Quotulatiousness

November 3, 2011

A “fat tax” would not improve anyone’s health or the healthcare sector

Filed under: Government, Health, Liberty, Media — Tags: , , , — Nicholas @ 09:10

Politicians and “food celebrities” in many western countries are calling for a tax on obesity, either on the foods that “make people fat” or on obese people themselves. Other than being incredibly regressive (poor people in the west tend to be fatter than well-off people), such a tax would do nothing to address the problem it is supposed to solve:

The regular calls for a fat tax — whether on the ‘wrong’ foods or on fat people themselves — are symptomatic of two regressive trends in society. The first is the view that experts know best, that these latter-day sages can come to an impartial view based on The Science, then guide government about the appropriate policy action. The new, evidence-based policy usually involves some kind of manipulation of our individual behaviour from gentle ‘nudges’ and increasing taxes through to criminalisation, as in the case of the smoking ban.

But this is not evidence-based policy, but policy-based evidence, with preconceived ideas being pushed through in the name of science at a time when those at the top of society have lost the ability to convince the electorate on the basis of a moral or political argument. This style of policymaking rarely solves social problems, but it does distort both politics and science.

The second worrying trend is the sheer intolerance towards obese people. Being very overweight has always attracted a certain amount of moral opprobrium. But Hatton’s outlook reflects a sea-change. Once, the NHS reflected a progressive outlook that disease was a misfortune that could strike any of us at any time and that the best thing to do was to share that burden across society. Now it’s every man and woman for themselves. In the worldview of Hatton and Coren, some morally weak individuals are costing them money and must be punished.

Ironically, this flows from a left-wing view of disease as having social causes. In the late Seventies, left-wingers correctly saw that some ill-health was the result of poverty, poor housing, polluted air, and so on rather than infection or bad luck. Unfortunately, this has morphed into the idea that disease is caused by individual behaviour — and so health professionals have taken to camping out in our private lives, demanding we stop smoking, drinking and eating the wrong things. Every naughty little pleasure must now be sacrificed to the god of longevity. If we don’t play ball, this intolerance suggests we should lose our right to treatment.

The disease of intolerance is likely to have a far more detrimental effect on society than obesity ever could.

November 1, 2011

Alberta’s policy to help small breweries has unintended consquences

Filed under: Cancon, Economics, Government — Tags: , , — Nicholas @ 08:20

When governments try to rig markets to achieve certain goals, they often end up getting results they didn’t foresee:

The Alberta Gaming and Liquor Commission presumably had good intentions in mind when it brewed up a policy to lend a helping hand to small breweries. Namely, beer companies qualify for substantially reduced beer tax rates on the first 200,000 hectolitres sold in Alberta. The explicit aim was to help small players compete against industry leviathans such as Molson and Labatt. And, implicitly, the tax break would entice craft breweries to set up shop in the province.

However, eight years after the reduced beer tax rates—estimated by one analyst to total about $200 million in savings—were first implemented, little in the Alberta beer business has worked out the way the AGLC envisioned. Only five small breweries have opened for business in Alberta since the policy was implemented. And in that time Alberta has, in fact, become a market characterized by discount beer. And at least one of the breweries taking advantage of the AGLC policy doesn’t even brew in the province, let alone Canada.

[. . .]

Alberta’s small brewer system would appear to be yet another case of the law of unintended consequences—especially when a government agency tinkers with the free market economy. From a dearth of craft brewers to a helping hand for American jobs, the AGLC’s beer tax policy is enough to drive a teetotalling Albertan to drink.

October 25, 2011

QotD: Tax policy

Filed under: Economics, Government, Quotations — Tags: , — Nicholas @ 10:00

One of the reasons I despise tax policy is that it so rarely turns on the utilitarian aspects of taxes and instead focuses on political and social issues (a tax “rewards” one group or “punishes” another). Liberals fret about how “progressive” a tax regime is because their main concern is that the wealthy pay more than the poor; conservatives fret about “punishing success” by taxing the creators and makers higher than the cheats and deadbeats. The problem is that the word “fair” is interpreted differently depending on where you stand in the ideological spectrum: to me, “fair” means that I pay the same tax rate for my place in this Republic as any other citizen; to a liberal, I suspect that “fair” involves overtones of social justice and victim-hood and so on. But regardless of where you come down on taxation, I think it is important that every person pay at least some amount of taxes, just to provide a reminder that government isn’t free — and that the more government you have, the more it costs.

