Quotulatiousness

June 22, 2012

Charities: the Trojan Horse for expansion of government

Filed under: Britain, Bureaucracy, Government — Tags: , , — Nicholas @ 08:51

Some charities are still what they were twenty years ago: organizations that provide help to those in need. Others, however, have morphed into specialized entities that exist primarily to lobby the government for more funds … to allow them to lobby more efficiently:

The relationship between charities and the British state has been significantly transformed in the past 15 years. There is a gulf between the public’s perception of what is charitable – a traditional view still dominated by visions of self-sacrificing volunteers and jumble sales – and the third sector’s view of itself as a more caring, semi-professional wing of the state. The public can be forgiven for being confused about a ‘voluntary sector’ that, according to a 2009 report for the National Council for Voluntary Organisations (NCVO), employs more than 600,000 people. The public might equally be puzzled by the plethora of ‘non-governmental’ organisations which require an Office of the Third Sector to preside over them.

Between 1997 and 2005, the combined income of Britain’s charities nearly doubled, from £19.8 billion to £37.9 billion, with the biggest growth coming in grants and contracts from government departments. According to the Centre for Policy Studies, state funding rose by 38 per cent in the first years of the twenty-first century while private donations rose by just seven per cent.

This surge in government spending coincided with a politicisation of the third sector which was actively encouraged by the state apparatus from the prime minister down. Traditionally, lobbying activity could not be a charity’s ‘dominant’ activity, but could only be ‘incidental or ancillary’ to its charitable purpose. In 2002, however, a report from the Prime Minister’s Strategy Unit called for charities to increase their lobbying activity and for the Charity Commission guidelines to be made ‘less cautionary’: ‘Charities perform a valuable role in campaigning for social change. The guidelines on campaigning should be revised to encourage charities to play this role to the fullest extent.’

The Charity Commission duly revised its guidelines on campaigning two years later, allowing all non-party political campaigning in furtherance of a charity’s goals so long as this activity was not ‘the dominant method by which the organisation will pursue its apparently charitable objects’. A subsequent Cabinet Office report in 2007 called for the rules to be relaxed further still. Accepting that charities had ‘considerable latitude… for political campaigning under existing rules’, the authors expressed concern about the range of legal and regulatory restraints which ‘unjustifiably restricts political campaigning by third-sector organisations’. Stressing the right of charities ‘to undertake campaigns, regardless of any funding relationship with government’, the Cabinet Office argued that organisations whose purpose was wholly political should not be barred from charitable status: ‘Provided that the ultimate purpose remains demonstrably a charitable one, the government can see no objection, legal or other, to a charity pursuing that purpose wholly or mainly through political activities.’

There are still charities that do what most of us think of as “charity”, but far too many of them are just lobbying devices to accomplish political rather than charitable ends. There’s no reason to prevent organizations from political lobbying, but they should not benefit from the special tax status of genuine charities.

June 18, 2012

Who’s afraid of austerity?

Filed under: Economics, Europe, Government, USA — Tags: , , , , — Nicholas @ 08:17

At the BBC News website, Niall Ferguson on why young westerners should welcome austerity:

The heart of the matter is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn.

In this regard, the statistics commonly cited as government debt are themselves deeply misleading, for they encompass only the sums owed by governments in the form of bonds.

The rapidly rising quantity of these bonds certainly implies a growing charge on those in employment, now and in the future, since — even if the current low rates of interest enjoyed by the biggest sovereign borrowers persist — the amount of money needed to service the debt must inexorably rise.

But the official debts in the form of bonds do not include the often far larger unfunded liabilities of welfare schemes like — to give the biggest American schemes — Medicare, Medicaid and Social Security.

The most recent estimate for the difference between the net present value of federal government liabilities and the net present value of future federal revenues is $200 trillion, nearly thirteen times the debt as stated by the U.S. Treasury.

Notice that these figures, too, are incomplete, since they omit the unfunded liabilities of state and local governments, which are estimated to be around $38 trillion.

These mind-boggling numbers represent nothing less than a vast claim by the generation currently retired or about to retire on their children and grandchildren, who are obligated by current law to find the money in the future, by submitting either to substantial increases in taxation or to drastic cuts in other forms of public expenditure.

