American consumers spend more on health care and housing, less on food and clothes than consumers in Canada, Britain, and Japan.. From the NYT's Catherine Rampell, economix blog:
As we know, it's a lot more on health care:
The guy in charge of getting the city of Harrisburg out of debt has left the building. His one assistant is no longer answering her phone.
He came up with a 200-page recovery plan to get the city out of debt. He shopped it around Harrisburg, taking suggestions and negotiating union contracts.
He seemed like a pretty mellow guy. Bowtie. Glasses. Surrounded in his office by tiny busts of Lincoln's head. Someone very driven by ideas of right and wrong.
...[A] comprehensive study from Citizens for Tax Justice and the Institute on Taxation and Economic Policy that analyzed 280 of America's most profitable companies found that 78 of them paid no federal income tax in at least one of the last three years. It's worth mentioning that the 280 companies also received a total of $223 billion in tax breaks. In fact, the report unearthed thirty companies that enjoyed a negative income tax rate over the three year period, while banking profits totaling $160 billion. ...
The Congressional Budget Office, an independent, non-partisan agency, has reported that the average corporate tax rate on domestic profits - meaning the share of profits that companies actually pay in taxes — is at 12.1%. This is less than half of the statutory rate of 35%, which will be held up as the raison d'etre for American corporations' inability to compete and continually referred to as the highest rate in the world. In fact, the corporate tax rate is at the lowest level since the early 1970s.
...Contrary to what will be heard on the campaign trail today, the U.S. collects less corporate taxes as a share of GDP than all but one of the 26 Organization for Economic Cooperation and Development (OECD) countries for which data are available. The contribution of corporate tax revenue to the federal government decreased from 30 percent in the mid-1950s to 6.6 percent in 2009.It's the base, stupid.
We imagine lobbyists stalking the halls of Congress, trying to influence lawmakers with cash. But often, it's the other way around: Members of Congress stalk lobbyists, looking for contributions.
"Most Americans would be shocked — not surprised, shocked — if they knew how much time a U.S. Senator spends raising money," Sen. Dick Durbin told us.
Not all of the events are boring. There are pheasant hunts, golf tournaments, sailing trips. This past week, for a thousand bucks, you could join South Dakota Senator John Thune at a Van Halen concert. Here's a count of fancy events from 2008 through early 2012:
A Vodafone statement called India's proposal to change its tax law on mergers with retrospective effect "grossly unjust," and said the move seeks to apply tax liabilities "which explicitly were not countenanced under Indian law in force at the time" when the company bought an about 67% stake in the Indian operations of Hutchison Whampoa Ltd. for $11.2 billion.Will be interesting to see how this comes out.
"Dr Kim would be the first World Bank president ever who seems to be anti-growth," said William Easterly, professor of economics at New York University. "Even the severest of World Bank critics like me think that economic growth is what we want."Geithner:
"[Dr. Kim] has an incredible feel for what matters most in development and recognizes that for economies to grow they have to invest in expanding opportunities for their people, in healthcare and in education. Those are lessons that the most successful emerging and developing countries have learned and been forced to learn, and in that sense he has the ideal feel. His experience comes from what he has done in the field, not just from his academic research."Yves Smith is scathing:
"It isn't hard to see how self serving these attacks are. Notice who is making them: economists! When I was at the Atlantic Summit the week before last, Larry Summers made a remarkably transparent "why you need economists" pitch: all the problems the US was facing (big military commitments, need for more healthcare spending, perceived need to reduce the deficit as a percent of GDP) could all be solved with one magic bullet: growth!"