“Monty”, “DOOM: I’m tore down, I’m almost level with the ground”, Ace of Spades HQ, 2011-10-25

October 16, 2011

“We have reached a point where the average earnings of a two income family can barely support the spending of government”

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas @ 11:38

Canadians have an addiction problem. They’re addicted to government:

Consider the following:

  • The Government of Saskatchewan alone spent over $11 billion last year (April 2010 to March 2011) to provide services for its citizens. That works out to nearly $11,000 for every man, woman, and child in the province, or $44,000 for a family of four.
  • The average wage for a person in Saskatchewan is about $44,000/year.
  • If the provincial government relied solely on the income tax of its citizens, then a family of four would have no choice but to have both parents work . . . one to provide for the family and one to provide for the government.

Now consider what other levels of government spend.

  • At the municipal level, the City of Regina has an operating budget of about $2500/person. Federally, the Government of Canada spends about $8,000/person.
  • All together our three levels of Government spend over $21,000/person . . . or $84,000 for a family of four.

We have reached a point where the average earnings of a two income family can barely support the spending of government . . . let alone pay for food, clothing, and shelter for themselves and their children.

The reality is that “free” public services come with a cost . . . and these costs increase as we demand more “free” stuff.

One of the truths about addictions is that they require larger and larger “hits” . . . that provide ever smaller and smaller “highs”. This results in people either becoming so dependent on the substance that they cannot function without it . . . or they pursue the addiction to its ultimate conclusion, an overdose.

H/T to Katewerk for the link.

The argument for value-added taxes

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas @ 10:37

In an article about the Canadian copy-cat protests, Mike Moffatt addresses some of the demands to increase taxes on the wealthy and explains why value-added taxes (like the much-hated Harmonized Sales Tax) are more efficient:

The Occupy Canada protests which began Saturday took place in over a dozen cities with mostly modest turnouts. They also lacked a cohesive goal or message, as their critics in the media are fond of pointing out. The protests did, however, address a number of important societal issues, such as the growing gap between the rich and the poor. As has been acknowledged by both Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty, rising income inequality in Canada is a real and legitimate concern.

Over the last 30 years, the income gap between the top 1 per cent (or more accurately, the top 0.1 per cent) and the rest of us has increased substantially. Furthermore, this inequality is growing faster in Canada than it is in most other countries, including the United States. The Conference Board of Canada has reported that Canada has fallen to 12th out of 17 countries in its peer group when it comes to income inequal-ity. Between 1980 and 2005, before tax earnings increased by 16 per cent for the top 20 per cent, but fell by over 20 per cent for the bottom 20 per cent. The Occupy Canada protests are the product of a rising tide only lifting a few boats.

[. . .]

So how do we reduce inequality? The obvious place to start would be to borrow solutions from countries where after-tax income inequality is relatively low. Three countries that consistently score well on income inequality measures are Denmark, Finland and Sweden. These three Nordic countries share very similar tax structures, featuring moderate-to-low marginal corporate tax rates, moderate-to-high income tax rates and very high value added sales tax rates (VATs, similar to Ontario’s HST). The average VAT in these three countries is 25 per cent, a rate nearly twice that of the average Canadian federal GST plus provincial sales tax or HST. A onepercentage-point increase in the HST alone would raise $5 billion to $6 billion per year for the federal government, so increases by a few percentage points could adequately fund programs designed to reduce inequality. No country on Earth has been able to find a way to fund the kind of social programs and redistribution needed for “reasonable” levels of inequality without VAT rates significantly higher than Ontario’s HST.

Why are high sales taxes needed to fund social programs rather than higher corporate taxes or higher income taxes? Put simply, VATs are the hardest taxes to avoid paying. Higher income taxes reduce labour effort by the taxed. Higher corporate tax rates reduce investment. Canada’s corporate income tax rate was, not so long ago, twice what it is today. Adjusted for the inflation and the size of the economy, however, the higher corporate tax rates brought in similar levels of revenue then as they do now. There are some ways to avoid the HST, of course, but these are far more limited than they are for other taxes. The HST, as with all VATs, is a cash cow that provides governments with the necessary resources to tackle important societal issues.

October 11, 2011

“Fat taxes” are doomed to failure

Filed under: Economics, Food, Government, Health, Liberty — Tags: , , — Nicholas @ 09:06

Patrick Basham and John Luik handily dismiss the potential of government-imposed “fat taxes” on certain foods as tools to reduce obesity or to change peoples’ food choices:

The obesity crusaders’ argument is that a fat tax will reduce junk-food consumption, and thereby improve diets and overall public health. There are many reasons, however, to suspect that a fat tax would be at best unsuccessful, and at worst economically and socially harmful.

