Quotulatiousness

May 27, 2010

Canada’s positive experience of US Prohibition

Filed under: Cancon, Economics, Liberty, USA — Tags: , , , , , , — Nicholas @ 12:07

I knew that individual Canadians did well out of supplying booze to thirsty Americans during the period of Prohibition, but I didn’t realize how well:

. . . Prohibition — perhaps the maddest of mad American dreams [NR: in a dead heat with the current War on Drugs, I think] — did pretty well by our nation from 1920 to 1933. As American writer Daniel Okrent points out in his fine social history of the era, Last Call, the rivers of Canadian booze that flowed south enriched not only the Bronfman liquor empire, but our federal government. Canadians did make and smuggle illegal liquor, evading both Canadian taxes and American law, but we also made millions of litres of the legal, taxed stuff, the ultimate destination of which was of no concern to Ottawa. The amount of alcohol subject to excise tax — most of which went south one way or another — went from 36,000 litres in 1920 to five million 10 years later, and the excise tax on it rose to a fifth of federal revenue, twice as much as income tax.

Few in Canada had the slightest inclination to aid the American government in cracking down on alcohol use. When a U.S. Coast Guard cutter in pursuit of a Lake Erie rum-runner ran aground near Port Colborne, Ont., locals looted the vessel, then filled its engines with sand. About the only Canadians Okrent could unearth who thought the Dominion should help Uncle Sam seal his border were those making a fortune selling alcohol to American visitors. One way or another, most Canadians agreed with the smug satisfaction of CNR president Sir Henry Thornton, whose railway was growing fat off liquor tourism: “The dryer the U.S. is,” opined Sir Henry, “the better it will be for us.”

If there was an upside to what was known — at first, without a trace of irony — as “The Noble Experiment” in the U.S. itself, Okrent is hard-pressed to find it. America had always been awash in alcohol. (Johnny Appleseed’s fruit was inedible, but Americans still embraced his trees — virtually every homestead kept a barrel of hard cider by the door for visitors.) During the sodden 19th century, adult Americans downed 27 litres of pure alcohol each annually. That kind of demand wasn’t going to disappear no matter what the law said.

And yet the lesson has been forgotten. When drug prohibition finally comes to an end, historians will have a field day drawing the obvious comparison between the War on Drugs and the “Noble Experiment”. The theses practically write themselves . . .

QotD: This isn’t what we mean by “the invisible hand”

Filed under: Cancon, Quotations, Wine — Tags: , , — Nicholas @ 12:03

Another Example of Your LCBO Hard at Work, Screwing You . . . If you’re feeling a pained sensation in your rear end, like a sandpaper wrapped glove entering your rectum, don’t worry fellow wine drinkers, that’s just the hand of the LCBO doing what they do best — sticking it to you. The LCBO has decided to take advantage of yet another potential money saving opportunity and has turned it into a money grab at your wallet. A recent article in the Toronto Star (“HST will lower tax on booze, but the price is going up ” – May 13, 2010) uncovered that the LCBO, instead of passing the HST savings on to you, which would have lowered the tax on booze from 12% to 8%, has decided to raise the price all in the name of “social responsibility”. Oh happy day, thank you LCBO for keeping me on the straight and narrow while lighting my pockets and lining yours in the process. Oh thank you — thank you.

Michael Pinkus, Ontario Wine Review, 2010-05-27

May 13, 2010

QotD: Because your government cares about your health

Filed under: Cancon, Government, Politics, Quotations — Tags: , , , , — Nicholas @ 12:55

If there ever was a reason to get the Ontario government out of the liquor business, this is it. While taxes on booze will drop on July 1, thanks to the introduction of the province’s new Harmonized Sales Tax, the price of your favourite poison will actually increase because — wait for it — the government doesn’t want to turn you into an alcoholic.

[. . .]

Actually, the whole modus operandi of the LCBO is counter-intuitive. At the same time that it preaches social responsibility, the LCBO inundates Ontario households with glossy brochures that take lifestyle advertising to new heights. The latest one cheekily invites customers to take “French lessons”, and features winsome couples in various states of embrace (hey, aren’t the French always making out?). A concurrent radio campaign features a sexy French-accented female voice extolling the virtues of Bordeaux. You get thirsty just listening to her.