"The Personal Wealth Study uses information reported on Form 706, United States Estate (and Generation Skipping Transfer) Tax Return, to estimate the wealth of the living population. These estimates, based on the Estate Multiplier technique, appear every three years. The estimates are limited to that segment of the population for whom personal wealth is at least equal to the estate tax filing threshold in effect for the estimation period."To go along with the amount gap, though, let's add how many people are in each category:
|Year||Number of Credit Claimants||Percentage Change||Credits Claimed (in milliions of dollars)||Percentage Change|
The essence of the Wanniski argument was that each political party needed to be a different sort of Santa Claus. The Democrats were the spending Santa Claus, promising more government benefits. The Republicans should be the tax-cut Santa Claus, he said.
... Republicans didn’t immediately embrace the two-Santa theory, but began to after Ronald Reagan’s victory in 1980, when he ran mainly in favor of a big tax cut, with far less emphasis on deficit reduction. In office, Reagan pushed for domestic spending cuts but also sharply raised spending for favored programs such as the military.
Although the budget deficit rose to 6 percent of gross domestic product in 1983 from 2.7 percent in 1980, Reagan easily won re-election in 1984. This further convinced Republicans that the deficit was a losing issue and only tax cuts mattered for political success.
The final straw was George H.W. Bush’s support for a tax increase in 1990 to reduce the deficit, which many Republicans say sealed his defeat in 1992 by Bill Clinton.
Since then, fealty to tax cuts and lip service to deficits has become Republican dogma.Norquist picked up the idea and ran with it, though apparently "thought of the same idea himself when he was in the seventh grade." If you haven't yet seen Samantha Bee's interview of Norquist and her exploration of his other grade school epiphany, the two-part pledge that has become the tax policy equivalent of an American flag lapel pin for Republican lawmakers, it's a must-see.
1. Soak the rich
2. Fatten government payrolls
3. Import more skilled labor
4. Universalize preschool
5. Impose price controls on colleges and universities
6. Reregulate Wall Street
7. Elect Democratic Presidents
8. Revive the labor movement
Although economists and other tax scholars occasionally acknowledge the so-called “income effect”—the possibility that people will need to engage in more of an activity, rather than less, in response to a tax increase—the basic story always begins with “Taxes reduce incentives.”
From there, it is a rather straight path to condemning all taxes. Because of the particular (and, to be honest, quite peculiar) set of assumptions that have now become standard in most economic analyses, tax scholars will typically assume that the effects of a tax increase are bad—that is, that it would have been better to have allowed people to do what they would have done in the absence of the tax.
To economists’ credit, some among us have finally begun to speak up about the weak empirical case against taxes. It might be too much to hope that we might also begin to challenge the idea that it is always bad to “distort” behavior, but at the very least, we should certainly insist on describing the big-picture consequences of cutting taxes.
Speaking directly after Schäuble, Luxembourg Finance Minister Luc Frieden showed why the lobbyists, and not democracy, were going to win out on that day. "We have to think about the competitiveness of the financial industry," he said. The small country between the Mosel and Sauer Rivers earns 24 percent of its gross domestic product with banking products.
"There are many good reasons to exempt the investment industry from a tax on the financial sector," the Association of the Luxembourg Fund Industry had told the country's finance minister before the meeting. In addition to Luxembourg, the Maltese finance minister also voiced concerns. The banking system is the blood veins of the global economy and must be treated with caution, he said.The article discusses the predicted effects of broader or narrower transaction taxes on the European and American markets, and concludes:
It is considered certain -- and desirable -- that a general tax would change practices in the financial industry. The European Commission, the EU's executive, forecasts that 15 percent of securities and 75 of derivative deals would be eliminated in the future because, with the new tax, they would simply not be profitable anymore.
Critics of the financial system, like London economist Paul Woolley, view this as the most important benefit of a financial transaction tax. "It's critical that we increase the cost of potentially dangerous transactions that are also highly questionable from a social standpoint."The EU continues to negotiate over the tax without the benefit of Britain's participation, as David Cameron is solidly against: ''I will block it unless the rest of the world all agreed at the same time that we were all going to have some sort of tax.''
280 profitable Fortune 500 companies collectively received $223 billion in tax breaks between 2008 and 2010 while contributing $216 million to Congressional candidates over the last four election cycles.
