Category: Taxes

When the Financial Times of London Sounds Like the Workers Daily World, The Times are a Changing

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London has long had a policy of allowing rich foreigners to live there tax free.

FT columnist Martin Wolf looks at proposals to eliminate this immoral give away to the rich, and finds that too many people in the UK subscribe to the Leona Helmsley way of doing thing.

We live in strange times, as evidenced by his concluding paragraph:

Yet the experience also shows that the case for a simple, neutral and stable fiscal system, which taxes the worldwide incomes of all long-stay residents on the basis of ability to pay, is overwhelming. As soon as one departs from that principle one enters in a maze of special pleading or invidious distinctions, in which failed ideas of industrial policy – subsidising winners through the tax system – return to the fore. If the application of that great principle means some rich people leave the country, so be it.

(Emphasis mine)

GAO is on Juncket to Caymans

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They are actually going to the Cayman islands on legitimate business…no…really…I mean it.

Congress had decided to go after tax havens, and they have sent GAO investigators, and they will be visiting the infamous Ugland House, corporate headquarters for 12,748 companies.

Good for Congress, and good for GAO, it’s investigative arm.

If the Republicans were in charge, this would never have happened, because they believe that, “only little people pay taxes.”

FWIW, offering bounties for tax cheats, as German investigators did with records of trusts in Lichtenstein, would be a very good thing.

Obama’s Presents Economic Plan

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Contrary to complaints, we actually have a decent bit of detail here.

  • Payment for program by elimination of upper class tax breaks and ending Iraq war.
    • My comment: I still think that you need more, at least a thorough review of the Byzantine system of tax credits and deductions to get enough money.
  • A National Infrastructure Reinvestment Bank, spending about $60 billion over the next decade repairing infrastructure.
    • My comment: Good, but we probably need to spend more. Unsure of the amount that states would have to match. Also, should include a similar amount for mass transit and/or freight rail, both of which save energy, etc..
  • Ending tax breaks for moving jobs overseas.
    • My comment: This one has almost become a cliche, but there are also programs that subsidize this in the US that need to be addressed (Ex/Im bank comes to mind).

Generally it’s pretty good. Generally, it’s also pretty similar to Hillary Clinton’s too.

However, there is something else that I found both interesting and laudable, which accompanies his speech (H/T to the other Matthew for the catch), specifically a credit card bill of rights:

  • Ban Unilateral Changes: Currently, credit card companies can unilaterally change the terms of a credit card agreement at any time for any reason with only a 15-day notice to the consumer. Barack Obama will ban these unilateral changes in credit card agreements unless companies have obtained written consent from consumers and have followed the rules and terms of the agreement.
  • Apply Interest Rate Increases Only to Future Debt: Credit card companies often apply increased interest rates to both new debt incurred by the cardholder, as well as previously incurred debt. Barack Obama will require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.
  • Prohibit Interest on Fees: Credit card companies often charge interest on transaction fees, such as late fees or paying a bill by telephone. Barack Obama will prohibit credit card issuers from charging interest on transaction fees.
  • Prohibit “Universal Defaults”: “Universal defaults” are a practice in which a credit card company raises an individual’s interest rate based on failure to pay a different creditor on time. Barack Obama will prohibit this practice.
  • Require Prompt and Fair Crediting of Cardholder Payments: Barack Obama will require credit card issuers to apply payments first to the credit card balance with the highest rate of interest and to minimize finance charges.

This is interesting for a number of reasons:

  1. It’s very good policy.
  2. This is a proposal where there is actually a loser, the credit card issuers, which is a change from his typical proposals where the policy is not a zero sum game.
  3. This is actually a fairly specific refution of the Washington DC/DLC/Milton Friedman orthodoxy that financial services need to be completely deregulated in order to provide maximum benefit. This may be more important than the first two in revealing his attitude on such matters. Much of the credit crunch today is due to the repeal of Glass-Steagel, which was driven by this ideology.

All in all, a solid B+ to my mind.

Senate Democrats Mull Adding Retirees to Rebate Plan, Extending Jobless Benefits

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Senate Democrats are looking about, “giving retirees tax rebates, extending unemployment benefits, boosting heating subsidies for the poor and temporarily increasing food stamp payments.”

This is great politics!!!, and here’s why:

  • Republican or Democrat, the Senate is smarting at having not been involved in the negociations, and there is a bipartisan consensus, in fact a near unanimous consensus that the Senate’s prerogatives should be respected in that body.
  • Getting more money to retirees is a politically powerful thing, because senior citizens vote.
  • There is widespread political support for extending unemployment benefits in the real (i.e. outside of DC) world.
  • Increasing food stamp payments will be seen as being good for American farmers, who figure prominently in a number of red states.
  • Heating subsidies for the poor is also very popular nationwide.