[. . .]

It is surprisingly easy to win the support of young voters for policies that would ultimately make matters even worse for them, like maintaining defined benefit pensions for public employees.

If young Americans knew what was good for them, they would all be in the Tea Party.

A second problem is that today’s Western democracies now play such a large part in redistributing income that politicians who argue for cutting expenditures nearly always run into the well-organised opposition of one or both of two groups: recipients of public sector pay and recipients of government benefits.

June 17, 2012

Narrow specialization, but very wide assumed knowledge

Filed under: Economics, Environment, Politics — Tags: , , — Nicholas @ 09:11

Tim Worstall on the problem when specialists in one area pretend deep understanding of radically different areas:

Regular readers will know that I’m perfectly happy to take what the climate scientists tell me about climate science. Where I start to stray from the path of green orthodoxy is those same scientists then tell us the economics of what we ought to do about it all. Something they are not competent to comment upon as they really don’t understand the economics. I do accept the economics of climate change as laid out by the economists who have studied the economics of climate change. William Nordhaus, Nick Stern and so on, tell us that if the climate science is right then a simple revenue neutral carbon tax will be the solution.

That’s fine by me. But it does still puzzle me as to why the not economists feel competent to pronounce on the economics of climate change. Are they intellectual supermen who can master two widely different subjects? Simply succumbing to politics: something must be done, this is something, do this? [. . .]

Which leads us to our conclusion. The reason the scientists are so in conflict with what the economists of climate change are saying about the economics of climate change is simply that the scientists are entirely ignorant of what the economists are saying. And I’m afraid that, despite the popularity of the stance among politicians, ignorance is not a notably successful form of governance.

June 13, 2012

When is a bribe appropriate?

Filed under: Britain, Bureaucracy, Business, Law, Russia — Tags: , , , , — Nicholas @ 09:59

The British government is trying to crack down on bribery, which on the surface seems like a good thing to do: but will it cripple British businesses in third world countries?

We used to draw a distinct line between what was acceptable business conduct here at home and what we did abroad with Johnny Foreigner.

Inviting Bertie from your major customer to Henley or the Derby, or waving Cup Final and Olympic tickets in his face was entirely acceptable. Slipping him £500 for an order was bribery and both illegal and immoral.

But what you did abroad was an entirely different matter: bribery was until very recently tax deductible.

[. . .]

This is of course very different from the system of old. Which was, essentially, that soft soaping someone with experiences and days out was just absolutely fine while any mention at all of cash was not just legally but also socially verboten.

At home, in Britain, that was. Having worked in some pretty odd and even rough places I’ve done my share of bribing people, but even so I would be profoundly shocked if I was asked for a bung in Blighty. But the system also most definitely facilitated the payment of bribes to Johnny Foreigner.

At one point, working in Russia, I needed to get cheap railway prices out of the Russian railroads to make the numbers on a metals shipment add up. The only way known to do this was to make a deal with the North Koreans who had special state-set prices on said railways. Which is how I found myself inside the N. Korean embassy in Moscow handing over $10,000 in crisp notes to their KGB-style guy after the successful conclusion of the shipment.

Yes, of course, it’s terribly naughty subverting the employees of a communist dictatorship, but the reaction here at home was the most interesting. When I made gentle enquiries to the taxman as to how I might account for this transaction, hinting gently at first, he finally pointed out that since I’d paid the bribe in a foreign currency to a foreign chap that was just fine. Just list it as a business expense and it was tax deductible.

QotD: “California is becoming Detroit”

Filed under: Economics, Government, Politics, Quotations, USA — Tags: , , — Nicholas @ 09:14

The liberal model — borrowing huge sums, rigging interest and the currency to enable state profligacy, turning large swaths of the population into less productive unionized government workers or dependents on the dole who vote in thanks to political hacks — simply does not work. How could beautiful blue-state California lose almost a million refugees to arid Texas? I like Texas, but Dallas had far less of nature to work with than did San Francisco. (It takes a lot of human failure for thousands to give up verdant California to move to Utah or the Nevada desert.) What we are witnessing is nothing short of surreal: in the manner that Tijuana was a different universe from San Diego, so too the entire state of California is becoming a different world from its neighbors. Whether one examines its near dead-last schools, its oppressive income and sales taxes, its decaying roads and infrastructure, its absurd prison system, its dysfunctional state offices (try the DMV), or its priestly public employee caste, California is becoming Detroit.

