Quotulatiousness

January 3, 2013

Comic book capers of expatriate Americans

Filed under: Media, USA — Tags: , — Nicholas @ 10:17

Wendy McElroy on Superman’s renunciation of American citizenship:

How do you know when the content of a nation’s character is bankrupt? One way is to examine the dynamic symbols that embody its character and which shift in reaction to circumstance. These symbols are often found within literature and other cultural expressions.

In last year’s Action Comic #900, Superman declared an intention to renounce his US citizenship. The Man of Steel explained, “I’m tired of having my actions construed as instruments of US policy. ‘Truth, justice, and the American Way’ – it’s not enough any more.” Many readers were outraged because, despite being an illegal alien in the most literal sense, Superman epitomized the American Way.

[. . .]

As it happened, Action Comic #900 was issued only days before the killing of Osama bin Laden. Afterward, there was a surge of general patriotism and of sharp criticism directed at Superman. The comic book publishers retreated faster than a speeding bullet. The mainstream media and elites were once again able to settle comfortably into the notion that only villains, cynics, and the irredeemably selfish would abandon US citizenship for a global identity.

And, yet, people on the street then and now sensed that something else was going on. When Forbes ran an expat article, an obviously knowledgeable commentator wrote that leaving America was not […] fundamentally about taxes for most people. “[T]he larger issue is the complete betrayal by one’s country in an attempt to gouge for money to make up for the horrific [US] debt…It is high time…Americans learn that the country they grew up in, no longer exists. The ‘American exceptionalism’ that we were taught to believe in, needs to be seen for what it has become, an excuse for the government to do whatever it wants with no concern for the consequences. ALL Americans lose in this process.” The United States has become what it used to denounce – a fascist police state. To love America (the ideal), you must now leave America (the reality) — either physically or spiritually.

It is wise to do so quietly because the very hint of ‘going expat’ can drive some people into fury. In his article “Citizenship is a problem to be solved,” Phil Hodgen addressed the ‘furious’. He admonished them, “Put down your pitchforks. The point of…an article like this is not to answer with ‘You’re right!’ or ‘You’re wrong!’ The point of the article…is to explore the ideas. There are some important concepts here that transcend taxation…

January 2, 2013

The corporate welfare pork in the fiscal cliff negotiations

Filed under: Business, Government, USA — Tags: , , , , — Nicholas @ 09:57

As widely expected, Congress did finally put something to a vote to “save” the country from going over the fiscal cliff. And as everyone should have expected, even a bill to “save” the country was still amply provided with pork for certain corporations:

Throughout the months of November and December, a steady stream of corporate CEOs flowed in and out of the White House to discuss the impending fiscal cliff. Many of them, such as Lloyd Blankfein of Goldman Sachs, would then publicly come out and talk about how modest increases of tax rates on the wealthy were reasonable in order to deal with the deficit problem. What wasn’t mentioned is what these leaders wanted, which is what’s known as “tax extenders”, or roughly $205B of tax breaks for corporations. With such a banal name, and boring and difficult to read line items in the bill, few political operatives have bothered to pay attention to this part of the bill. But it is critical to understanding what is going on.

The negotiations over the fiscal cliff involve more than the Democrats, Republicans, the middle class and the wealthy. The corporate sector is here in force as well. One of the core shifts in the Reagan era was the convergence of wealthy individuals who wanted to pay less in taxes — many from the growing South — with corporations that wanted tax breaks. Previously, these groups fought over the pie, because the idea of endless deficits did not make sense. Once Reagan figured out how to finance yawning deficits, the GOP was able to wield the corporate sector and the new sun state wealthy into one force, epitomized today by Grover Norquist. What Obama is (sort of) trying to do is split this coalition, and the extenders are the carrot he’s dangling in front of the corporate sector to do it.

Most tax credits drop straight to the bottom line — it’s why companies like Enron considered its tax compliance section a “profit center”. A few hundred billion dollars of tax expenditures is a major carrot to offer. Surely, a modest hike in income taxes for people who make more than $400k in income and stupid enough not to take that money in capital gain would be worth trading off for the few hundred billion dollars in corporate pork. This is what the fiscal cliff is about — who gets the money. And by leaving out the corporate sector, nearly anyone who talks about this debate is leaving out a key negotiating partner.