Such campaigns are designed to make Ontarians drink more, not less, of course, funneling more cash into LCBO coffers and keeping its employees on the public payroll at juicy union wages. All fuelled by taxes and a staggering mark-up of 71.5% on that latest imported bottle which pairs so well with flank steak and frites.

This kind of hypocrisy is but one reason why the government shouldn’t be in the liquor business. The others include higher prices, less consumer choice, and the general inefficiency inherent in any monopoly business, whether public or private.

Tasha Kheiriddin, “Lower taxes, higher prices, courtesy of your local LCBO”, National Post, 2010-05-13

May 11, 2010

A trillion dollars doesn’t buy as much as you’d expect

Filed under: Economics, Europe — Tags: , , , — Nicholas @ 07:54

It doesn’t, for example, buy exemption from the laws of economics:

European Union President Herman Van Rompuy said European governments need to consider pooling their national powers and create a joint economic government.

“We can’t have a monetary union without some form of economic and political union and that is our big task for the coming weeks and the coming months,” he said.

He said he would draft tougher rules for EU leaders to discuss in October that go beyond current EU limits on debt and deficit.

The core problem is near-zero economic growth, high unemployment and governments unwilling to take painful steps to get people to work more and longer.

Simon Tilford, an economist at the Center for European Reform think tank, warned that EU governments so far haven’t come up with anything “game changing.”

“What Europe needs is a growth pact because without growth, public finances aren’t going to be sustainable,” Tilford said. “The bond markets are going to be forcing them to make those kind of changes.”

Even EU president Van Rompuy warned that the bloc risks irrelevance and the end of its expensive welfare programs if it can’t speed up economic growth, forecast to expand by just 1 percent this year.

“With 1 percent growth we can’t finance our social model any more. With 1 percent structural growth we can’t play a role in the world,” he told the World Economic Forum in Brussels. “We need to double the economic growth potential that we now have.”

So even with a trillion dollar injection, you still can’t spend more than you make, year after year, and hope to carry on as if there wasn’t a problem. Who knew?

May 7, 2010

QotD: The HST only looks good on paper

Filed under: Cancon, Economics, Government, Quotations — Tags: , — Nicholas @ 09:47

I know all the reasons why sales taxes — i.e. consumption taxes — are to be preferred to income taxes. Every economist I respect believes consumption taxes are better because they let the taxpayer control the amount of tax he pays. Don’t want to pay as much? Don’t buy as much.

But to an ordinary person, this is a silly argument. Everyone has to buy stuff — school clothes for the kids, a new car, a laptop. If your washing machine breaks down, you have to buy a new one or pay for repairs. There is no alternative but to pay the sales tax.

To consumers, a sales tax looks like the least avoidable kind of tax. For most people, the only true way around a consumption tax is to hid their spending by switching to cash, barter or the black market.

On paper, I agree with my economist buds. And if we lived on paper, I might try to convince you to learn to love the HST.

Lorne Gunter, “The HST is fine on paper. It’s only painful in real life”, National Post, 2010-05-07

April 28, 2010

Sorry for the lack of bloggishness

Filed under: Administrivia — Tags: , — Nicholas @ 14:46

Today was a triple-whammy of first-thing-in-the-morning dentist appointment, followed by a meeting with my accountant, then a trip to the bank to open a vein pay my 2009 personal and business taxes. That left no time for more pleasant activities like blogging.

Regular blogging may resume later today.

March 29, 2010

Americans to lose privacy in offshore banking

Filed under: Economics, Government, Liberty, USA — Tags: , , , — Nicholas @ 09:27

Of course, the headline assumes that they had any such privilege in the past . . .

Samuel Taliaferro is disturbed by provisions in a new law which will extend US government intervention into foreign bank business:

The name of the bill is the Hiring Incentives to Restore Employment Act (H.R. 2487) commonly known as the HIRE Act. This is the jobs incentive bill that was signed by the President on March 18th amid little fanfare.