The thirty most aggressive tax dodging corporations—dubbed the “Dirty Thirty”— collectively paid a negative tax rate between 2008 and 2010 while spending $41 million on Congressional campaign contributions.
Of the 534 current members of Congress, 524(98 percent) have taken a campaign contribution from one or more of these thirty corporations since the 2006 election cycle.Everybody's happy!
A new organization of well-paid doctors thinks that they — and other high-income earners — should pay more in taxes.
“Who knows?” physician Michael Rachlis, one of the founders of Doctors for Fair Taxation, told me Wednesday. “Maybe we’ll start a trend. Maybe we’ll see a Lawyers for Fair Taxation start up.”The reporter says he is not going to hold his breath. He continues:
Most governments don’t have the nerve to scrap progressive taxation entirely. So they’ve been doing it gradually by reducing the number of income-tax brackets and by raising more money through user fees and consumption levies like the HST.
The upshot of this, as a recent study from the Canadian Centre for Policy Alternatives demonstrates, is that the poor in Canada now pay a greater share of their income to government in the form of taxes than do the ultra rich.
Which is the antithesis of the bargain made when governments first began to levy income taxes almost 100 years ago.
Doctors for Fair Taxation argues that a more progressive tax system would be good for human health.I'm not sure what the angle for Lawyers for Fair Taxation would be. Americans for fair taxation of course have the opposite goal.
IRS Commissioner Doug Shulman said at a congressional hearing that, since the beginning of the year, about 1,900 businesses have filed "Schedule UTP" information.
"A lot of the large business issues are international issues - the most serious one is transfer pricing. That's where we're shifting our large business operation," Shulman said.
...This is an area of frequent and intense international tax disputes between businesses and the agency.Others have suggested that transfer pricing is basically impossible to police; here is a recent take from Brazil.
The United States, too, has begun to reduce defence spending after a period of substantial expansion. A reassessment of policy and strategy is under way. The goal is that the long stability operations of the past decade will not be undertaken in future. ... American troop numbers in Europe will fall by 10,000 to around 70,000, while Marines are to deploy to Australia and Littoral Combat Ships to Singapore.
The Pentagon is being forced by Congress to make hard choices. In manpower terms, the army and Marines will see the largest cuts, but all services will have programmes curtailed, cancelled or delayed. Still, the extent of these cuts should not be exaggerated: the US will remain by far the world’s major military power and the only NATO member capable of sustaining large air–sea operations or of projecting substantial ground forces on a global scale for a sustained period.
We suggest that if China and Germany (as major surplus countries) switch their present VAT systems from a destination principle to an origin principle, and the US (as the major deficit country) adopts a VAT on a destination principle, jointly these actions can significantly reduce the three countries’ joint imbalances and so contribute to global rebalancing. ... VAT structures are not only good for global rebalancing but also the changes we consider are beneficial for welfare and revenue collection.And from the paper:
both China and Germany (and the EU more broadly) operate destination based value added taxes under which imports are taxed but exports leave the country tax free. Both have large trade surpluses of about 5% of GDP. Switching to an origin basis which taxes exports and allows imports tax free entry will, given these significant imbalances, raise taxes and effectively also tax imbalances potentially lowering their size. The long claimed neutrality of origin/destination basis switches for the VAT ... only holds for balanced trade, and not for today’s world. In the US there is no VAT, but revenue pressures given the debt and deficit situation could in the next few years potentially result in its adoption. Were this to happen, given the large US trade deficit a VAT in the US introduced on a destination basis could similarly serve to reduce the US imbalance. We also suggest that an internationally coordinated indirect tax change involving China and Germany switching to an origin based VAT, and the US introducing a destination based VAT could potentially lead to a significant change in global external sector rebalancing.
The NHS is Europe's largest employer, with well over 1 million people on the payroll. So you'd think it would be inefficient.
