Archive for the ‘Government and Politics’ Category
Chris Christie Allows New Jerseyans to Quaff Better Wine
While perhaps more identified with eating than drinking, New Jersey Governor Chris Christie — who headlined Cato’s recent Milton Friedman Prize Dinner — signed a law in January that allowed out-of-state winemakers to sell directly to in-state consumers and retailers. This wasn’t a spontaneous bit of New Year’s bonhomie — the U.S. Court of Appeals for the Third Circuit had ruled in Freeman v. Corzine that the previous rules benefiting in-state wineries was unconstitutional (that pesky Commerce Clause again) — but still it was a positive sign: even Wine Spectator took note.
More importantly, the district judge in charge of the nine-year lawsuit challenging that earlier law recently approved the consent decree whereby New Jersey’s new law remedied the claims brought by the out-of-state wineries. The agreement creates an out-of-state plenary winery license (good luck saying that after having consumed too much of the the vintage) under which “foreign” wine can compete on an equal playing field with good ol’ New Jersey stock. Specifically, the new law grants this license to out-of-state applicants, including those who sell their wares over the internet, who do not produce more than 250,000 gallons of wine per year and are duly licensed in another state.
The upshot is that the new law takes effect as of this month.
This all still seems like a bit too much regulation to me, but at least everyone is now subject to the same rules. I may have to take advantage of this newfound freedom when I travel up to the Garden State for my college reunion in a few weeks.
For my previous writings on booze and the Commerce Clause, read this and listen to this.
Krugman Is Wrong about Austerity in Britain – Say the Brits
When, late last month, Great Britain slipped back into recession, New York Times‘ Paul Krugman saw it as a vindication of his neo-Keynesian policies. According to Krugman, Britain failed to return to growth, because David Cameron’s government stepped on the fiscal break instead of infusing the British economy with more borrowed funds. My colleagues Juan Carlos Hidalgo from Cato and Veronique De Rugy from the Mercatus Center have already pointed out that austerity in Europe is something of a chimera. Spending cuts have been small, while tax increases have been large (a bad combination, in my view). Not to beat a dead horse, but here is a take on the British situation from, so to speak, the horse’s mouth:
Tullett Prebon, a bond trader, said that “public expenditures have hardly been reduced at all” and that claims of a “big cut in public spending is bare-faced deception”.
Figures highlighted by the firm show that public spending actually rose during 2010-11 and fell by just 1.5 percent last year.
Government spending is more than £22 billion higher than it was in 2008 when the financial crisis erupted.
The majority of extra money required by ministers to fill the black hole in the finances caused by the recession is being raised from extra taxes rather than cuts in Government spending.
Dr. Tim Morgan, the global head of research at Tullett Prebon, said: “It’s high time that this mendacity was exposed for what it is. Government has done very little about its spending, has appropriated three-quarters of all gains in economic output for its own use, has carried on piling up debt – and has tried to pass all this off as ‘responsible austerity’.
“The motivation for government spin is obvious enough. On the one hand, rises in market interest rates could be a disaster, given the extent to which British households are leveraged. On the other, implementing the real cuts required to back up a genuine austerity package have proved politically unpalatable.”
Dr. Morgan warned that it seemed “improbable” that the bond markets would “continue to fall for this spin-job” and would “sooner rather than later” call the Government to account.
Revolt of the Italian Tax Slaves
I wrote last year about a tax protest in Ireland, and I wrote earlier this year about a tax revolt in Greece.
But Irish and Greek taxpayers are wimps compared to their Italian compatriots. When Italians decide to have a tax revolt, they don’t kid around. Here are some remarkable details from the UK-based Telegraph.
In the last six months there has been a wave of countrywide attacks on offices of Equitalia, the agency which handles tax collection, with the most recent on Saturday night when a branch was hit with two petrol bombs.Staff have also expressed fears over their personal safety with increasing numbers calling in sick and with one unidentified employee telling Italian TV: “I have told my son not to say where I work or tell anyone what I do for a living.”