Relatively small by Washington standards (“just” an $18 billion stimulus package) the bill was drafted to provide incentives to employers to hire more people but contains some very disturbing language concerning the ownership and transference of money to any overseas account. The truly galling part of the bill is that it attempts to require “foreign financial and non-financial institutions to withhold 30% of payments made to such institutions by U.S. individuals unless such institutions agree to disclose the identity of such individuals and report on the bank transactions”. Think about this — the U.S. government is attempting to strong arm foreign financial and non-financial institutions (think banks and law firms) to either withhold 30% of the transactions in a U.S. individual’s account (and presumably remit this to the U.S. Treasury) or disclose the account details to the U.S.. The language of the bill addresses both bank accounts and any foreign trusts (ie- Private Interest Foundations).

In other words, the US government is afraid more Americans are going to be worried about the security of their money and will look to offshore institutions to preserve their savings. The government is moving pre-emptively to deter that flow of money away from their direct control. You’d almost think they didn’t trust their own citizenry.

March 23, 2010

Stimulus did little, private sector did much more

Filed under: Cancon, Economics, Government — Tags: , — Nicholas @ 12:09

Despite all the expensive ads (especially noticeable during the Vancouver Olympic coverage), it wasn’t the federal government’s stimulus package that has been creating jobs: it was the private sector:

Canada’s economic fortunes have seen a dramatic turnaround in the last year, but according to a new study by one of the country’s leading think-tanks, it had little to do with the federal government’s $47.2-billion Economic Action Plan.

The Fraser Institute released a study Tuesday that found that government stimulus packages contributed only 0.2 percentage points to the rise in GDP between the second and third quarter of 2009 and nothing between the third and fourth quarter.

The group found that it was private-sector investment and increased exports that were the driving forces behind the change in GDP growth.

“Although the federal government has repeatedly claimed credit for Canada’s improved economic performance in the second half of 2009, Statistics Canada data show that government spending and investment in infrastructure had a negligible effect on the country’s improved economic growth,” said the Fraser Institute’s senior economist, Niels Veldhuis.

Here is the news release from the Fraser Institute.

This shouldn’t be a surprise: the stimulus was, and continues to be, a media exercise much more than it was an economic plan. As with any outcry in the mass media, the government had to be seen to be doing something, regardless of the likely success. The illusion of positive motion was necessary, and the federal government knows it has little wiggle room as far as the mainstream media is concerned — doing nothing was not going to be an acceptable choice, even if doing nothing was the “correct” response.

The government can’t really “create” jobs — although it certainly can destroy ’em — most of the jobs “created” in response to government funding are going to go away as soon as that funding dries up. There’s no economic justification for them to exist, absent the stimulus money. If there was an economic justification, private employers would have created them (where not hindered by government action of one form or another, that is).

The increase in public sector employment is unsustainable: the money to pay salaries and benefits (ahem), training, equipment, and facilities all has to be taxed from individuals and companies. The more public sector jobs, the greater the drain on the private sector. The greater the burden placed on the private sector, the slower the growth of the economy. As you approach the “break even” point, where the private sector can no longer fund all the demands from the public sector, the economy gets more and more sluggish — no sane private employer is going to expand business if there’s no profit to be made. No expansion means no new jobs.

It might be possible for us all to live by “taking in one another’s laundry”, but it’s not possible for us all to live by approving permission forms, having meetings, and bureaucratic empire-building.

March 22, 2010

After MPAC?

Filed under: Bureaucracy, Cancon, Economics — Tags: , — Nicholas @ 12:51

Lorne Cutler looks at one of the proposals to replace the Municipal Property Tax Corporation (MPAC), which sets the property tax levels for Ontario towns and cities:

As the Ontario government grapples with ways of cutting their $25-billion deficit, they should note that there is one agency that that could be virtually eliminated overnight and few would shed a tear. It is the vast Orwellian bureaucracy known as the Municipal Property Tax Corporation (MPAC), which has the role of determining the value of Ontarians’ property every four years so that municipal taxes can either increase or decrease depending on how MPAC’s valuation of the property has changed relative to other properties in your municipality.

