March 24, 2011
March 23, 2011
Middlesbrough hopes for low tax designation
My old home town has been struggling pretty much my entire life, as its original prosperity was built on industries which have been declining for decades. The Guardian says there’s a chance that Middlesbrough will be one of the new designated “low-tax enterprise zones”:
George Osborne does not know it, but Wednesday’s “budget for growth” could change much more than the lives of ponies now grazing quietly on a grassed-over industrial site in the heart of Middlesbrough. It seems all but certain that the chancellor will designate the Tees valley one of 10 new low-tax enterprise zones. If so, one of the local options will be to set up a precision-engineering cluster on the old ironmasters site — relic of the days when “Made in Middlesbrough” was stamped on countless bridges, including Sydney harbour’s.
In September 1987, Margaret Thatcher famously took her “walk in the wilderness” across a similar derelict site five miles upstream in Stockton, where as local MP in the 30s Harold Macmillan once preached the economic “middle way” she rejected. Stockton’s enterprise zone eventually became a business park, supporting 4,500 jobs at its peak. But this is a region that has long struggled to diversify its coal-and-ships, chemicals-and-steel economy, its hard-won gains always at risk — from global conditions as well as government policy and the region’s own mistakes.
[. . .]
So an enterprise zone will generate good headlines in the Middlesbrough Gazette and Northern Echo. But in deciding exactly how to proceed, disrupting ponies will be the least of it. The five unitary authorities that make up the sub-region of Tees Valley – Hartlepool, Redcar, Stockton, Darlington and Middlesbrough – must agree which of their local plans will make most long-term impact for all of them in terms of inward investment, skills upgrades and job creation along the supply chain. Spread the opportunity too thinly and it may be wasted. It has happened here before.
As Teesside University’s professor Tony Chapman puts it, the north-east has endured so many changes in Whitehall’s regional policies that someone could make a career in “the archaeology of regeneration”. Likewise, countless local government reorganisations have seen Anglo-Saxon “Mydilsburgh” change from a hamlet to an industrialised borough, become part of unloved Cleveland (1974-96), return as a borough, and now boast an elected mayor in ex-superintendent Ray “Robocop” Mallon.
Everyone agrees Middlesbrough has had its problems, some worse than its neighbours. Steel and chemicals have shrunk, as has the population of the town (bidding to become a Jubilee city) by 20,000 since the 60s to 140,000. “We have 200 teenage pregnancies a year,” says Mallon, who thinks a hardcore of families let the town down. But 16 wards out of 23 have high indices of deprivation, which cuts seem likely to intensify.
March 22, 2011
March 14, 2011
January 29, 2011
Bad news for US small businesses
A very small item in the recent US Obamacare legislation will mean a huge increase in tax compliance paperwork:
Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.
[. . .]
But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they’ll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.
The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.
Taken together, the two seemingly small changes will require millions of additional forms to be sent out.
“It’s a pretty heavy administrative burden,” particularly for small businesses without large in-house accounting staffs, says Bill Rys, tax counsel for the National Federation of Independent Businesses.
Eliminating the goods exemption could launch an avalanche of paperwork, he says: “If you cater a lunch for other businesses every Wednesday, say, that’s a lot of information to keep track of throughout the year.”
For a one-person business, this change could double or triple the tax-related paperwork right there. Given that a lot of people have started new businesses in the last couple of years — partly because big businesses downsized and haven’t been hiring again — this will be a significant discouragement to self-employment.
H/T to Virginia Postrel for the link.
Update: It may not stand: there’s a bi-partisan coalition in the Senate to repeal that provision.
January 19, 2011
Pack of feral states now circling fallen Illinois
The plight of Illinois just seems to get worse and worse:
As Illinois tax rates shoot up, nearby states are fluffing their feathers in an attempt to catch the eye of businesses looking to leave the Land of Lincoln.
Governor Pat Quinn (D) and the slim Democratic majority that passed the rate hike claim it was necessary to keep the state afloat: Considering Illinois’ comptroller already spends much of his time apologizing to creditors for missing payments, it’s more likely that businesses will start fleeing the flattened wreckage. Illinois now boasts the highest corporate income tax in the world when all charges are taken into account, and is heading into 2011 with a 40 percent budget shortfall. The tax hike drops the state 13 places in the Tax Foundation’s State Business Climate rankings.
[. . .]
Other state governors took their shots at Illinois’ duncery: Daniels compared the state to The Simpsons, saying “Oh you guys are nothing if not entertaining over there.…you know the dysfunctional family down the block?” Wisconsin Gov. Scott Walker (R) repeated his promise to lower his state’s tax rates and hinted business should heed the old tourism bumper sticker motto: “Escape to Wisconsin.” New Jersey’s Chris Christie (R) was making plans for an Illinois salesmanship trip before the legislation was even signed.
I remember hearing about the massive tax increase in Illinois, with reports about 50-60% hikes, and I thought it was pretty bad. However, even after this massive increase the Illinois state tax level would still be a rounding error compared to Ontario provincial taxes.
