Quotulatiousness

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.)

July 18, 2011

It won’t hurt just the “rich”

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 11:00

Michael Boskin illustrates just what the current levels of US government spending will mean when translated into personal tax rates:

Many Democrats demand no changes to Social Security and Medicare spending. But these programs are projected to run ever-growing deficits totaling tens of trillions of dollars in coming decades, primarily from rising real benefits per beneficiary. To cover these projected deficits would require continually higher income and payroll taxes for Social Security and Medicare on all taxpayers that would drive the combined marginal tax rate on labor income to more than 70% by 2035 and 80% by 2050. And that’s before accounting for the Laffer effect, likely future interest costs, state deficits and the rising ratio of voters receiving government payments to those paying income taxes.

It would be a huge mistake to imagine that the cumulative, cascading burden of many tax rates on the same income will leave the middle class untouched. Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO’s projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages. At the margin, virtually everyone would be working primarily for the government, reduced to a minority partner in their own labor.

Nobody — rich, middle-income or poor — can afford to have the economy so burdened. Higher tax rates are the major reason why European per-capita income, according to the Organization for Economic Cooperation and Development, is about 30% lower than in the United States — a permanent difference many times the temporary decline in the recent recession and anemic recovery.

While policy makers may shrug off the impact of higher tax rates, it has a significant effect on individual choices when it comes to part-time jobs, overtime, and even raises. Even if in reality working a few hours of overtime won’t make a difference, psychologically, the higher tax burden can act as a deterrent: “why put in the effort if the government gets more out of my effort than I do?”

July 15, 2011

Why a budget deal won’t work

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 08:11

Sheldon Richman provides a few reasons to doubt that any deal worked out between congress and the President will actually solve anything:

Whether President Obama and congressional Republicans can work out a deal to let the government to borrow even more (!) money seems to hang on whether the latter will go for increased in tax revenues.

Following the zigzagging negotiations isn’t easy. First the aim was a short-term deal. Then both sides decided to go for a big package: $4 trillion in deficit reduction over ten years. That broke down when Obama said a quarter or a third of that amount should come from new revenues.

When I hear about ten-year budget deals, I first divide the aggregate number by ten so I see how little is at stake each year. I also want to know if the spending reduction is real or phony. Chris Edwards of the Cato Institute says most cuts are likely to be accounting tricks. For example, Edwards shows how the rulers could easily “reduce” the Afghanistan/Iraq war budget by $1 trillion without really cutting a penny. (Hint: pretend the wars will go on forever.)

I also remind myself that no Congress can bind a future Congress. Would you bet a substantial sum on a congressional promise to reduce the deficit over ten years? I didn’t think so. Even if Obama is reelected, he wouldn’t be in office for the last four years of the period.

Skepticism is justified. In the 1980s another deal was struck that supposedly would deliver $3 in spending cuts for every $1 in new revenue. Know what happened? That’s right.

Oh, and the various polls showing that either a majority or a significant minority of voters are willing to see increased taxes in order to get a budget deal? Remember that nearly 50% of Americans do not pay income tax — it’d literally be no skin off their noses if the other half have their taxes raised.

June 29, 2011

The real reason for the Greek bailout

Filed under: Economics, Europe, Government, Greece — Tags: , , , , , — Nicholas @ 15:03

Eric S. Raymond explains why all the politicians and apparatchiks of the world’s bureaucracies are lining up to pump for a Greek bailout:

Lost in the eye-glazing babble about maturity extensions, haircuts, and which acronymic organization is going to funnel the money into place is the real magnitude of the stakes here. It’s not just the Greeks’ opera-bouffé parody of the modern redistributionist state that is circling the structural-insolvency drain; what really terrifies our political class is the prospect that, very soon, the investors simply won’t buy government bonds anymore — and massive borrowing through bond issues is the only thing keeping the redistributionist state afloat.

As I have documented many times on this blog, the entitlement-spending commitments of the U.S. Federal government, most U.S. state governments, most European governments, and indeed most national governments everywhere exceed the capacity of their economies to generate wealth. And demographic trends are making the imbalance worse over time, not better.

This is why raising taxes won’t help. The amount of private wealth available to be taxed is insufficient, even if taxation could be raised to 100% without suppressing all economic activity. In practice, raising taxes leads to increases in spending which more than consume the increased revenue (by a ratio of 1.17:1 in the U.S. since the 1940s).

[. . .]

That is the assumption that is now under threat. Greece must be bailed out in order to preserve the illusion that the borrowing can continue indefinitely, that the bill will somehow never come due. When the political class speaks of “contagion”, what they’re really worried about isn’t the solvency of German banks holding Greek paper, it’s a general flight of investors from the sovereign-debt markets.