Victor Davis Hanson, “The Liberal Super Nova”, PJ Media, 2012-06-11

June 3, 2012

Quebec case may force common-law couples into marriage

Filed under: Cancon, Law — Tags: , — Nicholas @ 13:00

An interesting development in Quebec’s laws relating to common-law relationships:

Somewhere in North America, there is a place where little girls don’t give the slightest thought to what kind of wedding dress they’ll wear one day. A place where young men have never heard the expression: “why buy the cow when you can have the milk for free?” — because the milk is always free. A place where no one asks an unmarried couple expecting a baby if they’re getting hitched.

This place is the province of Quebec. The French language spoken here is no guarantee for romance. Couples are practical, and lovers treasure their individuality. Quebec has become one of the least marrying places in the world, thanks to the institution known as “de facto spouses.” But now, thanks to a bizarre legal case entangling a Quebec billionaire and his de facto spouse, the freedom to un-marry is under threat. More than 1 million Quebecois in this kind of relationship may soon be automatically married by the state, against their will.

De facto spouses are defined by Quebec’s law as two people who have been living together for a year or more without being married and who check the “couple” box on their income tax statement form. Quebec’s lawmakers have deliberately chosen not to give de facto couples the same rights and responsibilities that married couples have under the Law of Quebec, to preserve the freedom of choice. Upon the termination of a relationship, “no matter how long cohabitation has lasted, de facto spouses have no legal support obligation to each other, even if one spouse is in need and the other has a high income.” Quebec is the only province in Canada where spousal support payments are not recognized by law for de facto spouses.

May 29, 2012

The fuzzy good intentions of equalization and the bad results

Filed under: Cancon, Economics, Government — Tags: , , , , — Nicholas @ 10:07

Peter Holle in the National Post, outlining the economic distortions of federal equalization payments in the recipient provinces:

Equalization, viewed critically, does no favours to either the funding or recipient provinces. After 50 years, outside transfers constitute an ever larger portion of the economies in have-not provinces. In an otherwise globally-oriented, market-driven world, Canada’s equalization program has encouraged the development of locally-oriented, public-sector driven economies.

Here are just a few ways that equalization provides incentives to harmful policy, stunting economic growth in the jurisdictions the policy means to help.

  • Inflating the public sector: Equalization has allowed recipient jurisdictions to create disproportionately larger public sectors because someone else is paying the bill. Manitoba’s public sector, for instance, employs 103 people per 1,000 residents, compared to a Canadian average of 84.
  • Politicizing spending. The external funding from equalization has allowed local politicians to build up vote-buying infrastructure with little political cost, by disconnecting taxation from benefit. Quebec’s $7-a-day daycare, and university tuition at less than half the Canadian average, would be unworkable without $7.4-billion in annual equalization subsidies from the rest of Canada.
  • Incentives for higher taxes. A path-breaking study by the Atlantic Institute for Market Studies showed that equalization rewards recipient provinces for imposing high and damaging tax rates, which deter private-sector investment and job creation. Manitoba, the only have-not province in Western Canada, has the highest income taxes in the region, and also has the lowest rate of private-sector investment.
  • Artificially inexpensive hydro power. By excluding the true value of renewable hydro energy revenues from the calculation of revenue capacity, the equalization formula rewards Manitoba and Quebec for charging artificially low domestic electricity prices. Below-market prices, in turn, encourage consumers to use more resources that otherwise would be conserved in response to accurate price signals.

May 20, 2012

This is why I don’t expect the Bush tax cut to be allowed to expire

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 08:42

Here it is in one easy-to-understand graph:

Brad Plumer explains:

What will the economy look like in 2013? A great deal depends on what Congress decides to do at the end of this year. Remember, the Bush tax cuts are expiring, the payroll tax holiday will sunset, and a bunch of new spending cuts under the debt-deal “sequester” are scheduled to kick in. Coming all at once, that’s a potentially big drag on growth.

[. . .]