If MPAC determines that a property’s value went up less than the average for the community, the municipal taxes will drop (before any tax increases implemented by the municipality) and if the property went up more than the average, the taxes will increase. It is a capital gains tax without the capital gains!

Not content to actually use the market to determine property values, every few years, MPAC’s army of 1,500 civil servants assesses what they think each property is worth. Even if you just bought your house last year, MPAC can decide you really didn’t pay the true value. In order to determine the value of over 4 million properties and fight assessment challenges, the agency spent over $180-million in 2008, an 11% increase from 2007. This cost doesn’t even include the millions in subsidies that the government has to provide to seniors so they don’t lose their homes because of rising property taxes due to MPAC.

Elizabeth and I had our day in “court” with MPAC back in 2004, when we were handed an assessment claiming that our house was worth (for tax purposes) 25% more than we paid for it — in the same month we took it over from the builder:

Now it was our turn, and we already knew that our ace had been trumped: we couldn’t use the builder’s sale price as part of our evidence. We tried anyway, and to our astonishment, it was allowed. In fact, we seem to have unwittingly wrong-footed the representative from MPAC, because we mentioned that we’d received two separate assessment notices for different values (the first was about 5% more than we’d paid, the second nearly 25% more).

Because we’re in a pretty fast-moving market area, we could certainly believe that the house would be worth 5% more within a couple of months of buying it, but 25%? Come on. There was no way that we could have sold the house for 125% of list price that quickly. After a few years, sure, that’d be possible, but not that soon.

We were treated to a long-ish lecture about how our builder had owned the land for such a long time that they weren’t selling the houses for what they would really be worth on the open market, because they didn’t need to make a profit on the land . . . or something equally economically unlikely. I rather lost the thread at that point. Anyway, during our respective summations, it became clear that he didn’t think we had a leg to stand on (he wasn’t openly gloating, but it was edging in that direction).

The final act was a bit of a Scrooge-to-Bob-Cratchit moment, as the adjudicator turned to us and said “. . . and in summary, I will be lowering your assessment to $XXX,XXX” — about 5% less than the lowest assessment figure we’d got. I was so sure that I’d misheard him that it was only as the MPAC rep started whining that I believed what I’d heard. The observer from the town suddenly went into a huddle with the MPAC guy, because the lowered assessment for us might have a domino effect in our entire subdivision.

March 17, 2010

Superbubble?

Filed under: China, Economics, Politics, USA — Tags: , — Nicholas @ 12:14

Jon, my former virtual landlord, sent me this link, suggesting that it “gives you an opportunity to round up all of your ‘as I said about China earlier…’ [posts]”.

The world looks at China with envy. China’s economy grew 8.7 percent last year, while the world economy contracted by 2.2 percent. It seems that Chinese “Confucian capitalism” — a market economy powered by 1.3 billion people and guided by an authoritarian regime that can pull levers at will — is superior to our touchy-feely democracy and capitalism. But the grass on China’s side of the fence is not as green as it appears.

In fact, China’s defiance of the global recession is not a miracle — it’s a superbubble. When it deflates, it will spell big trouble for all of us.

I don’t want to give the impression that I’m anti-Chinese, because that isn’t why I post this sort of material. I think the Chinese miracle has been to raise literally hundreds of millions out of poverty, but it hasn’t been a purely positive thing: hundreds of millions of others are supporting the uplift but being deprived of similar opportunities. It’s a fantastic achievement, but it has involved — and continues to involve — injustice and repression.

It also requires continued state control over media, and not just BBC/CBC/PBS type state funding, but actual state censorship and worse:

During the crisis, Chinese exports were down more than 25 percent, tonnage of goods shipped through railroads was down by double digits, and electricity use plummeted.

Yet Beijing insisted that China had magically sustained 6 to 8 percent growth.

China lies. It goes to great lengths to maintain appearances, including censoring media and jailing those who write antigovernment articles. That’s why we have to rely on hard data instead.

Those lies will compound the impact when the lies can’t be maintained any more:

What happens in China doesn’t stay in China. A meltdown there — or even a slowdown — would have severe consequences for the rest of the world.