As much as I despise high taxes, I don’t think petrol bombs are the answer. But I am glad that at least some of the bureaucrats feels shame about their jobs.
Not surprisingly, the political elite wants people to be deferential to predatory government.
Annamaria Cancellieri, the interior minister, said she was considering calling in the army in a bid to quell the rising social tensions.“There have been several attacks on the offices of Equitalia in recent weeks. I want to remind people that attacking Equitalia is the equivalent of attacking the State,” she said in an interview with La Repubblica newspaper.
Here’s some advice for Ms. Cancellieri: Maybe people will be less likely to attack “the State” if “the State” stops attacking the people.
But don’t expect that to happen. The Prime Minister also demands obedience to “the State” and there’s rhetoric about “paying taxes is a duty” from other high-level government officials.
Saturday night’s attack took place on the Equitalia office in Livorno and the front of the building was left severely damaged by fire after the bombs exploded. The phrases “Thieves” and “Death to Equitalia” were sprayed onto outside walls. It came just 24 hours after more than 200 people had been involved in running battles with police outside a branch in Naples which left a dozen protesters and officers hurt. …There has also been a striking increase in suicides with people leaving notes directly blaming Equitalia and tax demands. Paola Severino, the Justice minister, said: “The economic situation has produced unease but paying taxes is a duty. On one side there is anger and the problem of paying when the resources are scare but on the other side is the fact that they must be paid.” …Mr Monti has vowed to press on even harder this year to recover the lost money. He is due to have a meeting with Equitalia chief Attilio Befera to discuss the situation and he has already said: “We are not going to take a step back, there will be no giving in to those who have declared was against the revenue and therefore the State. We will not be intimidated.”
Keep in mind, by the way, that this is the government that supposedly is being run by brilliant technocrats, yet they are so incompetent that they appoint the wrong people to posts. But the real problem is that government is far too big, consuming one-half of Italy’s economic output.
If Italy’s political class wants to improve tax compliance, they should listen to the IMF and academic economists, both of whom point out that lower tax rates reduce incentives for evasion and avoidance.
It also would help to shrink the burden of the public sector. Unfortunately, as is the case with most other European nations, “austerity” in Italy mostly means higher taxes, not less spending.
J.P. Morgan and Yahoo: Market Successes
Investment giant J.P. Morgan made a bad trade that cost its owners $2 billion. The responsible parties are losing their jobs. Yahoo’s CEO evidently misled people about his qualifications. As a result, he lost his job.
If you want to know why these are market successes, consider: Medicare and Medicaid lose at least 35 times as much per year to fraud and other improper payments, and Medicare wastes even more on medical care that does nothing to make patients healthier or happier. This happens year after year after year.
Now ask yourself: when was the last time someone got fired over those losses? And yet the politicians’ first reaction to the J.P. Morgan trade was greater oversight by the political system, which tolerates much greater losses than the market system that is currently disciplining J.P. Morgan.
Here’s hoping the Yahoo incident inspires some politician to crack down on people who embellish their resumes.
Filed under: General; Government and Politics; Health Care; Political Philosophy
$1 Million in Waste, but No Bathtubs
(Image Credit: Google Plus)
Occasional episodes of government mismanagement explode into big scandals, such as the General Services Administration’s party in Las Vegas that wasted more than $800,000.
Other waste gets flagged by auditors but generally goes unnoticed. I came across this new Inspector General (IG) report revealing $1 million of waste at the Bureau of Indian Affairs (BIA). Unlike the GSA scandal, it included no photos of bureaucrats in bathtubs, so you probably won’t see it on the cable news.
Still, the BIA episode revealed many standard elements of federal waste. According to the IG, the episode included:
- A Politician Seeking Something: Then Senator Byron Dorgan (D-ND) pressured the BIA to hire more law enforcement officials.