To put this in perspective, the Federal Reserve expects the economy to grow at a roughly 2.9 percent pace in 2013. If Congress does nothing at the end of this year, much of that growth could be wiped out, and there’s a strong possibility that the United States could lurch back into recession. (Granted, a lot could depend on how the Fed reacts in this situation.)

On the flip side, as Ezra discussed in Thursday’s Wonkbook, letting all of the tax cuts expire and spending cuts kick in would also cut the U.S. deficit considerably: “Public debt falls from 75.8 percent in 2013 to 61.3 percent in 2022.”

H/T to Doug Mataconis for the link.

May 1, 2012

The morality of taxation

Filed under: Britain, Economics, Government — Tags: , , — Nicholas @ 08:17

In the Telegraph, Philip Johnston recounts the story of the 10 beer-drinking men and uses it to discuss the morality of taxes. Although the details are British, the story applies equally to Canada or the United States:

No discussion of the morality of taxation can be divorced from what is done with the money. It is not enough to say we must all contribute according to our means without at the same time questioning where it all goes. Tax has become the new immigration: a taboo subject for politicians who fear being derided as friends of the rich or denounced for immoral policies.

Yet, even with the parlous state of the nation’s finances, an argument can be made for low taxation that speaks to both a desire for smaller government and for greater personal freedom. The last Labour government took too much in taxes not merely because it believed that ever-increasing amounts of public spending were the only way to achieve better services. It did so because socialists think they know best how to spend people’s money and should be entrusted to do so. That is the essence of the Left’s worldview; and it is the principal reason why the state has grown so much in the past 50 years.

Where is the morality in taking money from people so that politicians can feel good about themselves? How is it ethical of a government to remove 40 per cent of an individual’s income with the purpose of engineering society the way it sees fit, rather than ensuring that people have the means to get on, by and large, with their own lives? Our system of governance has become characterised by grotesque waste, unfulfilled promises, incompetent delivery and excessive red tape. It has over-reached itself and seems incapable of retrenching, even under a Tory prime minister.

The moral, and Conservative, case for lower taxes is that they allow people to make their own decisions, to save when they wish, to give if they choose and to spend on what matters to them. Tory politicians should not be ashamed to talk about cutting taxes, because high taxation removes the need for individuals to take responsibility for their own lives and heightens cynicism about the ability of the government to deliver.

April 25, 2012

Complaint submitted to CRA over the David Suzuki Foundation’s charitable status and partisan political activity

Filed under: Cancon, Law, Media, Politics — Tags: , , — Nicholas @ 08:56

It’s been an open secret for years that some organizations with charitable status under the Canada Revenue Agency’s rules are stepping over the line with regard to partisan political activities. A complaint has been lodged with the CRA over the David Suzuki Foundation on these grounds:

The David Suzuki Foundation on Tuesday became the target of a complaint to the Canada Revenue Agency, just days after its namesake co-founder stepped down amid heightened tensions between environmental charities and the Conservative government.

EthicalOil.org, a non-profit organization that promotes oil from Canada and other democracies, sent a letter to the agency asking it to investigate whether the David Suzuki Foundation is breaking rules that pertain to political activity. Registered charities are allowed to devote only a small fraction of their resources to political activity, although they can never be partisan.

“If you find the Suzuki Foundation is in contravention of the CRA rules, then we request that you consider whether the Suzuki Foundation should have its charitable status revoked or otherwise be sanctioned,” EthicalOil.org said in its 44-page letter, which was drafted by Calgary-based JSS Barristers and obtained by the National Post.

April 20, 2012

The stadium issue for the Minnesota Vikings

Filed under: Economics, Football, Government — Tags: , , , , — Nicholas @ 08:40

It’s been a big issue in Minnesota for the entire off-season, but I haven’t been following too closely (not living in the state, I don’t know anything about the issue other than what the StarTribune and the Pioneer Press have been reporting, leavened with some angst and bile from the various Viking fan blogs).

In a nutshell, the Vikings have been playing at the Hubert H. Humphrey Metrodome in Minneapolis for 30 years. Their lease on the building expired at the end of the 2011 season and they’ve been trying to get political support for a new stadium for the last ten years. The stadium debate has gone over the same ground repeatedly, but even when the site is agreed upon and the team and the city appear to be happy with the compromise, it still required the state to provide additional funding … lots of additional funding.

