornography to CDs or DVDs that he accumulated in boxes in his office.”

    …to living a porn-free existence at l’office.

Truly a mind-boggling set of employees. One regional staff accountant ran into the “no-porn” wall 1,800 times in a two week period, yet remained undeterred. Those caught accessing porn with ridiculous frequency cited the “stress” of their jobs as the underlying reason for the nearly uninterrupted pornathons.

Waiting for the Feds to respond to legal marijuana in Colorado and Washington

Filed under: Government, Law, USA — Tags: , , , , , — Nicholas @ 09:38

Phillip Smith examines the changed situation in Colorado and Washington in the wake of the marijuana legalization votes and what the federal government may do:

While the legal possession — and in the case of Colorado, cultivation — provisions of the respective initiatives will go into effect in a matter of weeks (December 6 in Washington and no later than January 5 in Colorado), officials in both states have about a year to come up with regulations for commercial cultivation, processing, and distribution. That means the federal government also has some time to craft its response, and it sounds like it’s going to need it.

So far, the federal response has been muted. The White House has not commented, the Office of National Drug Control Policy has not commented, and the Department of Justice has limited its comments to observing that it will continue to enforce the federal Controlled Substances Act.

“My understanding is that Justice was completely taken aback by this and by the wide margin of passage,” said Eric Sterling, former counsel to the House Judiciary Committee and currently the executive director of the Criminal Justice Policy Foundation. “They believed this would be a repeat of 2010, and they are really kind of astonished because they understand that this is a big thing politically and a complicated problem legally. People are writing memos, thinking about the relationship between federal and state law, doctrines of preemption, and what might be permitted under the UN Single Convention on Narcotic Drugs.”

What is clear is that marijuana remains illegal under federal law. In theory an army of DEA agents could swoop down on every joint-smoker in Washington or pot-grower in Colorado and haul them off to federal court and thence to federal prison. But that would require either a huge shift in Justice Department resources or a huge increase in federal marijuana enforcement funding, or both, and neither seems likely. More likely is selective, exemplary enforcement aimed at commercial operations, said one former White House anti-drug official.

November 13, 2012

Denmark discovers that “price elasticity” is a real phenomenon

Filed under: Economics, Europe, Food, Government, Health — Tags: , , , — Nicholas @ 11:24

Denmark is getting rid of its “fat tax” imposed last year, as it has failed to solve the problem it was intended to address:

Gone, by popular demand: Denmark’s fat tax. ‘The fat tax is one of the most maligned we [have] had in a long time’, said Mette Gjerskov, the Danish food and agriculture minister, in a press conference on Saturday announcing the decision to ditch the policy. ‘Now we have to try improving the public health by other means.’

[. . .]

It turns out, unsurprisingly, that slapping taxes on things doesn’t necessarily persuade people to consume less of them. So Danes either went downmarket in their buying habits by buying cheaper products, or popped across the border to Sweden or Germany to buy their fatty foods there instead. The only real effect was to hit the profits of Danish companies. Chastened by the experience, the Danish government has also scrapped plans for a sugar tax, too.

As the OECD notes: ‘The impact of imposing taxes on the consumption of certain foods is determined by the responsiveness of consumers to price changes, ie, price elasticity. However, it is difficult to predict how consumers will react to price changes caused by taxation. Some may respond by reducing their consumption of healthy goods in order to pay for the more expensive unhealthy goods, thus defeating the purpose of the tax. Others may seek substitutes for the taxed products, which might be as unhealthy as those originally consumed. Depending on the elasticity of the demand for the taxed products, consumers will either end up bearing an extra financial burden, or changing the mix of products they consume in ways that can be difficult to identify.’

So, simply from a practical point of view, food taxes — indeed, any sin tax, including extra duty on tobacco or minimum prices for alcohol — can have some unwanted negative consequences while largely failing to achieve their intended aim.

November 9, 2012

Solving the “tax haven problem” … with military intervention

Filed under: Economics, Europe, Government — Tags: , , , , , , , , — Nicholas @ 12:30

Radley Balko suggested that this is insanity. I agree, but as Dan Mitchell explains, it’s being bruited about by people who should know far, far better:

A former bureaucrat from the European Bank for Reconstruction and Development actually called for the forcible annexation of low-tax jurisdictions, writing in the Financial Times that, “Jersey, Guernsey and the Isle of Man should simply be absorbed lock, stock and barrel into the UK…Andorra, Monaco and Liechtenstein should be given the choice of ending bank secrecy or facing annexation.”

He wasn’t quite so belligerent about Switzerland, perhaps because all able-bodied male citizens have fully automatic assault weapons in their homes. But he did urge financial protectionism against the land of chocolate, yodeling, and watches.

What a bizarre attitude. It’s apparently okay for certain countries to persecute – or even kill – ethnic minorities, religious minorities, political dissidents, homosexuals, and other segments of their populations. Very rarely do people like Mr. Buiter call for annexation or sanctions against such loathsome regimes.