December 28, 2012

The new Zero-Sum era of American politics

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 10:18

P.J. O’Rourke offers some mild congratulations to President Obama for a few accomplishments during his first term, then explains why the way he won his second term is a bad thing both for the United States and for the rest of the world:

You sent a message to America in your re-election campaign. Therefore you sent a message to the world. The message is that we live in a zero-sum universe.

There is a fixed amount of good things. Life is a pizza. If some people have too many slices, other people have to eat the pizza box. You had no answer to Mitt Romney’s argument for more pizza parlors baking more pizzas. The solution to our problems, you said, is redistribution of the pizzas we’ve got — with low-cost, government-subsidized pepperoni somehow materializing as the result of higher taxes on pizza-parlor owners.

In this zero-sum universe there is only so much happiness. The idea is that if we wipe the smile off the faces of people with prosperous businesses and successful careers, that will make the rest of us grin.

There is only so much money. The people who have money are hogging it. The way for the rest of us to get money is to turn the hogs into bacon.

Mr. President, your entire campaign platform was redistribution. Take from the rich and give to the . . . Well, actually, you didn’t mention the poor. What you talked and talked about was the middle class, something most well-off Americans consider themselves to be members of. So your plan is to take from the more rich and the more or less rich and give to the less rich, more or less. It is as if Robin Hood stole treasure from the Sheriff of Nottingham and bestowed it on the Deputy Sheriff.

But never mind. The evil of zero-sum thinking and redistributive politics has nothing to do with which things are taken or to whom those things are given or what the sum of zero things is supposed to be. The evil lies in denying people the right, the means, and, indeed, the duty to make more things.

December 24, 2012

What is the French for “voting with your feet”?

Filed under: Europe, Government, Media, USA — Tags: , , , — Nicholas @ 10:03

Put your tax rates up too high and people start to look at alternative living and working arrangements:

Actor Gérard Depardieu’s decision to flee France for Belgium to avoid a 75 percent marginal tax rate on incomes above $1.3 million sends a message we here in America should heed: Those who are singled out for tax increases are not stationary targets. The means of avoiding and evading the taxman are legion.

U.S. government agencies routinely issue estimates of how changes in the tax code will affect the flow of revenues to the treasury. President Obama says the tax changes he has been seeking will bring in $1.6 trillion over a decade. But such estimates assume taxpayers are something other than human beings who engage in purposive action. People like to keep the money they make — why shouldn’t they? — and they typically avail themselves of every legal (and not-so-legal) strategy to do so. Change the tax environment by raising rates or adversely modifying the rules, and taxpayers, especially those in the upper echelons of earners, can be counted on to modify their conduct accordingly; there’s no reason to think their wish to hold on to their money has diminished just because the tax code has changed.

Economists as far back at J. B. Say and Gustave de Molinari in the 19th century understood this. As Molinari wrote in his 1899 book, The Society of To-morrow, “The laws of fiscal equilibrium set a strict limit to the degree within which it is possible to impose new taxes, or to increase the rates of those already in force. The relative productivity of taxes soon shows when this point has been overstepped, for then returns not only cease to rise, but immediately begin to fall.”

December 21, 2012

Externalities explained

Filed under: Economics — Tags: , — Nicholas @ 00:01

H/T to Popehat for the link.

December 19, 2012

Clever wording can’t take away an enumerated constitutional right

Filed under: Law, Liberty, Politics, USA — Tags: , , , , — Nicholas @ 13:54

Megan McArdle on the pious hopes of those who hope to bring in draconian gun control regulation by abstruse and intricate verbal gymnastics:

Others are suggesting a de-facto ban, accomplished either through a huge tax, or a ban on ammunition. Oh, I’ve also seen calls to limit the amount of ammunition people can buy, but I don’t think those people have thought this through. For starters, the number of bullets used by a typical rampage shooter is about what a target shooter or hunter might go through in an afternoon or two of range practice. And most gun homicides are not rampage shootings; they have one or two victims, and a correspondingly small number of cartridges expended. Moreover, even a very strict per-purchase limit would permit people to accumulate ammunition over time.