T.R. Reid, a former overseas bureau chief with The Washington Post toured the world's health care systems for his recent book, The Healing of America. Reid says:
"That seems sensible, right? The private sector can do things more efficiently? It doesn't work in health care. The least efficient payers in the world are the American private insurance companies. They have administrative costs of 20 to 30%. That's a 30% tax on every dollar you spend on health care. Britain is totally socialized medicine [and its] administrative costs [are] 5%. Canada is private doctors and public payers - 6% administrative costs. So it turns out, for some reason in health care, governments are doing this more efficiently than our private sector."What is the reason? Is it that the government need not strive to maximize returns to shareholders? Zakaria has a program this evening on CNN, perhaps he will discuss it.
Sorting through the deceptive attacks on health care reform gets old, even for me. But on Wednesday the Republicans and their allies made a claim so obviously misleading that they, and the media outlets parroting them, must have known they spreading false information.
...If CBO had truly determined that health care reform’s cost will be twice the original estimates, it would be huge news. But CBO said nothing of the sort.
...The real news of the CBO estimate is that, according to its models, health care reform is going to save even more taxpayer dollars than previously thought.
I want to be clear about something. The Affordable Care Act has flaws: Among other things, it reaches fewer people and provides less financial protection than I would prefer. The revised CBO report actually suggests this problem will get mildly worse, since it also expects slightly fewer people to end up with insurance. That’s one reason why the law will cost less; it’s helping fewer people. Another reason is that more employers pay penalties for not offering insurance and more people pay penalties pay penalties for not obtaining it. That’s obviously not great, either.
Two Swiss men who acted as “full service tax evasion advisers” helped U.S. clients hide hundreds of millions of dollars from tax authorities, while delivering cash in hotels and through a child courier, prosecutors said.
... Both Thomann, 61, and Beck, 46, met clients in Manhattan hotels to hand them cash they couldn’t withdraw without visiting Switzerland and pick up money to deposit in their undeclared accounts, according to the indictments.
...A person identified as “Client 2” faxed Beck a letter to withdraw $150,000 in 2009 from Wegelin, according to the indictment. An “unknown person” told him to go to an address in Brooklyn, New York, at a particular time, the indictment said.
...Upon Client 2’s arrival, “a small child of approximately five years of age exited from the home located at the specified address, walked up to Client 2’s car, and handed Client 2 a brown paper bag containing approximately $150,000 in cash,” according to the indictment.
U.S. hunts for black money in Europe Financial Times Netherlands
A few days ago, the Netherlands announced that it joins the FATCA implementation agreement between the US and Germany, France, the UK, Italy and Spain. Under this agreement, foreign banks and other financial institutions do not need to report information directly to the IRS, but they will be obliged by national legislation to report it to the government of their home country, which then exchanges it on reciprocal terms with the US. This reduces the reporting burden for the banks and other institutions and for that reason, the agreement is supported - somewhat grudgingly - by the Dutch Banking Association. See the government press release Netherlands prepared to join U.S. and G5 on FATCA.The links take you to articles in Dutch. Google tries hard to translate but I think we'll have to take the TJN's word for it. This implies that automatic information exchange is in the works between the U.S. and a country it called a tax haven (but quickly took back); here is the implementation agreement. Of course all we're doing right now is agreeing to agree:
"the United States, France, Germany, Italy, Spain and the United Kingdom have agreed to explore a common approach to FATCA implementation through domestic reporting and reciprocal automatic exchange and based on existing bilateral tax treaties."
Fascinating comment in the Guardian this morning:
Willie Walsh, the British Airways chief executive, will launch an excoriating attack on the government on Thursday for the absence of a coherent growth plan, accusing ministers of "warm words and cold action".
At the British Chambers of Commerce conference in London, he will say this government and the last Labour administration "produce a growth strategy every week, but none of them up add up to anything".
...he's saying he wants the state to have a growth plan. Now that's an interesting admission.
