Topic: International Economics and Development

Bulgaria Takes Big Step to Flat Tax

In the first test vote, the 10 percent flat tax was approved in Bulgaria by an overwhelming margin. If the Bulgarian experience matches what happened in other nations, the low-rate flat tax will be adopted, the economy will grow faster, and the government will collect more revenue. But just to show that there are some things that remain constant, the bureaucrats at the International Monetary Fund will continue to urge countries not to adopt this simple and fair tax system. The Sofia Echo reports:

Parliament approved on November 23, in first reading, amendments to the Income Tax for Natural Persons Act, which will introduce a 10 per cent flat tax rate starting from January 2008. The amendments were supported with 152 against 36 votes, with four abstentions, Bulgarian news agency (BTA) said. The flat tax rate will replace the current progressive tax system.

England’s Free-Market Future?

No, the title does not refer to possible policy changes if Tories win the next election (after all, that would require a smaller-government agenda). Instead, it is a somewhat tongue-in-cheek reaction to a story in England’s Daily Mail about couples who choose sterilization because they think children cause an unacceptable carbon footprint.

It is probably reasonable to assume that these people have a statist orientation. Since voting patterns and ideological orientation tend to be passed from one generation to the next, the electorate presumably will shift over time in a more market-friendly direction (or at least won’t shift as quickly in the wrong direction).

From the article:

Had Toni Vernelli gone ahead with her pregnancy ten years ago, she would know at first hand what it is like to cradle her own baby, to have a pair of innocent eyes gazing up at her with unconditional love, to feel a little hand slipping into hers — and a voice calling her Mummy. But the very thought makes her shudder with horror. Because when Toni terminated her pregnancy, she did so in the firm belief she was helping to save the planet.

…At the age of 27 this young woman at the height of her reproductive years was sterilised to “protect the planet”. Incredibly, instead of mourning the loss of a family that never was, her boyfriend (now husband) presented her with a congratulations card. …”Every person who is born uses more food, more water, more land, more fossil fuels, more trees and produces more rubbish, more pollution, more greenhouse gases, and adds to the problem of over-population.” While most parents view their children as the ultimate miracle of nature, Toni seems to see them as a sinister threat to the future.

…Toni is far from alone. When Sarah Irving, 31, was a teenager she sat down and wrote a wish-list for the future. …Sarah dreamed of helping the environment — and as she agonised over the perils of climate change, the loss of animal species and destruction of wilderness, she came to the extraordinary decision never to have a child. “I realised then that a baby would pollute the planet — and that never having a child was the most environmentally friendly thing I could do.” …[Her husband] Mark adds: “Sarah and I live as green a life a possible. We don’t have a car, cycle everywhere instead, and we never fly. We recycle, use low-energy light bulbs and eat only organic, locally produced food. In short, we do everything we can to reduce our carbon footprint. But all this would be undone if we had a child. That’s why I had a vasectomy. It would be morally wrong for me to add to climate change and the destruction of Earth.”

New Data Show Lagging Living Standards for Welfare States

The Paris-based Organization for Economic Cooperation and Development is hardly a hotbed of free-market thought. So it is particularly remarkable that the OECD has just released new figures on per capita gross dometic product and per capita consumption.

The latter data, for AIC (“actual individual consumption”), are especially interesting since they allow comparisons of living standards across nations. For the 30 member nations of the OECD, the United States is second, with per capita consumption that is 152 percent of the OECD average, trailing only the small tax haven of Luxembourg.

Europe’s major welfare states, by contrast, do not fare so well. France is at 106, Sweden at 104, and Germany at 103, meaning that their living standards are only about 70 percent of U.S. levels.

The report also has data for both 2002 and 2005. During that period, Iceland enjoyed the biggest increase in living standards, climbing from 113 percent of the OECD average to 128 percent of the average. Not coincidentally, Iceland has been lowering tax rates and reducing the burden of government.

European Politicians, Global Warming, and Moral Preening

European leaders (and their doubtlessly bloated staffs) plan to fly to Lisbon to sign a treaty and then fly to Brussels for a summit the following day.

This has caused a bit of griping, but not because taxpayer funds are being wasted, but rather because all those private jets will cause a large carbon footprint. So in a hollow gesture, the political heads of three countries are going to share a jet.