December 17, 2010
QotD: “all players in the game have revealed themselves to be interventionists”
. . . all players in the game have revealed themselves to be interventionists. (Okay, we knew this already but confirmation is nice.) Regardless of party, they see the economy as something to fix by turning a knob here, pulling a lever there, and stepping on a pedal over yonder in order to get the desired performance: higher consumer spending, lower unemployment, increased investment, and so on. It’s as though the economy were a machine in need of adjustments and a few quarts of oil. But an economy is not a machine. It’s a network of people engaged in myriad exchanges of goods and services — pursuing end-oriented activities informed by subjective values and expectations. Such information is largely unavailable to politicians, bureaucrats, and their economic advisers.
With unemployment officially at 9.8 percent, the economy indeed remains in the doldrums. None of the palliatives that George W. Bush or Obama tried has worked, but instead of realizing that government and its corporate-state policies are the obstacles to a flourishing economy, the ruling elite remains committed to the managed economy. So it’s decided not to raise taxes — for two years — and to reduce the employee payroll tax — for one year. These expiration dates are signs of political management. Understanding the necessity of a freed market would lead one to call for permanent — not temporary — government retrenchment.
Some questions were apparently overlooked. If tax rates may go up in two years, why make tax-sensitive long-term plans? If the payroll tax is to be two points lower in 2011, that implies it will most likely be two points higher in 2012. Will people spend the extra money next year or save it in anticipation of the tax increase to come? At any rate, they will need to make an unpleasant adjustment in their household economies on January 1, 2012. People do think long term, even if politicians don’t.
Something worth noting about the debate is that there was scarcely an acknowledgment that money subject to taxation belongs to someone and not the State. You’d think it magically appears in a common pot and the government’s job is to ladle it out effectively and fairly. I can recall hearing only one member of Congress say, “It’s their money,” during a television interview about why tax rates shouldn’t go up on high-income people.
Sheldon Richman, “A Boost for the Managed Economy: What did you expect?”, The Freeman, 2010-12-17
November 26, 2010
British Columbia: Canada’s Banana Republic
A story in the Globe and Mail on how Elections BC rigged the rules after the fact to reject a petition:
Elections BC rejected a Fight HST recall application as too lengthy — but did so using rules that were drafted after it received the application.
The rejection has led recall organizers to suggest the province’s chief electoral officer deliberately thwarted their attempt to get approval to launch a petition to oust a Liberal MLA who supported the harmonized sales tax, and should step down.
While Elections BC has defended its new rules — which pushed the Fight HST application over a 200-word limit by counting the acronyms MLA and HST as eight words instead of two — recall organizers expressed concern that they were not included in the application form when they downloaded it from Elections BC’s website.
“It’s a total joke. This is the kind of thing they do in banana republics … when they don’t want to have elections or they don’t want people to win. And we’re doing it right here in Canada,” said Chris Delaney, an organizer of the Fight HST campaign.
H/T to Steve Muhlberger for the link.
Marni Soupcoff says get the government out of the marriage business
Although the column was prompted by the attention-whoring actions of a British couple, the basic principle still applies in Canada:
It really doesn’t make sense for the government to be divvying up rights and benefits based on the sexual orientation of its citizens. Yes, marriage has an undeniably rich history in our cultural and serves very useful societal purposes — I don’t buy into the arguments that marriage is dead. But it’s ultimately a moral and, in some cases, religious matter that should be sanctioned (or not) by a couple’s peer group, religious group and family. It’s not rightfully a spot for government to be sticking its nose, and the fact that it does so puts it in charge of decisions it has no business making — like who is fit to be called a married couple and who should get special tax treatment based on the status relationship.
The preferable scenario, and the one which would forestall lawsuits like the Goggin/Skarsholt one, would be for the government to remove itself from the marriage business altogether.
That would mean no more government-sanctioned civil unions or marriages or references thereto in the law. Yes, that would also mean massive revisions to the tax code, family law, criminal law — really reams and reams of laws from which the government would have to extricate its judgments about couples’ legal standing.
It would also nicely short-circuit the ongoing debate on polygamy (currently active in BC, but due in your local courtroom very soon too).
Canadian retailers are “furious” at customers for looking to the US for cheaper prices
A brief filler piece on the Canadian Press newswire explains only part of the reason so many Canadian shoppers are headed south to do their Christmas shopping this year:
This is Black Friday in the U.S., but many Canadian retailers are a furious red at the thought of consumers heading south for bargains.
The Retail Council of Canada says there is a long list of reasons to shop north of the border.
It says retailers are a vital part of any community’s economy and it employs 10 per cent of the workforce.
It also reminds consumers that Canadian taxes — which cause much of the traffic south — help pay for health care and education.
The higher taxes are certainly a big part of the explanation, but even if you control for tax, Canadian prices are generally higher than their US counterparts. For example, a paperback I picked up at random from our coffee table (published quite recently) has a price of $7.99 on it. If you’re an American, that is. Canadians pay $10.99. The Canadian dollar is around US$0.98.