It will tank the commodity markets. Demand for industrial goods will fall off the cliff. Finally, Chinese appetite for our fine currency will diminish, driving the dollar lower against the renminbi and boosting our interest rates higher. No more 5 percent mortgages and 6 percent car loans.

It will be bad for the US and the rest of the world’s economies, but it could well be catastrophic (in the full meaning of that word) for China. As the US economy contracted over the last couple of years, it revealed lots of malinvestments . . . and the companies which were most exposed to the risks took huge hits to their balance sheets and their business models. A similar shock to the Chinese economy could topple the government or raise the already-high chances of massive unrest and corresponding increased repression.

Interesting times, indeed.

As Jon suggested, you can see my previous concerns about the Chinese economy here.

March 10, 2010

California launches yet another attempt to tax out-of-state corporations

Filed under: Books, Bureaucracy, Economics, Government, Politics — Tags: , , — Nicholas @ 08:28

California is getting desperate to scrape up every penny it can, so a renewed proposal for a tax grab vetoed by Governor Arnold Schwarzenegger last year is back in play:

The online retail giant [Amazon.com] has enjoyed an edge over many competitors in the state because it is not required to collect sales tax from residents who buy books, top-of-the-line plasma televisions, cases of diapers and thousands of other products from its website. The Seattle corporation has no store, warehouse, office building or other physical presence in California, and the state cannot tax such businesses under a 1992 Supreme Court decision.

Consumers here are required to pay sales tax on the goods they purchase at Amazon but almost never do, because the state has no mechanism for tracking Amazon purchases and collecting the money.

No story is complete without a nasty accusation:

The Democrats who control California’s Legislature plan to put their own bid on the governor’s desk this month in hopes of reaping up to $150 million annually for state and local coffers. The revenue would make only a tiny dent in the state’s $20-billion deficit, but supporters say every dollar counts in tight times, and there’s a principle at stake.

Amazon has “built an entire business model based on tax avoidance,” said Assembly tax committee Chairman Charles Calderon (D-Montebello).

Of course, tax avoidance is perfectly legal . . . he’s trying to smear Amazon (and every other business selling to customers in California) as being tax evaders. Avoidance is not only legal, it’s a sensible strategy to minimize costs and gain a competitive advantage. Tax evasion, on the other hand, is illegal.

So who is going to get hurt if the measure passes — other than Californians who have been remiss in declaring and remitting their sales taxes?

The California proposal seizes on the thousands of online sales affiliates that Amazon contracts with to get customers to its site. Those companies advertise Amazon products, provide links to the company’s website and get a percentage of the resulting sales.

Many of the affiliates are in California. Supporters of the Democrats’ bill, ABX8 8, say that the connections amount to a presence for Amazon as well and that California should be able to force the firm to collect sales tax.

H/T to Clive, who became aware of this through a website he visits regularly which may have to close down due to the proposed law.

March 9, 2010

QotD: Early America

Filed under: Britain, France, History, Quotations, USA — Tags: , , , , , , — Nicholas @ 12:30

Early America enjoyed, perhaps, a little more participatory local democracy than Britain, and had a slightly broader electorate and already the highest standard of living in the world. But the revolution so rapturously mythologized by Jefferson, Thomas Paine, Patrick Henry and others, was really, as Washington, Franklin, Hamilton, Madison and Adams did not forget, a somewhat grubby contest over taxes.

In one of the greatest feats of statesmanship of all history, the Americans, and especially Benjamin Franklin, persuaded the British to expel the French from North America, and then persuaded the French to provide the margin of victory in evicting the British themselves. This precocious manipulation of the world’s two greatest powers by a group of colonists showed astounding finesse and precocity, made more piquant and ironic by the fact that their rebellion was against paying the colonies’ share of the cost of removing the French, and the French were recruited to save the Americans their proportionate share of the cost of their own eviction.

All countries swaddle themselves in myths, and the Americans aren’t more self-indulgent than others; only more successful and operating on the grand scale of a country that in two long lifetimes grew to possess completely unprecedented power and influence in the world.

