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.
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.
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.
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.
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.
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.
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
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.
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.
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.
Frequent commenter “Lickmuffin” responded to the post entitled SWAT forces now spend more time doing non-SWAT policing with a long comment tying together the Olympics and the omnipresent SWAT teams:
I have to say that I really don’t understand your views here.
Olympic fascist spectacle: A-OK!
The actual functional trappings of a police state: Boo, hiss!
You can’t have one without the other. As the man said, you have to break a few skulls to make Olympic Gold. Or something like that.
Lickmuffin then provided an extended discussion on the same theme:
It’s quite simple, really: if you want to host the Olympics, and you want to have a succesful national Olympic team, you have to have armed-to-the teeth SWAT teams.
To fund the Olympics and Olympians, you need to have confiscatory tax rates.
When you have confiscatory tax rates, you’re going to have people trying to avoid the taxes.
Some of those people are going to engage in dodgy and risky behaviour, such as importing, growing, manufacturing or just generally dealing with narcotics.
Some of those people are going to use violence to protect their businesses.
To deal with those guys, you need heavily armed and specially trained police.
Just three degrees of separation there, really, but it works out to something like this:
Publicly funded Olympics = SWAT teams on every corner.
What do we tell people whose family members are killed in no-knock raids where the cops had the wrong address? “Sorry about that, but that snowboarding dude needed a gold medal.”
It’s ironic that the first snowboarder to win a medal for the sport — a Canadian — tested positive for weed.
It’s not ironic at all that the same dude wants to become a Liberal MP. Snowboard boots, jackboots — same thing, really.
It really does cover all the ground, doesn’t it? Just lacking the obligatory German rendering of SWAT as Sturmabteilung, and we’re golden, as they say.
A new study shows that Canadian travellers can do basic math (which means bad news for Canadian airlines and airport authorities):
It’s not just the cheap fares, many Canadians report it’s simply easier to pass through United States customs via land than air. They also report security lineups at the small regional hubs offer a fraction of the waiting time of their Canadian counterparts.
Self-employed Toronto business owner Mike Payer says the past two years he has flown out of Buffalo’s airport for Christmas vacation because the price difference has been too hard to ignore.
“I saved $3,000 flying to Fort Lauderdale. It was $4,500 [for a family of four] to fly from Toronto but only US$1,200 from Buffalo. On top of all that it’s just so much simpler with U.S. Customs. You stay in a hotel overnight and most of them will even let you leave your car there [while on vacation]. I guess the only risk is the weather and missing a flight.”
I suspect there’s a mistake in the second paragraph of the linked article: no matter how much you can save, I strongly doubt that 18% of Canadians flew out of their closest US airport. 18% of Canadians who flew, maybe, but not 18% of the whole population.
Some regional airports are booming with the new Canadian traffic:
The pitch has been probably the strongest in Plattsburgh, a little town of 25,000 that spent millions in 2007 to convert a former air force base into an airport that would attract Quebec passengers. The airport, which is 100 kilometres from downtown Montreal, is fully bilingual.
“They don’t even call us Plattsburgh. We’re known as Montreal’s U.S. airport now,” said Michele Power, vice-president of marketing with the Plattsburgh-North County Chamber of Chamber of Commerce.
Greece has a thriving economy . . . but it’s not the official, tax-paying one:
The Greek government is trying to recover billions of euros lost to tax evasion as part of its austerity programme, but as the BBC’s Malcolm Brabant finds, many Greeks see it as their right to keep as much black money as possible.
A good friend of mine bent my ear with a vengeance on the day the Greek government cranked up its austerity programme another notch.
“My husband is thinking of writing the word vlacha on his forehead in very big letters,” she said.
Vlacha means stupid.
Her husband’s name is Stelios and he is anything but a stupid man.
Stelios is a leading cancer specialist whose dedication to saving lives is such that he rarely takes time off, or holidays.
But he has come to the conclusion that he is stupid because he has been honest.
Lorne Gunter finds that what were once considered “intolerable” rates of taxation are microscopic compared to what we pay today:
The American colonists, by comparison, felt they were groaning under a crippling tax burden. Many of their staples, they felt, were onerously taxed while they received little from England in return and had no say in how large the levies against them would be.
[. . .]
So out of curiosity, I asked the historian what the level of taxation was in 1776 that caused the U.S. to declare its independence.
I will always recall his answer: “the equivalent today of about 5% to 7% of their income.”
What?
Today, in Canada, all levels of government, through all their taxes, can confiscate as much as half or more of a taxpayer’s income, in total. Income taxes, pension claw-backs, the GST, gasoline excise taxes, import duties and tariffs, estate taxes, property taxes, capital gains and on and on and on.
And yet, like the abused spouse rushing back to an abuser, many Canadians continue to sing the praises of ever bigger and bigger government. They rush to it in any crisis looking to be saved, whether through “free” health care during times of personal crisis or through auto company bailouts that demonstrate solidarity with distant workers in distant communities during times of global crisis.
The problem has been that Canadians expect the government (at all levels) to do something any time there’s a real or perceived crisis. Governments are happy to oblige by (at least appearing) to do something. Inevitably, the scope of what the government does increases every year. As “Steve the Pundit” wrote in the comments to the original article:
It’s true that Canadians have become far too dependent on government to save us from any crisis, large or small, much in the same way that the citizens of Metropolis continually looked to “Superman” to save them from all of their ills, whether it be an irradiated mutant bent on mass destruction … or a purse snatcher. Any crisis, it seems, “… look(ed) like a job for Superman!”
Exactly.
An interesting Wall Street Journal article tries to put a dollar value on the “intangible” value of a professional sports team to the fans . . . in this case, the Minnesota Vikings:
Christopher Slinde, a lifetime Minnesota Vikings fan who has endured decades of heartbreak and lots of overpriced beer in supporting his team, believes Vikings fandom is priceless. According to economists, it’s worth $530.65.
“This is deep,” said Mr. Slinde, a 33-year-old X-ray technician, outside the Park Tavern near Minneapolis on Sunday. He had been handed a recent economics paper that is tattooed with equations and attempts to value, in dollars, the joy and pain Minnesotans get from the Vikings.
“Don’t economists spend their time on more serious stuff?” he asked, after thumbing through the paper in the cold.
As fans pack stadiums and couches to watch the National Football League’s divisional playoffs this weekend, they care about victory. Economists are tackling a more abstract challenge: putting a price on the emotional benefits of having a pro sports team in town.
Interestingly, the one question that doesn’t come up is why non-fans (the rest of the taxpayers being asked to pay for a new Vikings stadium) should use their tax dollars to subsidize their sports-mad fellow citizens. The answer is, of course, that if Minnesota won’t then some other state or city will do. It seems reasonable to me to ask the billionaire owners of these sports franchises to pay for their own buildings . . . but there’s a long, inglorious history of these very well-off, well-connected folks being able to get politicians to pry the coffers open and paying public money to benefit private interests.
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