That’s where what appeared to be a done deal went off the rails earlier this week. The state legislature voted down the state’s share of the funding for the stadium, which appears to have been a rude surprise to both Minneapolis and the team.

The NFL is now warning Minnesota that the Vikings could move out of state (Los Angeles has been hoping for a team for years now, although given California’s dire financial straits, it’s hard to imagine them putting up any more money than Minnesota might be willing to offer).

As I wrote back in November,

The Vikings are hoping to get a new stadium built, and the state legislature has been doing what they can to kick the issue down the road every time it’s come up. I don’t have a say in the matter, as I’m not located in Minnesota and I’d probably still cheer for the team even if it moved elsewhere (though it would be a sad thing to see it move after half a century in Minnesota).

In general, I don’t think governments should build stadiums for professional sports teams, as it’s using tax money to subsidize private profits. If a new stadium is going to generate a profit, the team’s ownership should bear the costs themselves. The fact that they generally don’t — mostly because politicians don’t want to deal with angry sports fans after the team leaves town — doesn’t make it right.

It is quite noteworthy that the question has never actually been asked of the voters — the folks whose taxes will have to subsidize the team’s new stadium — if they are willing to pay. I have to assume that this is because they have indicated in other ways that they are not willing. If that’s the case (and I can’t blame them in the slightest if that’s true), then the Vikings should either pony up enough money to build a stadium without taxpayer assistance, or go looking for a city or a state foolish enough to pour more money into the pockets of the team’s ownership. Here once again are Nick Gillespie and Matt Welch on why public funding for professional sports facilities are a bad idea:

April 15, 2012

Increasing taxes on the “1%” won’t close the gap — and might make it worse

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas @ 11:13

Joseph Brean in the National Post:

That the rich should contribute more than their current share to the common good is a proposal with popularity. From Paris and London to Nova Scotia and Alberta, “tax the rich” has become a dominant theme in budget debates and elections around the world.

In Ontario, for example, NDP leader Andrea Horwath’s proposal to create a new tax bracket for people who make more than half-a-million dollars a year, illustrates the persistent attraction of such schemes for governments in deficit.

“The issue really is one of perceived fairness,” said Robin Boadway, a taxation expert and professor of economics at Queen’s University, who notes that the income of the highest earners has been increasing much faster than the middle and lower ranks. Taxation, to a great degree, relies on the goodwill and trust of citizens, he said, and inequality in tax codes can violate that trust.

Governments acting like Robin Hood, however, have tended to provoke unforeseen problems, most recently in Britain, where an effort to tax the rich ended up — quite literally — costing the government deeply.

It always seems to be a surprise when people respond to incentives in creative ways … and this applies especially to creative ways to avoid paying higher taxes. People will adjust their behaviour to minimize their tax burden — both legally and not-as-legally. This is after all one of the reasons that there are so many tax provisions: the government wants to encourage certain kinds of behaviour (and so gives a tax credit) and discourage other kinds of behaviour (and so levies a specific tax on it). Flexibility occurs on both the tax-levying and tax-paying sides of the fence.

One of the complaints of middle-class taxpayers is that there are few mechanisms they can use to legally reduce their tax burden, while the wealthy have lots of ways to do this. This isn’t going to change if the government increases the top rate of tax — in fact it will encourage more creative use of the tax-lowering provisions of the law (and lawyers and accountants will benefit by helping their wealthy clients ot take advantage of those provisions).

March 28, 2012

“[T]he Government of Canada is [like] a big national insurance company with a side business as a tax collector for the provinces”

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas @ 10:17

Kevin Milligan in the Globe and Mail:

The first question to ask of any budget announcement is whether the dollars are recurring or one-time only. If we change a tax that brings in $1-billion a year, the budget changes not just this year but in future years as well. […] Politicians and commentators often choose the time frame that suits their current argument. Confusion results. A good economist keeps her eye open to these tricks and tries to ensure we compare numbers on similar time-frames.