On a policy level, if they were to strike the business tax credits, which will take months to have any effect, and are very inefficient, that would be a good thing.

Pelosi Caves to Republicans….AGAIN

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Yes, Nancy Pelosi, in discussions with Republicansgave up more in food food stamps and an extension to unemployment benefits to get tax rebates for the working poor.

She also gave in on tax breaks for business.

I heard on the radio that 1$ in unemployment benefits generates about $1.60 in economic activity, and $1.70 for the food stamps, while the business tax cuts generate about 25¢ for every dollar.

The unemployment and food stamps also hit the economy in weeks, as opposed to about 6 months for business tax breaks.

Thank you for knuckling under and screwing the economy to give tax breaks to Bush’s buddies.

Yes, Nancy Pelosi, good old Ms.
NOT ON THE TABLE! NOT ON THE TABLE!

Nobel Prize Winning Advice on Stimulus

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From Nobel Prize winner, Joseph Stiglitz:

  • Improving unemployment, which Pelosi has already bargained away.
  • Provide assistance to state and local governments who will be hit with tax shortfalls, particularly in property taxes.
  • More spending on education.
  • Find a way to help victims of predatory lenders without bailing out the perps.

On Bush’s ideas for tax cuts, he says:

The Bush administration has long taken the view that tax cuts (especially permanent tax cuts for the rich) are the solution to every problem. This is wrong. Tax cuts in general perpetuate the excessive consumption that has marked the American economy. But middle- and lower-income Americans have been suffering for the last seven years — median family income is lower today than it was in 2000. A tax rebate aimed at lower- and middle-income households makes sense, especially since it would be fast-acting.

Bernanke supports stimulus package – Jan. 17, 2008

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Bernanke speaks out in favor of a stimulus package, and he is saying that it should help “beleagered consumers” and that it “should be explicitly temporary”.

While he does speak favorably of some temporary tax credits for business investment too, he is not repeating Alan “Bubbles” Greenspans incompetence, and endorsing massive permanent tax cuts.

He’s already put himself well ahead of Ayn Rand’s acolyte in the competence department.

Bush to Hold Stimulus Package Hostage

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Read the article about the Bush Administration strategies.

The stimulus is needed now, but veto anything that does not extend Bush’s disastrous tax cuts, which would otherwise end in 2011.

The fact is that sticking with appallingly bad tax policies in order to create a relatively modest stimulus package is a bad idea both in terms of the well being of the republic, and in terms of politics, and the Democrats should be willing to walk away from the table if this is a condition.

Of course, they will drop the soap instead.

Gas Tax Increase Recommended by National Surface Transportation Policy and Revenue Study Commission

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They have recommended a 40¢ a gallon to meet the infrastructure maintenance for roads and bridges.

Obviously, I think that we need to maintain our infrastructure, but I would add a couple of caveats to any gas tax:

  • Over the road truckers are heavily subsidized relative to railroads, which would generally be more energy efficient and economical, and they should pay their own way, which would imply additional taxes and fees for long haul truckers.
  • If taxes are raised, at least half of the revenues should go to mass transit.

Obviously, our infrastructure is falling apart, and needs to be fixed, but it should not be another subsidy.

The Effect of Proposition 13 On the California Real Estate Market

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A friend of mine pulled a graph from an old story in the Orange County register where they predicted that home prices were expected to fall in 2007. (Well I did say it was an old story, dated 19 October 2006.

What I found interesting was the graphic, what we can learn from it with a bit more data:

Ignoring the obvious, that they underestimated the drop like every other real estate ad supported media entity, we can learn something about the effect of Proposition 13 on the California real estate market.

Proposition 13, passed in 1987, says that a house can only be taxed at 1% of property evaluation, and that absent a sale, that the evaluation can not increase by more than 2% per year.

So that $62,290.00 house in 1977 would now be assessed, absent any intervening sale, at $112,830.00 in 2007, while the true market value would $550,000.00 in 2007.

Truth be told, it would probably be less, if just because houses are getting bigger (McMansions), so let’s call it $508,000.00.

So if you stay in the house, and improve it, and don’t down size it, and leave it to your kids, right now you will be paying 22% the taxes you would if it has been assessed at fair market value.

Under those circumstances, it makes no sense to move to a bigger house when your family gets bigger, you just add on to the existing one, and if you sell to move to a smaller house when the children move out, your profit are wiped out by the tax hike.

There are a whole bunch of people sitting on houses that they would otherwise sell, because of the tax consequences.

So less housing reaches the market, you see less of the empty nesters moving into townhouses, etc., more sprawl, and through supply and demand, prices rise.