June 25, 2011

Taxes must rise to maintain “the overall size of government programs”

Filed under: Economics, Government, Politics, USA — Tags: , , — Nicholas @ 11:59

Treasury Secretary Timothy Geithner was being as honest as he knows how in talking to the House Small Business Committee this week. Reducing the size of government is literally unthinkable:

[T]he Obama administration believes taxes on small business must increase so the administration does not have to “shrink the overall size of government programs.”

The administration’s plan to raise the tax rate on small businesses is part of its plan to raise taxes on all Americans who make more than $250,000 per year — including businesses that file taxes the same way individuals and families do.

[. . .]

Geithner, continuing, argued that if the administration did not extract a trillion dollars in new revenue from its plan to increase taxes on people earning more than $250,000, including small businesses, the government would in effect “finance” what he called a “tax benefit” for those people.

“We’re not doing it because we want to do it, we’re doing it because if we don’t do it, then, again, I have to go out and borrow a trillion dollars over the next 10 years to finance those tax benefits for the top 2 percent, and I don’t think I can justify doing that,” said Geithner.

Not only that, he argued, but cutting spending by as much as the “modest change in revenue” (i.e. $1 trillion) the administration expects from raising taxes on small business would likely have more of a “negative economic impact” than the tax increases themselves would.

June 22, 2011

QotD: Who’s more smug than Bono? The “Bono Pay Up” protesters

Filed under: Africa, Media, Quotations — Tags: , , , — Nicholas @ 12:00

[T]he Bono Pay Up lobby, far from challenging Bono’s gobsmackingly paternalistic attitude towards Africa, is encouraging him to put his money where his mouth is. Its message is effectively: Stop talking about saving Africa and go out and actually save it! The campaign group claims that it is because of individuals like Bono, who export bits of their business overseas in order to avoid paying high taxes at home, that Africa is a mess. Some of that tax could be used for the foreign aid budget, you see. Not only is this a spectacularly naïve view of the massive structural problems facing underdeveloped nations in the Third World — as if their woes could be magically fixed by Bono and others stumping up a bit more tax — but it also suggests, explicitly, that it is up to rich white men to save downtrodden Africa.

According to Bono Pay Up, if Bono paid his taxes in a more “ethical” fashion, he could help to alleviate “suffering in the developing world”. Unless the protesters succeed in shifting Bono’s personal habits, “the poor will always be with us”, they claim. In short, all it takes for the poor to be lifted up from their empty-stomached, teary-eyed existences is for a few good men — white ones, naturally — to behave more ethically and caringly. It’s the White Tax Man’s Burden. In focusing on Bono’s alleged hypocrisy, the protesters are actually trying to bridge the gap between the Bono persona (saviour of Africa) and the Bono reality (he pays his taxes in a weird way). That is, they want him to become what he claims to be — the Moral Viceroy of Africa — and to show the Dark Continent how to reach the light. A plague on both their houses. If there are any African bands playing at Glastonbury I hope they lay into the Bono Pay Up lobby, and then use its silly placards to wallop Bono.

Brendan O’Neill, “The ‘Bono Pay Up’ protesters have achieved the remarkable feat of being even more smug than Bono”, The Telegraph, 2011-06-22

June 8, 2011

Ontario’s (pathetic) choices in the next election

Filed under: Cancon, Economics, Politics — Tags: , , , , , , — Nicholas @ 12:04

Read ’em and weep:

Dalton’s McGuinty’s record is so well known it barely justifies repeating: the health tax he promised not to introduce, but did. The HST. The eco tax. The soaring power bills. The epic borrowing. The multiple boondoggles. The “wage freeze” that turns out not to apply to police, nurses, civil servants or anyone who actually gets paid by the government. The big bonus for eHealth workers for overseeing a billion dollars in wasted spending. Stop me before I break into tears.

Tim Hudak says he’ll end the agony, but can’t be believed. Sorry Tim, but it’s true. If the campaign platform recently released by the Tories was handed in as a project in a first-year finance class, it would be returned with suggestions that the author find another line of interest. Like line dancing; something that doesn’t involve numbers, or adding and subtracting. Mr. Hudak says he’ll raise spending on all the important programs, but make up for it by finding “waste”. We all know that isn’t going to happen. Politicians never find waste. What they find is that if they keep spending money, their chances of re-election improve. The federal Tories have been promising to find waste for five years now, and have jacked up spending every year.

It’s been widely understood that this election was the Tories’ to lose . . . and they’re determined to do exactly that. This is how the NDP might finally get another chance to form a government . . . perhaps the misery of the Rae experiment has finally been forgotten. Between McGuinty and Hudak, the NDP could run a cardboard cut-out of Jack Layton and be (significantly) more appealing to the average Ontario voter.

« Newer Posts — Older Posts »

Powered by WordPress