Second, he says that it's been a failure of neoliberal governments not to have one. Another interesting admission. Third, he's implicitly saying as a result that without the state taking the lead then the private sector goes nowhere. That's true.
Fourth, in that case he admits the state needs the resources to deliver such a plan. That means paying tax is essential. And yet he argues business taxes must be cut. That's absurd: that makes him guilty of thinking much worse than any government.
Fifth, he implicitly says that the state has to do the things the market never can universally to make this work. That includes supplying the private sector with educated, housed, healthy workers who can afford to take the risk on working for the private sector because there's an adequate safety net to let them do so. The state's failed in that role for too long too.
"As someone who chose not to purchase health insurance —and felt strongly that the federal government had no business telling her that she had to buy it whether she liked it or not—Mary had become an active and outspoken critic of the law. As a result, she was the perfect candidate to be a human face on the challenge to Obamacare.
Last fall, Mary Brown and her husband filed a petition of bankruptcy seeking relief for some $55,000 in debts the couple had run up . . . [including] $4500 worth of medical bills...
Almost half of the medical debt run up by the Browns is owed to Bay Medical Center in Panama City, Florida. A spokesperson for the hospital had this say about their experience with the Browns and the many others who cannot pay their medical bills because they have chosen to remain uninsured. “This is a very common problem. We cover $30 million in charity and uncompensated care every year,” “If it’s a bad debt, we have to absorb it.”And related to that is this:
"The financial crisis has changed everything. Now governments desperate for revenue are looking to close loopholes and claw back as much money as they can from taxpayers, through settlement or in court.
Meanwhile, the public mood has turned against avoidance as people take to the street to demand companies pay their fare share of tax. ...
Tax transparency, country-by-country reporting, information exchange and transfer pricing rules are becoming increasingly important issues for taxpayers to consider in terms of their investors, their reputation and their exposure to risk. The issue will only continue to grow in importance in the coming years and, as such, it will become an increasing concern for companies looking more nervously at their bottom lines.
International Tax Review has decided to place itself ahead of the curve and is inviting taxpayers and advisers to join this crucial debate.
The US is already making it harder for young people of modest means to attend college. Public higher education is being starved and the middle class will shrink even more as a result.
...The children of middle- and lower-income families are hardest hit. Remember: The median wage has been dropping since 2000, adjusted for inflation.
... public higher education isn't just a private investment. It's a public good. Our young people - their capacities to think, understand, investigate and innovate - are the US' future.
...Public higher education has been the gateway to the middle class, but that gate is shutting - just when income and wealth are more concentrated at the top than they've been since the 1920s, and when the US needs the brainpower of its young people more than ever.A solution:
A big part of the answer has to be more government support for public education at all levels. This requires more tax revenues - especially from Americans who are best able to pay.
Most Americans still believe in the ideal of equal opportunity. And most harbour the patriotic notion that we have responsibilities to one another as members of the same society.
Over the centuries, proposed answers have varied greatly. Smith declared that the difference between wealth and poverty resulted from the relative freedom of the markets; Thomas Malthus said poverty comes from overpopulation; and John Maynard Keynes claimed it was a byproduct of a lack of technocrats. (Of course, everyone knows that politicians love listening to wonky bureaucrats!) Jeffrey Sachs, one of the world’s most famous economists, asserts that poor soil, lack of navigable rivers and tropical diseases are, in part, to blame. Others point to culture, geography, climate, colonization and military might. The list goes on.He doesn't mention what continues to be one of my favorite books on the subject, Guns Germs & Steel. But the column is on the more recent work (linked to last week), which I have ordered but haven't read yet, by Darren Acemoglu and James Robinson. Davidson says this book argues
"that the wealth of a country is most closely correlated with the degree to which the average person shares in the overall growth of its economy...when a nation's institutions prevent the poor from profiting from their work, no amount of disease eradication, good economic advice or foreign aid seems to help."This seems in tune with the Spirit Level.