No, the people who want to tax guns at 17,000%, or ban ammunition, or make cartridges cost $2,000 apiece, are the only ones hinting at something that might make a real dent in America’s unusually high rate of gun homicide. Except for one thing: you can’t do an end-run around an enumerated right with some sort of semantic game. Chief Justice John Roberts is not Rumplestiltskin; he is not bound by the universe to disappear if you can only find the correct secret word.

You cannot accomplish back-door censorship by taxing at 100% all profits of any news corporation named after a “carnivorous mammal of the dog family with a pointed muzzle and bushy tail, proverbial for its cunning.” You cannot curtail the right to protest by requiring instant background checks and a 90-day waiting period on anyone who wants to assemble with 500 of their friends in a public area. Nor can you restrict the supply of ink used to print Korans. If you pass a law like that, the Supreme Court will say “nice try, guys” and void all the painstakingly constructed verbal origami that was supposed to make civil liberties infringement look like an innocent exercise of the taxing power.

December 18, 2012

Don’t expand the Canada Pension Plan: reform it

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas @ 10:52

Andrew Coyne briefly praises the CPP before advancing a plan to (eventually) supplant it entirely:

By most measures, Canada’s retirement income support system is an outstanding success. The poverty rate for Canadian seniors, with just 4.4% living below half the median income, is among the lowest in the world. The Canada Pension Plan, once careening towards insolvency, is now on a sounder footing. Millions of Canadians contribute to their Registered Retirement Savings Plans every year, with a view to replacing more of their income than the 25% covered by the CPP; Tax-Free Savings Accounts are a fast-growing alternative. For most people, then, the pension system works well. There is no evidence of a generalized pension “crisis.”

[. . .]

Suppose an additional levy were tacked onto CPP premiums. Only instead of going into the regular CPP pot, the funds would accumulate in the contributor’s own personal fund — like an RRSP, only compulsory. To avoid wasting money on management fees, funds would be invested strictly passively (ie buying the indexes), with the particular asset mix varying as the investor aged: more stocks when younger, more bonds when older.

Any increase in benefits would thus have to be fully funded; at the same time, since legal title to the funds would rest with the contributor, there would be no way politicians could raid the kitty. Moreover, with such a direct link between contributions and the size of their nest egg, contributors would be less likely to see the rise in premiums as a tax increase, and more as savings, mitigating labour market effects, at least on the supply side.

On its own, this would be vastly preferable to CPP expansion. If we liked the results, we might even think of going further. Over time, one could imagine migrating more and more of the regular CPP over to these mandatory personal accounts, allowing the CPP fund to be slowly wound down. Rather than simply expanding the CPP, the challenge of population aging presents an opportunity to reform it.

December 9, 2012

Sheldon Richman decries “Romanticizing Taxation”

Filed under: Government, History — Tags: , — Nicholas @ 12:25

Of all the topics you might try to romanticize, taxation would certainly be at the bottom of the list:

In the debate over avoiding the “fiscal cliff” — especially over whose taxes should and shouldn’t be raised — I detect an annoying attempt to romanticize taxation. I read this as an act of desperation on the part of those who want higher taxes on the wealthy, for there is nothing romantic about taxation.

The other day MSNBC’s Chris Hayes invoked Franklin Roosevelt in support of higher taxes on the top 2 percent. Pulling out all the stops, Hayes quoted from one of FDR’s October 1936 campaign speeches […]

Roosevelt’s claim that we can judge the social conscience of the government by how it collects taxes is true in a way he could not have imagined. Contrary to FDR and Justice Holmes, taxes are neither a price (in the voluntary-transaction sense) nor club dues. On the contrary, they are exactions by threat of violence. Some social conscience! How ironic that organized society and civilization itself are said to depend on the government’s threatening peaceful people if they fail to surrender their property as demanded by politicians who presumptuously and self-servingly claim to “represent” all the people.