Nice little markup, eh? Add the 13% Hack-and-Slash Tax on top of that, and you know exactly why thousands of Canadians are willing to put up with long lines at the border to do their shopping in the States.
September 8, 2010
Austrian economics? That’s crazy talk
As has been observed over and over again, we’re all Keynsians now. It’s usually meant in the economic sense, but perhaps it’s a reflection of Keynes’ other famous dictum: in the long run, we’re all dead. A different school of economics deserves a longer look:
Common sense is the crux of Austrian theory economics. Austrians look at how individuals act, not how “economies” or “nations” act or behave. Ludwig von Mises, the greatest Austrian thinker, and in my opinion the greatest economist, entitled his great work, Human Action not National Action. The Austrian School was referred to by the Germans as the Psychological School because its analysis started with individual action and how those actions would either attain or fail to attain the goals sought by individuals. In other words, it involves a lot of the “common sense” that guides human behavior most of the time. It’s comforting to know there’s a philosophy of economics that conforms to what human beings actually do rather than how some economist thinks we ought to behave.
Examples of economic Newspeak flourish, especially if you listen to President Obama’s economic team. My favorite example is the present conflict between consumer spending and consumer saving. Since the crash, consumers have cut back on spending and are increasing their savings. Most economists are saying this is bad for the economy; they urge us to spend, spend, spend to save the economy.
Actually, it’s just the opposite: Saving is the road to recovery.
It seems rather obvious that during a downturn of the economy it would be natural for people to save more and spend less: They’re uncertain about their jobs; the values of their homes have plummeted (about 30% since the peak in 2006); their stocks have declined, and their debts are high. Isn’t it common sense that people are doing the rational thing by saving? This is something our parents and grandparents understood well.
August 27, 2010
Uncertain economic conditions mean weak growth
As I’ve argued before, the economy won’t start to really recover until the political situation stabilizes. In an article from earlier this year, Robert Higgs makes this point very well:
The explosion of the federal government’s size, scope, and power since the middle of 2008 has created enormous uncertainties in the minds of investors. New taxes and higher rates of old taxes; potentially large burdens of compliance with new energy regulations and mandatory health-care expenses; new, intrinsically arbitrary government oversight of so-called systemic risks associated with any type of business — all of these unsettling possibilities and others of substantial significance must give pause to anyone considering a long-term investment, because any one of them has the potential to turn what seems to be a profitable investment into a big loser. In short, investors now face regime uncertainty to an extent that few have experienced in this country — to find anything comparable, one must go back to the 1930s and 1940s, when the menacing clouds of the New Deal and World War II darkened the economic horizon.
Unless the government acts soon to resolve the looming uncertainties about the half-dozen greatest threats of policy harm to business, investors will remain for the most part on the sideline, protecting their wealth in cash hoards and low-risk, low-return, short-term investments and consuming wealth that might otherwise have been invested. If this situation continues for several years longer, the U.S. economy may well suffer its second “lost decade” for much the same reason that it suffered its first during the 1930s.
Unfortunately, the incentives for politicians are biased toward meddling, so don’t anticipate a slowing down of political “fixes” any time soon. If the US mid-term elections later this year return a “gridlocked” government, the economy might start to adapt to the current conditions and only then will any significant growth begin to take place. Given a relatively static political situation, businesses can at least make some plans based on their regulatory/legislative conditions as they are. Until some kind of stability is established, no businessperson in their right mind will take on major new plans: entrenching your existing business is far safer, while trying to do something radically different incurs too much risk. Risk, that is, over and above the “ordinary” risk of expansion, launching new products, or entering new markets.
July 9, 2010
Brewing up a real stimulus package
I find it hard to believe that such luminaries as Senator Kerry and Senator Snowe are the moving forces behind this tax reduction scheme:
Can microbreweries revive the economy? That’s the hope of Sen. John Kerry (D., Mass.) and a bipartisan group of senators who are pushing a plan to cut taxes on the nation’s legion of small brewers in hopes of stimulating hiring among craft brewers.
The plan, which was introduced by Sen. Kerry, would lower the per-barrel excise taxes on small breweries’ first two million barrels of beer per year (that’s 62 million gallons) and would triple the size of what the government classifies as a small brewer — to breweries that produce six million barrels a year from two million currently. Some co-sponsors include Sens. Olympia Snowe (R., Maine) and Ron Wyden (D., Ore.), whose states, not surprisingly, rank high on the list of states with the most breweries per capita.
So-called craft brewers are one of the few industries to thrive through the recession. The segment grew from 7.2% by volume last year and 5.9% in 2008. The segment has even become a haven for budding entrepreneurs that have been let go from corporate jobs. “There’s not that many success stories in American manufacturing today and craft beer is one of them,” says Jim Koch, founder of The Boston Beer Co. which makes the various Samuel Adams beers. Mr. Koch — whose company is in Mr. Kerry’s home state — has been leading the charge for a lowering of the excise tax on small brewers.
Admittedly I’m in favour of most tax reductions, but this one in particular seems to be a good idea.