You also have the side effect that commerical property is corporate owned, and the corporation is sold, rather than the property, which raises the burden on new home purchasers.

It’s one of the reasons that California is so screwed up.

Senate Folds on AMT to Republicans

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Let’s be clear about this, the Alternative Minimum Tax is just a flat tax. You compute the regular, and the AMT taxes owed, and choose the higher. For all the talk of millions of people being hit, it’s not a big deal.

Most of these people, will pay a few hundred bucks more than they would have otherwise.

When the House passed this bill, they closed loopholes for oil companies and phony capital gains for hedge fund managers to pay for it.

There were the votes to do that in the Senate, but not the votes to overturn a filibuster, so the Senate caved, and passed AMT relief without paying for it, violating pay-go.

At the very least, Reid could have insisted that the Republicans talk. We need a real filibuster, not one of these 24 hour talk fests, but one where you take a vote when the guy stops talking.

So far this year, the Republicans have filibustered more times than during any session ever, and each session covers two years.

Enough is enough. If the Republicans want to filibuster, make them filibuster.

Obama Uses ‘Phant Framing on Social Security

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Barack Obama has chosen the meme that social security is in crisis as his first line of attack against Hillary Clinton. The fact that we have “only 40 years” or so to fix it is something that we need to act upon RIGHT NOW DAMMIT!!!!

I have to go with Chris Bowers’ analysis:

Obama made it clear he would not run as either a partisan Democrat or a partisan progressive from the start.
Back on Sunday, playing on the whole “what happened to the Obama of 2004” theme, the Carpetbagger Report notes we should have seen that Obama was not going to run as a partisan from the start

……

We should have seen that Obama wouldn’t run as either an ideological or Democratic partisan from the start. His 2004 convention speech made that perfectly clear. We should also have seen that a bruised and battered Democratic activist base, after years of defeat, being called traitors, and inability to get Republican to compromise on anything at all, wasn’t exactly willing to just throw their hands up in the air and say to Republicans:

…..

That wasn’t going to happen, even though it would have helped Obama if it had. Democrats, especially the under 50 progressive creative class portion of the party, don’t just want conservatives to finally stop attacking them so everyone can finally all hold hands. Instead, for once, they actually want to win. Unfortunately for Obama, he offered them milquetoast unity instead.

Now, in reaction to being pushed by the progressive base on McClurkin, Atrios notes the many ways that Obama lashes out against progressives:

Aside from the adoption of right wing frames, this kind of statement is incredibly insulting to both the LGBT community who are apparently “hermetically sealed from the faith community” and to the “faith community” which is apparently defined as nothing more than a bunch of anti-gay bigots. Not to mention the Democratic Party, which apparently includes no actual religious people.

It’s really just insulting to everyone, with a touch of “shut the hell up I know best.”

This isn’t new. Obama has done this before. In fact, during 2006, he repeatedly engaged in the long-standing practice of chastising progressives for not being nice to people of faith:

…..

Obama has long criticized the left for being hostile to Americans of faith whenever he was pushed on this topic. In fact, he often made such criticisms without even being pushed. As such, there was no reason to expect that his reaction to criticism of choosing McClurkin, or really his reaction to any progressive criticism, would be any different. If Democrats and progressives criticized anything in his campaign that had to do with faith, those same Democrats and progressives would simply be told that they aren’t properly reaching out to people of faith. At the same time, he has consistently failed to offer progressives and Democrats any red meat, no matter what Republicans would do or say. This is a clear pattern for Obama. We should have seen it coming.

(emphasis mine)

Obama is well spoken, but for whatever reason, and my guess would be his loss to Bobby Rush early in his career, it is clear that he holds liberals in disdain, and it is clear that he wants to be considered one of Washington, DC’s “very serious people”.

The problem is that Washington, DC’s “very serious people” are always wrong. They were wrong on Iraq, they were wrong on social security, they are wrong on Iran and tax cuts, and they continue to be wrong when they say that the adults will take charge in the Bush White House.

Private Players in Most State Lotteries Corrupt and Inefficient

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Given the history of private tax collection, you can go to Paul Krugman’s blog post regarding the return of this activity, it is no of a surprise that the operation of most state lotteries greatly resembles the “Tax Farming” that bankrupted and caused the overthrow of the French monarchy.

It turns out that morally dubious is the most charitable description of how these companies operate, and when one takes the long view, they cost the states money when they operate a lottery.

While a state with an active lottery cannot switch immediately, it would benefit everyone by the lottery oligopoly, Gtech and Scientific Games, to take these functions internal to the state government, where there is far greater transparency.

I have not followed the lottery in Maryland, but it is clear that bribery, or something akin to bribery, has been going on in Texas for years.