Far from some enlightened institution, taxation began when conquerors realized that formal and continuing appropriation of a subject population’s wealth was preferable to hit-and-run pillaging. For this to work, however, the rulers needed to convince the peasants that the regime would protect them from predators in return for their regular remittances. That’s right: It was a protection racket, from which the racketeers and their cronies profited handsomely. For the taxpayers, there was little choice in the matter. They weren’t buying protection as people buy insurance in the market, and they weren’t paying dues as they would later pay dues to mutual-aid societies. They paid or they were punished. The ideology of benevolent state protection reduced enforcement costs because the ruled outnumbered the rulers and widespread tax resistance would have doomed the regime. Things have changed little in our time.

December 2, 2012

Define or be defined: fiscal edition

Filed under: Government, History, Politics, USA — Tags: , , , — Nicholas @ 10:54

Ron Hart talks about the distant past where congress passed budgets and those budgets were actually in surplus:

Most Americans expect politicians to work out a back-room deal to avoid embarrassing themselves again. The politicians feel these deals are too ugly for us to watch, so they are compelled to spare us the indignity of the “most transparent president” ever. Political deals are like sausage; it is best not to watch the product being made. The difference is, sausage as an end product is actually good.

In the Democratic vernacular, taxes have changed to “revenues.” Long ago they replaced the word “spending” with “investments,” especially when wasting money on Solyndra and the like. They think we are stupid.

When Bill Clinton so famously “balanced the budget” with the Internet boom and all the taxes from those stock sales, the GOP and Newt Gingrich passed a budget (yes, Congress used to do that) of $1.7 trillion in expenditures. Adjusted for inflation, our federal government would be spending $2.3 trillion today and collecting $2.5 trillion in “revenues,” resulting in a $200 billion surplus. But instead of increasing government spending in line with normal inflation, under Bush and Obama we are spending $3.8 trillion today. Democrats, who believe we have a “revenue” problem instead of a “spending” problem, must also think they have a bartender problem, not a drinking problem.

Those Republican neocons who have never seen a country they do not want to bomb because it looked at us wrong, have to give on defense. We spend $1.19 trillion a year on defense — more than the other top 10-countries combined and more than six times what second-place China spends.

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 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 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 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 11, 2012

A major reason for Romney’s defeat

Filed under: Politics, USA — Tags: , , , , , — Nicholas @ 11:55

At Reason, Sheldon Richman explains one of the major reasons Mitt Romney’s campaign for president fell short of victory:

Romney couldn’t call Obama to account because he fundamentally agreed with most of what the president did. He could hardly have substantively criticized Obama’s fiscal record: Romney had little specific to say about cutting the government’s deep-in-deficit budget, and he even proposed to leave education and other federal spending intact. While Romney talked about cutting income-tax rates, he emphasized that he had no intention of cutting government revenues, which represent resources extracted from the private economy. He proposed only revenue-neutral tax “reform.”

While Romney promised to “repeal and replace” Obamacare, the architect of Massachusetts’ Romneycare was hardly in a position to offer a fundamental critique. The insurance mandate is the linchpin of Obamacare, but since Romneycare has the same mandate, what could the Republican candidate say? His weak federalist defense of state mandates versus national mandates sounded more like a rationalization. Moreover, Romney doesn’t understand what is wrong with America’s overpriced health-care system: the pervasive, monopolistic government privilege and regulation in the medical and insurance industries at both the state and federal levels. There is no free market in health care — something Romney does not get. As a result, he made the fatal mistake of implying that a partial repeal of Obamacare is all that is needed.

He also endorsed economic regulation, just to a vaguely lesser extent than what Obama favors. That only muddled the message. Romney showed no sign of understanding the relationship between regulation and privilege, which usually go hand in hand. So it’s not enough to favor deregulation; a true advocate of the free market favors “de-privileging” as well.

The biggest pass Obama got was on foreign policy and civil liberties, where his record has been horrendous. Of course, Romney could make no principled criticism because he basically approves of the record, though he claimed Obama hasn’t been aggressive enough.

As early as August, this lack of actual substantive differences between the candidates had already become quite clear.

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