For example, scientifically rigorous evidence suggests that higher prices do not reduce soft-drink consumption. There are no studies demonstrating a difference either in aggregate soft-drink consumption or in child and adolescent body mass index (BMI) between jurisdictions with soft-drink taxes and those without such taxes.

[. . .]

These results are confirmed in a study by Christiane Schroeter in the Journal of Health Economics which examined the link between food prices and obesity. The study concluded that while increasing the price of high-calorie food might lead to decreased demand for these foods, ‘it is not clear that such an outcome will actually reduce weight’.

Why do fat taxes fail? The economic answer is that demand for food tends to be largely insensitive to price. Considerable research on food prices has demonstrated this inelasticity. A 10 per cent increase in price, for instance, reduces consumption by less than one per cent.

[. . .]

Furthermore, fat taxes have perverse, unintended consequences. According to the US government’s Economic Research Service, another unintended consequence of a fat tax on consumer behaviour is that taxes on snack foods could lead some consumers to replace the taxed food with equally unhealthy foods. Adam Drewnowksi similarly found that poorer consumers react to higher food prices not by changing their diets, but by consuming even fewer ‘healthy’ foods, such as fruits and vegetables, and eating more processed foods.

A Danish study confirmed this problematic outcome, finding that sin taxes on junk foods would fail to reduce consumption by the population (that is, the poor) who consume these foods most frequently. Additionally, it found that taxes levied on sugar content — the basis for the soft-drinks tax — would increase saturated fat consumption.

October 2, 2011

Tyler Cowen on why “no new taxes” won’t work this time

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 11:03

Almost everyone (except Warren Buffett) agrees that higher taxes are a bad thing, and the GOP candidates are all singing from the same hymn book about not imposing higher tax rates. Under normal circumstances, this might work. Tyler Cowen explains why these aren’t normal times and how “no new taxes” isn’t a serious way to deal with America’s financial problems:

Consider the example more closely. Cutting $10 in spending for every $1 in tax increases would result in $9 in net tax reduction. That’s because lower spending today means lower taxes tomorrow, and limiting the future path of government spending does limit future taxes, as Milton Friedman, the late Nobel laureate and conservative icon, so clearly explained. Promising never to raise taxes, without reaching a deal on spending, really means a high and rising commitment to future taxes.

Furthermore, this refusal to contemplate a tax increase — which I’d characterize as an extreme Republican stance — has brought what seems to be an extreme Democratic response: President Obama’s latest budget plan is moving away from entitlement reform and embracing multiple tax increases on the wealthy. We may be left with no good fiscal options.

The problems with a no-new-taxes stance run deeper. Because it’s unlikely that spending cuts alone can balance the budget, politicians who espouse extreme antitax views often end up denying the scope of our long-run fiscal problems.

[. . .]

The more cynical interpretation of the Republican candidates’ stance on taxes is that they are signaling loyalty to a cause, or simply marketing themselves to voters, rather than acting in good faith. It could be that candidates are more worried about having to publicly endorse tax increases than they are about the tax increases themselves. If that’s true, it is all the more reason to watch out for our pocketbooks; it means that the candidates are protecting themselves rather than the taxpayers.

The final lesson is this: Many professed fiscal conservatives still find it necessary to pander to voter illusions that only a modicum of fiscal adjustment is needed. That’s an indication of how far we are from true fiscal conservatism, but also a sign of how much it is needed.

September 29, 2011

ReasonTV: Prohibition Vogue

Filed under: Government, History, Law, Liberty — Tags: , , , , , — Nicholas @ 13:25

Greek tax evasion: not a new problem at all

Filed under: Bureaucracy, Economics, Europe, Government, Greece — Tags: , , — Nicholas @ 09:28

In a New York Times article from last year, Suzanne Daley reported the rather amazing statistic from Athens:

In the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools.

So tax investigators studied satellite photos of the area — a sprawling collection of expensive villas tucked behind tall gates — and came back with a decidedly different number: 16,974 pools.

That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, points to the staggering breadth of tax dodging that has long been a way of life here.

H/T to Araminta Wordsworth for the link.

September 21, 2011

“Our existing income tax structure is nothing short of crazy”

Filed under: Cancon, Economics, Government — Tags: , — Nicholas @ 12:50

That’s Kevin Milligan in the Globe and Mail talking about the Canadian tax structure:

Here are five nuggets of information Canadians should keep in mind as the high income taxation discussion unfolds. [. . .]

Second, our existing income tax structure is nothing short of crazy. The graph shows the marginal tax rate (the tax owed on the last dollar earned) across different income levels for a two-child family in Manitoba in 2010, the clawback of both federal and provincial refundable tax credits. (Similar graphs for more provinces are here.) What redistributive goal is such a bizarre tax structure designed to achieve? A strong argument can be made that we should improve and reform our existing income tax structure before slapping more confusion on top of it.