Even without the great pre-eminence of America, the founders of the country possessed a presentational skill that vastly exceeded the procession of demagogues and lunatics that sent and followed each other to the guillotine in the French Revolution. And they were certainly more persuasive and sophisticated than the British spokesmen for constitutional monarchy.

But their unintended legacy of this gift for theatricality is the endless hyperbole and hucksterism of American materialism and individuality.

Conrad Black, “Send in the clowns”, National Post, 2010-03-09

This is why Fark.com has a special “Florida” tag

Filed under: Media, USA — Tags: , , , , , , , — Nicholas @ 09:57

The headline really does say it all:

Shows with gay characters could lose Florida tax credits

Florida lawmakers are considering a “family friendly” bill that would deny tax credits to films and television shows with gay characters in favor of those promoting traditional values.

The proposal, which has fueled a heated controversy for its discriminatory nature, would increase current tax credits from 2 to 5% of production costs for shows considered “family friendly.”

I’m not in favour of tax credits for TV and movie production in any case, but if your government is going to be providing them, they should at least be available to all legal forms of entertainment. Discrimination in this way is ridiculous — and I’d be astounded if it was actually constitutional.

If persuasion doesn’t work, raise the taxes

Filed under: Bureaucracy, Food, Law, USA — Tags: , , , — Nicholas @ 07:12

New York City is moving ahead in their war on junk food, with a new proposal to add a significant tax to the sales of carbonated pop:

[Mayor Michael Bloomberg] described the soda tax — equivalent to an extra eight pence on a can — as “a fix that just makes sense”, saving lives and cutting rising health care costs.

“An extra 12 cents on a can of soda would raise nearly $1 billion (£663 million), allowing us to keep community health services open and teachers in the classroom,” he said on his weekly radio programme on Sunday.

“And, at the same time, it would help us fight a major problem plaguing our children: obesity.”

David Paterson, the mayor of New York state, has already proposed a soda tax but it was dropped last year following a public outcry.

H/T to Chris Greaves for the link, who said “Let’s see now, prohibition didn’t work, so let’s try something different!”

Of course, the proposed tax would be very popular in some areas: all the retailers outside NYC who would be able to reap significant additional sales to New Yorkers who didn’t want to pay the sin tax.

March 4, 2010

Shooting the messenger over extra taxes

Filed under: Economics, Government, USA — Tags: , , — Nicholas @ 07:32

An article in the Chicago Tribune talks about the latest “extra” to appear on restaurant bills in San Francisco: the “health” charge. This is how many restaurants in the city are handling the latest tax increase — making it explicit on the bill — but the Tribune writer appears to feel the restaurant owners should “eat” the new tax as “part of doing business”. Implied in this is that the restaurants shouldn’t raise prices either.

So, let’s all blame those evil restaurant owners, shall we?

The rationale for this one is to cover the employers’ mandatory contribution to the City’s “Healthy San Francisco” health-coverage system. The charge actually is levied on employers, but at least some restaurants are adding a few dollars or percentage points to each customer’s bill to cover this charge.

The restaurants’ excuse for assessing this charge separately is to let customers know how much they’re paying for employees’ health coverage. That’s the same excuse hotels use when they add “resort” or “housekeeping” fees to unsuspecting guests’ room bills. It’s the same excuse airlines would use to exclude fuel surcharges from their advertised fares if the Department of Transportation would allow them. And it’s sheer nonsense. Employees’ health insurance is no less of a cost of doing business than rent, property taxes, food costs, security services and all the other inputs businesses require to operate. To single out health care for a separate surcharge is unwarranted.

What’s missing here is the distinction between mandatory fees or taxes which various levels of government impose, and extra charges for things which logically should be intrinsic to the basic price. I agree that adding a “housekeeping” item to a hotel bill is wrong, but calling out a new tax that has to be paid is correct. Hidden taxes (in which category the Tribune writer misleadingly includes the San Francisco “health” charge) are the ones that don’t get itemized for you on your bill . . . that’s the “hidden” part.

Hidden taxes are far worse than itemized entries, because when prices rise due to changes in the tax rate, they naturally blame the seller (who doesn’t benefit from the raised price) and not the government which raised the tax rate underlying the price increase.

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