- An Incompetent Agency: The BIA contracted-out head-hunter activities to a group called the National Native American Law Enforcement Association (NNALEA). The IG says that the BIA “violated federal procurement regulations” a variety of ways, and it was clearly duped by the contractor. The NNALEA “capitalized on the bureau’s failures.”
- A Contractor Doing Shoddy Work: The applications sent by the NNALEA to the BIA for the law enforcement jobs were of very poor quality. Of the 514 reviewed by the IG, for example, 104 simply didn’t meet the age requirements. All in all, “none” of the applications was of any use to the BIA.
- A Lack of Personal Responsibility: NNALEA’s leaders generally refused to be interviewed by the IG regarding their failures. And because the IG’s new report came out a couple years after the events took place, the key BIA personnel responsible have moved on, including the then-head of the BIA, Larry Echohawk.
In sum, routine bureaucratic and political factors resulted in the BIA spending $1 million from which taxpayers and the intended recipients received “no benefit,” according to the IG. So no bathtubs on this one, just a run-of-the-mill Beltway boondoggle.
Will Smith: Socialists Just Don’t Understand
My French is rusty, but I’m pretty sure the Fresh Prince just flipped out at the idea of a 75-percent marginal tax rate like that advocated by France’s new socialist president.
Adult Supervision
Some politicians say that banks need more regulation because JPMorgan Chase lost $2 billion, about 2 percent of its annual revenue.
Meanwhile, the federal government will have a deficit of about $1.3 trillion this year, more than half its annual revenue (and about a third of its annual spending).
Is there some sort of regulation that might remedy that?
Scott Walker and Public-Sector Unions
Today POLITICO Arena asks:
Did foes of Scott Walker make a bad bet on the recall?
My response:
We’ll know soon enough whether foes of Scott Walker made a bad bet on the recall, but either way, Wisconsin made a bad bet years ago in initiating America’s public-sector union movement.
The incentives thus established — with concentrated benefits for state employees and dispersed costs for taxpayers — have made it all too easy for politicians to cave in to union demands, resulting over time in government workers with benefits far exceeding anything a rational market would afford – or those who pay for the benefits (taxpayers) can afford. Not surprisingly, therefore, states with strong public-sector unions — California, Illinois, New York — are today in economic disarray.
Bad enough that private-sector unions make businesses less competitive, the remedy for which is moving to right-to-work states or abroad. States can’t move. But their businesses and citizens can — and they do. Witness California over the past decade, and New York for several decades. Scott Walker has done us all a favor by crystallizing the issues facing so many states today.
Romney Needs Spending Cutters
The Washington Times today discusses whether Mitt Romney’s political and policy team is looking too much like George W. Bush’s team. The reporter quotes me in his article:
Chris Edwards, director of tax policy studies at the Cato Institute, a libertarian-leaning think tank, offered glowing reviews of Mr. Romney’s troika of advisers—Mr. Hubbard, Mr. Mankiw and Kevin Hassett, another former member of the Bush team—on issues of taxation and economic policy.
“These are brilliant economists,” Mr. Edwards said before cautioning that Mr. Romney shouldn’t look to Mr. Bush’s team on the spending side.
“A key failing of Bush was that he spent far too much money. Bush’s Office of Management and Budget chiefs, like Joshua Bolten, were not spending cutters. Indeed, they were believers in big government like Bush was,” he said.
“So,” he said, “Romney needs spending-cutting experts to complement these tax experts. Our giant $1 trillion deficits and huge Obama spending increases will be the key thing Romney needs to tackle if he is elected.”
“So he needs experts on how to cut, privatize and downsize federal departments like Housing and Urban Development, Energy and Education. If elected, he needs a hard-line spending-cutting OMB chief. He needs Cabinet secretaries who believe in cutting their own departments.”
Survey: Which States Are Small-Business-Friendly?
