Tag: earnings

Will Taxing Foreign Visitors Promote Tourism?

President Obama is taking a break today from promoting a more federalized health-care system to sign a bill creating a federalized tourist promotion campaign.

In a closed ceremony at the White House, the president signed the Travel Promotion Act. After gaining final passage by the Senate last week, the bill will raise an estimated $200 million a year by imposing a $10 tax on visitors to the United States from countries where they are not required to obtain a visa. The revenue will be used to create and fund a new agency, the Corporation for Travel Promotion, that would work with the U.S. tourism industry to promote the United States as a global travel destination.

I’m all for promoting tourism to the United States. Tourism is an important “service export” that generates more than $100 billion a year in earnings from foreign travelers to the United States. But a new federal agency and a new tax on travel are not the right way to drum up more tourism business.

First, just on principle, promoting a particular industry should be the business of that industry, not the business of government. Americans also export billions of dollars worth of farm goods, semiconductors, machinery, aircraft, pharmaceuticals, and chemicals, along with financial, education, insurance, and other services. None of those industries deserves their own tax-financed promotion board either. If the payoff from promotion is so huge, the industry should be willing to bear its cost without the aid of the government.

More practically, it goes against basic economic logic to promote tourism to the United States by imposing new costs on tourists. Granted, $10 is not a large amount, but the demand curve for tourism is downward sloping - as it is in every other market. A higher price will lead to less demand, not more. As a spokesman for the International Air Transport Association told ABC News:

It’s absolutely counterintuitive. To us, we’re saying we’d love to see more people visit the United States, but we’re going to charge you more for the privilege of entering the country. We are in favor of increased tourism and visitation… but let’s look at our priorities. We don’t think that videos and billboards are necessarily a priority. Instead, we should be focusing on how to make customs and immigration easier for people.

As I argued in a previous post, the U.S. government should be doing more to keep dangerous people off  flights to the United States instead of making it even more difficult for perfectly harmless tourists and business travelers to get on those same flights.

Degree Disaster Behind The Great Wall

Based on my regular reading on education, but not China specifically, I know that the world’s most populous nation has had a lot of trouble finding jobs for its throngs of recent college graduates. I wrote a bit about that yesterday, pointing out that the important higher education lesson from China is that pumping out more college grads is meaningless if they don’t have skills that are in demand. Well, thanks to a very helpful Cato@Liberty reader who actually lives in China (and wishes to remain anonymous) I now have a much better idea just how important that lesson is. He directed me to this Asia Times article that includes, among many fascinating tidbits, this startling revelation:

An explosive report released by the Chinese Academy of Social Sciences (CASS) in September said earnings of graduates were now at par and even lower than those of migrant laborers [italics added].

Wow! If this report is accurate, until now I have had no idea how truly ridiculous Washington’s obsession with pumping out more degrees to keep up with the Chinese has been – and I’ve been pretty sure it’s ridiculous! Much more troubling, if I’ve had little clue about the true extent of the absurdity, imagine how far from grasping it our government-loving federal politicians have been! Of course, as I wrote yesterday, even if they did know it, they probably wouldn’t let on.

Marginal Tax on Corporate Profits was 74.2% in the 1st Quarter

From the Bureau of Economic Analysis news release of May 29:

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $42.6 billion in the first quarter… Taxes on corporate income increased $31.6 billion… [therefore] profits after tax … increased $11.1 billion.

In other words, taxes extracted 74.2% of any added (marginal) corporate earnings, leaving only scraps for stockholder.

Companies that lost money, on the other hand, were often bailed out and/or nationalized.

Why bother even trying to maximize profits or minimize losses?

Tax Bureaucrats Take the Fun out of Everything

The Daily Mail reports that a Romanian student who sold her virginity to the highest bidder as part of an online auction may wind up keeping less than half of her earnings thanks to Germany’s oppressive tax system:

Tax authorities in Germany are poised to claim 50 per cent of the money that a teenage student earned for ‘auctioning’ her virginity… Romanian-born Alina Percea, who is a student in Germany, was paid £8,800 in cash for a weekend of sex with the Italian businessman after she auctioned her virginity online. But tax officials in Berlin regard the 18-year-old’s act as ‘nothing more than prostitution’. Prostitution is legal in Germany – but it is heavily taxed. …It also emerged that, because Alina earned so much in such a short time, she may even be liable for a hefty VAT bill too. VAT in Germany works out to 19 per cent, meaning the sale of her virginity could land her with just over £3,000 in the end.