Third, the threshold at which one reaches the highest tax bracket is exceedingly low in Canada compared to other countries. In the United Kingdom, one reaches the highest tax bracket of 50 per cent at the Canadian dollar equivalent of $234,000. In the United States, currently the highest federal rate of 35 per cent is reached at incomes of $379,150 (U.S.). In Canada, the highest federal rate is 29 per cent, reached only at $128,800. Just to reach the level of income tax progressivity observed in the United States under President George W. Bush, Canada would need to increase this high income threshold dramatically.

September 1, 2011

Did Google buy Motorola Mobility just for the tax advantages?

Filed under: Economics, Europe, Technology, USA — Tags: , , — Nicholas @ 12:12

If so, it was probably a brilliant move:

I think we all know that Google’s pretty good at, um, obeying tax laws to the letter. For example, they’ve paid an entire £8m in UK corporation tax on revenues of some £6bn from 2004 to 2010.

[. . .]

However, this deal to purchase Motorola Mobility might be a coup to beat that hands down. The headline price to purchase the handset-maker and their bundle of patents is $12.5bn but that’s not what the net cost to Google might turn out to be. How about $3.8bn for that? For, along with the company and the patents, Google has also bought a series of tax losses.

For the record, it’s cheap politics to accuse a person or a corporation for paying “only” so much tax. If the politicians have set up the system to allow certain deductions or credits, then you’re insane not to take advantage of them. Like a number of headlines over the last day or so, pointing out that this or that company paid less in taxes than they paid their CEO. If the company paid more than it should, it’s depriving its shareholders of what they are rightfully due, and will likely be facing them in court.

August 30, 2011

QotD: Casinos are a neon-decorated IRS

Filed under: Government, Humour, Liberty, Quotations — Tags: , , , — Nicholas @ 12:07

. . . no phenomenon of nature could possibly be as strange as the alternative reality one encounters entering Wendover, Nevada. In that physical regime, hotels and restaurants are connected to—and often concentric with—caverns with mirrored ceilings, walls, and columns, making it difficult to find your way across the room. Serried ranks of electronic slot machines are clung to by half-starved-looking wights — the cigarettes in their hands nothing but long cylinders of gray ash — worshipping runes that appear when they insert a coin and watch the lights and listen to musical notes that would make a Pac-Man fan start screaming, tearing his hair, and running for the roof with a rifle.

To be sure, there are other kinds of gambling going on. I saw a poker room, roulette wheels, and a genuine James Bond baccarat table. But they were truly lost in a great labyrinth of electronic slots. I was surprised not to see slot machines on a free wall of the men’s room.

I’d seen all of this before, mind you. I was in Las Vegas last year, and it was my second time. I first saw it only a couple of years after Bugsy Siegal did. And I gotta confess to youse guys, I just don’ geddit.

What I mean is, there are a number of points of view that various human beings have, which I am forced to accept purely intellectually. I know there are men who find other men sexually attractive, but I don’t really understand it. I know there are grownup people who seem to go into shock when they discover that their aged parents still enjoy sex — I think my mother would have lived longer if she’d had a boyfriend. And I know — but do not understand that folks like to hand their hard-earned money to casino owners who already have plenty of it.

Casinos are like a neon-decorated IRS.

L. Neil Smith, “The Past That Never Was — The Future That Will Never Be”, Libertarian Enterprise, 2011-08-28

The Canadian economic recovery

Filed under: Cancon, Economics — Tags: , , — Nicholas @ 07:06

David Lee compares the Canadian experience in the most recent recession with that of other nations:

As Republicans and Democrats pushed America further and further to the left and Europe approached ever closer to its socialist ideals, Canada’s political discussion turned from which party could offer the greatest subsidies to the greatest number, to which party’s program of tax cuts would be of more benefit to the economy. For a country where an openly avowed socialist party regularly polls in the top three in provincial and federal elections, this is no small feat. For perhaps the first time in its history, Canada finds itself at the most pro-market limit of the political spectrum among the world’s industrialized nations.

It is not only in this regard that Canada has become an island unto its own. Equally unique to the country is its economic performance subsequent to the financial crisis of 2007 and throughout the ensuing alternations between recession and stagnation that has characterized the experience of the greater part of the developed world since. As the world teeters from crisis to crisis, Canada has proven remarkably resilient in spite of its heavy economic dependence on international trade. Whether there is any significance to the coincidence of these two anomalies will be examined in what is to follow.