Gee, how thoughtful.

The EU Observer reports on the farce:

At the insistence of the Portuguese EU presidency, all 27 EU leaders and their delegations will fly to Lisbon on 13 December for a special signing ceremony of the bloc’s new treaty — and then jet on to Brussels for a regular EU summit meeting the next day. The cumbersome travel arrangements allow Portugal to call the new treaty the ‘Lisbon Treaty’ — but they have also led to criticism that EU leaders are setting a bad example by preaching about green values but then unnecessarily contributing to global warming through the short round trip. To reduce at least part of the summit’s carbon footprint, the Benelux leaders will board a Dutch government airplane when flying to and from Lisbon — something suggested by Mr Balkenende.

Without the Farm Bill, We Would All Starve Tomorrow

Farmers’ groups would have us believe that without the multi-billion dollar dollops of taxpayers’ money that flow to farmers, the abundance of food we will all tuck into tomorrow would be reduced to a few grains of (probably foreign) rice. So, with Thanksgiving upon us, I thought I would provide an update of the Farm Bill debate.

Because of procedural wranglings, the Senate last week suspended consideration of the farm bill, possibly until early next year. The Republicans objected to Senate Majority Leader Harry Reid’s wish to limit the number of amendments that could be offered to the farm bill, meaning that time-honored Republican favorites such as the estate tax could not be considered. So, the bill was pulled. Assuming the Senate can pass a re-introduced bill in December, it will probably not go to conference before January.

In the meantime, our esteemed lawmakers are trading jibes about who is to blame for the current gridlock. Pity the farm-state Senators who have to go back to constituents to explain why the farm bill has been held up. In practice, so long as a bill is passed sometime in early 2008, it will probably not affect many farmers. Just in case though, and to placate farmers who say they are incapable of making planting decisions or securing loans without some sort of guarantee of government support, a bill to extend the current farm bill has been introduced.

What does all this mean for reform? Is the current stasis a positive sign? It would be if it reflected a deep unease about the farm bill and a fundamental, principled objection to the very premise of American farm policy. But, alas, so far the debate has been characterized by differences over the best way to deliver farm welfare (see my previous post) and how to spend any savings from higher commodity prices. Even the “alternative” farm bill, introduced by Sens. Richard Lugar (R, Ind.) and Lautenberg (D, N.J) delivers only modest relief to taxpayers, instead spending money on things such as the “Seniors Farmers’ Market Nutrition Program” ($200 million) and $75 million for “socially disadvantaged farmers and ranchers.”

President Bush’s veto threat still looms but, again, I have doubts about how committed he is to vetoing the bill, especially as the presidential election draws near. And, after all, he signed the egregious 2002 Farm Bill.

Britain’s “Incapacity” Racket

The United Kingdom has an “Incapacity” program for people allegedly unable to work. And like the “Disability” portion of America’s Social Security program, the British system is a magnet for fraud. The Times reports that more than $8 million was paid to people who are “too fat” to work. But this is a drop in the bucket compared to the people receiving handouts for mental health reasons. In an obvious sign that people are scamming the system (unless the UK’s government-run health care system is even more dangerous than current stories suggest), the number of people who are ostensibly incapacitated has tripled in less than 30 years:

Almost two thousand people who are too fat to work have been paid a total of £4.4 million in benefit, it emerged last night. Other payments went to fifty sufferers of acne… Billions of pounds is being paid in benefits to people claiming to be unable to work because they suffer from depression, stress, fatigue and unknown or unspecified diseases. …Frank Field, a former Social Security Minister, said last night that too many people were working the incapacity benefit system to avoid work. “It is a racket, which governments have allowed to exist for far too long. I do not blame people for working the system, it is the job of politicians to stop them doing it.” …The number on incapacity benefit has more than trebled since 1979… More than £2 billion was paid in 2006-07 for mental health complaints, including £518 million to those with what are described as “unknown and unspecified” diseases.

WHTI Should Go

Rep. Bart Stupak (D-MI) has had the good sense to introduce a bill to repeal the Western Hemisphere Travel Initiative.

WHTI is a classic self-injurious overreaction to the threat of terrorism. The reductions in lawful trade and travel produced by WHTI and the direct costs of the program are greater than the damage to the country that would be averted by this readily defeated “security” measure.