As Tad has noted, Thumbtack.com in cooperation with the excellent Kauffman Foundation of Kansas City has produced this attractive, clickable map of the 50 states displaying the results of a survey of small-business friendliness. It’s worth checking out your state’s standing, as well as that of states with which it competes for new business. To a large extent the findings come in just about where one would expect:
- California plus the Northeast (aside from New Hampshire) are the most unfriendly overall. Add in the trio of Midwest industrial states (Illinois, Michigan, Ohio) plus Washington and Hawaii and you get the full list of seriously unfriendly states, with “D+” or worse grades.
- The list of best states also includes few surprises: Texas, Oklahoma, Idaho, Utah, Virginia and several other Southern states.
- Virginia (grade of A) far outdistances Maryland (C-), notwithstanding the views of Washington Post business writers who often chide the Old Dominion for not emulating the economic policies of its neighbor to the north.
- Other states, even in the Northeast, tend to do OK in one or two areas—New Jersey and Vermont avoid piling costs onto new hiring, Connecticut and Illinois are not entirely hopeless on zoning, and so forth. The exception is California: it’s awful on everything.
There are also some data available on the city level.
Tad and Econlog’s David Henderson pick up on the following remarkable sentence from the study:
Small businesses care almost twice as much about licensing regulations as they do about tax rates when rating the business-friendliness of their state or local government.
Everyone knows high taxes depress business activity; it is libertarians who go on to offer a critique of licensure laws, and never has it seemed so relevant.
Facebook Billionaire Gives Up Citizenship to Escape Bad American Tax Policy
It is very sad that America’s tax system is so onerous that some rich people feel they have no choice but to give up U.S. citizenship in order to protect their family finances.
I’ve written about this issue before, particularly in the context of Obama’s class-warfare policies leading to an increase in the number of Americans “voting with their feet” for places with less punitive tax regimes.
We now have a very high-profile tax expatriate. One of the founders of Facebook is escaping to Singapore. Here are some relevant passages from a Bloomberg article.
Eduardo Saverin, the billionaire co-founder of Facebook Inc. (FB), renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill. …Saverin’s stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. …Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities in that country. …“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” said Tom Goodman, a spokesman for Saverin, in an e-mailed statement. …Singapore doesn’t have a capital gains tax. It does tax income earned in that nation, as well as “certain foreign-sourced income,” according to a government website on tax policies there. …Renouncing your citizenship well in advance of an IPO is “a very smart idea” from a tax standpoint, said Avi-Yonah. “Once it’s public you can’t fool around with the value.” …Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records. …“It’s a loss for the U.S. to have many well-educated people who actually have a great deal of affection for America make that choice,” said Richard Weisman, an attorney at Baker & McKenzie in Hong Kong. “The tax cost, complexity and the traps for the unwary are among the considerations.”
Gov. Christie Vetoes ObamaCare Exchange — ‘At This Time’
Today, New Jersey Gov. Chris Christie (R) became the latest governor to throw sand in the gears of ObamaCare, issuing an eleventh-hour veto of a bill to create an ObamaCare Exchange in New Jersey. An excerpt from his veto message:
While I am unwilling to approve the establishment of a statewide health insurance exchange at this time, I am mindful that the requirements of the Affordable Care Act still stand today and I intend to fully oversee New Jersey’s compliance in a responsible and cost-effective manner should its constitutionality ultimately be upheld by the Supreme Court… My Administration will continue this work and stands ready to implement the Affordable Care Act if its provisions are ultimately upheld.
Christie suggests he isn’t yet convinced that Exchanges are per se harmful. He also seems to suggest that if the Supreme Court upholds the law, creating an Exchange might be the best course for the state and that refusing to do so would put the state out of compliance with federal law–neither of which is true. But the veto message contains enough wiggle room for Christie to come out hard against any future ObamaCare Exchange.
Here’s hoping the Supreme Court renders all of this moot.
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