By no means is this piece to be taken as an unqualified endorsement of the policies undertaken by the incumbent administration. Despite the overall tenor of the article, this piece could have just as easily been scathing indictment as commendation. The appraisal to be made varies directly with the choice of benchmark. Measured against examples that more closely approximate the free-market ideal such as 1980s-era Hong Kong and Jacksonian America, Canada falls hopelessly short.

August 25, 2011

Look at what they actually do, not what they say

Filed under: Economics, Europe, France, Government — Tags: , , , — Nicholas @ 09:36

Tim Worstall peers behind the curtain of those noble, generous French fat-cats who wrote the letter to the French government, insisting that they be taxed more. It’s not a pretty picture:

All very jolly and public-spirited you might think, but applying a little bit of economic theory reveals that they’re somewhere along the “speaking with forked tongues” to “lying toads” continuum.

That bit of economics is the concept of “revealed preferences”: translated out of the jargon it just means don’t look at what people say, look at what they do. For example, Liliane Bettencourt, the L’Oreal heiress, is one signatory calling for higher taxes on herself: it’s also been widely reported that she has received tax refunds under French “fiscal shield” provisions intended to limit taxes on the wealthy to 50 per cent. Madame, if you really want to pay higher taxes, just don’t cash those cheques.

We see the same sort of call everywhere of course. All sorts of people call for higher taxes: it’s just that very few actually pay higher amounts of money. We can see this in both the UK and US.

The US has an account, “Gifts to the United States”, specifically for charitable-minded citizens. Send them a cheque, they’ll cash it and spend the money on government. Last time I checked, the figures they received were $2,671,628.40. Roughly speaking, 1 cent per head of population. OK, so, yes, taxes were too low in the US that year. By exactly that amount.

The UK numbers aren’t even that good. In the same year only five Brits sent in cheques to the Treasury and four of those people were deceased. No, the fifth was not Polly Toynbee, despite the impression one might get from her columns (well, I don’t know it wasn’t her but I’m sure she would have urged the rest of us to do the same if it were).

An FOI request revealed that from 2002 to 2009 actual living people contributed £7,349.90 to the Treasury, over and above their legally due taxation. No, not each or per year… but in total.

There’s literally nothing stopping people from paying more taxes than they actually owe: every jurisdiction appears to allow people to give more money voluntarily. The US government even allows it to be done electronically. So, if you feel you’re not paying “your rightful share”, go right ahead and give it to the government. If you don’t, you’re demonstrating that you really don’t feel under-taxed after all.

July 19, 2011

Tax-wary millionaires flee to . . . Canada?

Filed under: Cancon, Economics, Liberty — Tags: , , , — Nicholas @ 12:56

Jason Kirby is either smoking some really premium weed, or the world is changing even faster than we thought it was, in an article titled “The Great White tax haven”:

For decades, Canadians have been told this country is a high-tax, unwelcoming place for business people and the wealthy. It’s a reputation we came by honestly. But a shift has taken place both here and abroad, say experts. While Canada is reforming and lowering its taxes, politicians in other developed countries — those faced with crushing debt loads and economic stagnation — are turning a hungry eye to the bank accounts of their richest citizens. At the same time, instability in the Middle East and Asia means wealthy individuals are looking for a safe place to move their families. Where they might have flocked to the U.S. in the past, many now see Canada as the better option. Tax specialists even use terms like “the Great White tax haven” and “Switzerland of the North” when talking about Canada.

The world’s rich are restless, says Lesperance, whose clients are worth between $30 million and $1 billion. Most work in financial services, but in every sector and every country wealthy individuals are on the move. Lesperance calls these ultra-rich the Golden Geese, arguing that wherever they go, they generate economic benefits—they start companies, buy real estate, keep restaurants busy and spend money on big-ticket items. Along with Ian Angell, a professor at the London School of Economics, he’s writing a book entitled Flight of the Golden Geese, which argues that as countries squeeze wealthy taxpayers, they will pull up stakes and flee. “Canada has an unprecedented, once-in-several-generations opportunity to put up its hand and offer itself as an alternative,” he says.

The migration is well under way. Last year, nearly 12,000 people moved here under the federal government’s Immigrant Investor Program, up from 4,950 a decade ago, according to Citizenship and Immigration Canada. (The figure includes spouses and dependents.) To qualify, immigrants must have a minimum net worth of at least $1.6 million, and are required to “invest” $800,000 with the government, which is returned after five years. (Ottawa says the money is used to fund economic development programs, though critics call it a cash grab.)

« Newer PostsOlder Posts »

Powered by WordPress