But if a nation has low taxes and a strong human rights policy on financial privacy, then cry havoc and let slip the dogs of war.

November 8, 2012

Has Stephen Harper begun “starving the beast”?

Filed under: Cancon, Government — Tags: , , — Nicholas @ 09:43

In Maclean’s, Stephen Gordon says that Republicans should carefully observe the way Stephen Harper has gone about his goal of reducing the size of the government:

The “starve the beast” strategy works like this:

  1. Cut taxes.
  2. Wait until the resulting budgetary deficit becomes a problem important enough to solve.
  3. Cut spending in order to deal with the budget crisis.
  4. Go to 1.

The goal of this exercise is to steadily reduce the size of government. The idea has its origins in the US conservative movement, but US conservatives haven’t had much success in implementing it. Steps 1 and 2 work as advertised, but politicians can never get the hang of the third part.

[. . .]

Meanwhile, Stephen Harper is quietly implementing a Canadian “starve the beast” strategy, and not without success. Unlike the Republicans, the Conservatives have actually reached stage 3. Step 1 was the reduction to the GST, which created a structural deficit. After a certain period of denial, step 3 was reached in the austerity measures announced in the 2012 budget.

Federal revenues have been held below 15 per cent of GDP for four years in a row, well below the levels we’ve seen in the last fifty years. And the outlook is for more of the same.

Republicans are entering a rebuilding phase. I wouldn’t be surprised if some of them start paying close attention to how the Canadian Conservatives have managed to pull off the “starve the beast” trick that always seems to elude U.S. conservatives.

November 7, 2012

Reason.tv: The Wildly Unpopular Status Quo Is Ratified!

Filed under: Government, Liberty, USA — Tags: , , , , , , — Nicholas @ 09:41

“After four years of a crappy economy, bipartisan dissatisfaction with bailout economics, and populous revolts on the right and the left, we are seeing basically the exact same government we had on November 6th,” says Reason magazine Editor in Chief Matt Welch. “The status quo, which has never been less popular, has just been ratified.”

And yet, says Welch, big wins on marijuana legalization and gay marriage give limited government types a lot to be happy about.

Update: Jacob Sullum on the victories for both same-sex marriage and marijuana normalization:

Tonight was a good night for gay marriage as well as marijuana. Voters approved ballot measures legalizing same-sex marriage in three states by similar margins: 53 to 47 in Maine, 52 to 48 in Maryland and Washington. In Minnesota an initiative that would amend the state constitution to ban gay marriage is tied right now, with 75 percent of precincts reporting [was defeated 51-48].

This is the first time gay marriage has been legalized by popular vote. In the six other states where it is legal (Connecticut, Iowa, Massachusetts, New Hampshire, New York, and Vermont), the policy was enacted by the legislature or compelled by a court decision. By contrast, most of the state laws allowing medical use of marijuana — another one of which passed tonight in Massachusetts — have been enacted by voters. (Colorado and Washington both had such laws before broadening the policy to include recreational use.)

November 2, 2012

California tax collectors discover exciting new technique: double billing

Filed under: Bureaucracy, Government, USA — Tags: , , — Nicholas @ 08:04

Let’s say you’re an honest, upstanding citizen who pays your taxes on time and in full. Let us also say you happen to live in California. What would you do when you got a bill from a different agency of the state government, saying you still owed an amount of money that you paid in your state taxes (and have the documentation to prove it)? David Friedman ponders whether this new approach to state fund-raising is fraud or mere incompetence:

I recently received a bill from the California Board of Equalization (BOE) demanding that I pay them about three hundred dollars in use tax. That puzzled me, since I had already paid the use tax with my California state income tax return—my reporting it on that return is the only reason the BOE knew that I owed it. Just to be sure, I went online and checked my account with the Franchise Tax Board, the body that collects California income tax—it showed me owing nothing.

So I called the number for the BOE. The woman I spoke with told me that they had not received the money from the FTB and that if I did not want them to bill me for it I should call the FTB and have them take care of the matter. I called the number she gave me, got an FTB phone tree with no option of talking to a human being and no reference to use tax.

[. . .]

It is possible, of course, that I am misinterpreting incompetence as dishonesty—that at some stage in the process someone made a mistake, which will now be corrected. One reason I doubt that is that what the letter I received said was:

    “According to information provided to us by the Franchise Tax Board (FTB), you reported a use tax liability on your state income tax return. However, FTB advised the funds were not available to be transferred to the State Board of Equalization (BOE), which is ultimately responsible for the collection of use tax.”

    “If the use tax was remitted with your FTB return, the use tax was either redirected to a FTB liability or refunded by FTB. Accordingly, the BOE is sending this letter to inform you that the use tax remains due (see enclosed billing notice)”

They do not say that I did not pay the money to the FTB, merely that the FTB did not pay it to them. And the final bit, which I missed in the initial draft of this post and have just added, makes it clear that if I paid the money but the FTB didn’t pass it on, they want me to pay it again.

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