Next up is properly adjusting future dollars to account for inflation and our ability to pay. Dollars spent in the future are different than dollars spent now. Imagine that inflation averages 2 per cent a year, and inflation-adjusted economic growth is 1.5 per cent a year on top of that. In just 20 years, prices will increase by 50 per cent and the size of our economy — and our ability to pay for programs priced in nominal dollars — will double.

[. . .]

As a final note, it is always useful when crunching the numbers to keep in mind what the Government of Canada actually does with our tax dollars. Transfers to individuals for insurance programs (such as Employment Insurance and Old Age Security) are 25 per cent of spending. Transfers to provinces and territories (health and other transfers) are another 20 per cent. Interest takes a further 11 per cent. The best way to think of the Government of Canada is a big national insurance company with a side business as a tax collector for the provinces. (This is only slightly different from the US Government, which has been called by Ezra Klein an insurance company with a standing army.) Everything else the Government of Canada does — from fisheries management to culture to the military — takes the remaining 44 per cent. Making any change to the trajectory of total spending when insurance and inter-government transfers are both projected to grow rapidly requires very large changes to that residual 44 per cent.

The “Greatest Generation”, then the “Luckiest Generation”, and now the bill comes due

Filed under: Economics, Government, Politics — Tags: , , , , , — Nicholas @ 10:01

John Kay on the luck of the Baby Boomers:

I belong to a lucky generation: too young to have experienced the Depression, or the second world war, or postwar austerity. The first political figure I recognised was Harold Macmillan, who told voters they had never had it so good.

His statement was true, if foolish, and my contemporaries and I benefited. The government paid us to go to university. We took for granted we would choose between attractive job offers. I was quickly appointed to a post from which it was practically impossible to be fired and which offered a pension scheme with generous, index-linked benefits. I bought a flat with a mortgage whose value was wiped out by inflation. By the time I was paying a higher rate of income tax, the level had been cut from 83 per cent to 40 per cent. My life expectancy is several years longer than my father’s, and I have already considerably exceeded the age at which his father died.

If young people today want to attend university, they will have to pay for tuition and borrow to meet living expenses. When they graduate, they face a much more competitive job market. Few careers will offer the job security once characteristic of middle-class employment. Defined benefit schemes have almost disappeared from the private sector, and public sector pensions are to be substantially less generous. Tax rates must rise, partly to pay for the care and medical treatment I will demand as senility advances. The only financial consolation for the next generation is the windfall when we leave them our houses.

The first half of the baby boom generation certainly were the luckiest cohort in human history. The second half of that generation didn’t do quite as well, the Gen X kids and the Millennials are going to be stuck with most of the bill for all the government-provided goodies that the early boomers have arranged for themselves. Pensions and healthcare, in particular, will have to be reined in for younger workers … just as the bulk of the early boomers have squeezed all the juice out of the system.

Aside from retroactively cutting back the benefits to baby boomers, the only other way to mitigate the financial burden is growth, but most governments in the west are pursuing goals that will not help and in many cases will retard economic growth.

March 26, 2012

Debating “granny tax” and generational warfare

Filed under: Britain, Economics, Government, Health, Media — Tags: , , , — Nicholas @ 07:38

In the Guardian, Patrick Collinson looks at the media’s response to the British government’s recent “granny tax” moves:

In case you missed every newspaper front page (the Telegraph went for “Granny tax hits 5m pensioners”, the Daily Mail said “Osborne picks the pockets of pensioners”, but Metro won with “Gran theft auto”), at issue is the decision to freeze and then scrap the higher personal allowances for people over 65.

But let’s first ask why people in retirement are awarded better income tax breaks than those who are working? There was a fascinating analysis in the Financial Times last weekend of the economically “jinxed generation” — and they’re not pensioners. It found that today’s adults in their 20s will be the first generation who won’t be better off than their parents. What’s more, the disposable income of people in their 60s is now higher than people in their 20s, for the first time ever. We’ve created a society where the non-working retired earn more than working people — and that’s before adding up the largely unearned wealth tied up in the houses of those in their 60s.

It wasn’t like this when the welfare state started. Before the second world war, retirement was for most people short and miserable. It was entirely right that as a rich society we found a way to improve the lot of the elderly with better state pensions and free healthcare. Along the way, we added better personal allowances, fuel payments, free bus passes, free TV licences, free prescriptions and so on.

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