Iran’s Guardian Council announced yesterday that former president Ali Akbar Hashemi Rafsanjani has been barred from Iran’s presidency poll—reportedly due to his old age and debilitating health. In recent weeks, speculation over a Rafsanjani comeback bid had spurred some optimism among Iranians who recognize that their broken economy desperately needed a jolt. Some Iranian voters have described him as a “master of the economy” and the solution to their economic woes. However, a closer look at Iran’s misery index shows just how fatally flawed this perception is.

There is little doubt that the economic policies of current president Mahmoud Ahmadenijad have been a disaster. Even before the United States and European Union imposed economic sanctions over Iran’s nuclear program, Iran’s economy was hardly in good shape.

For decades, the Iranian economy has been cobbled together by a coalition of conservative clerics and Revolutionary Guard commanders. The resulting bureaucratic monstrosity has employed mandates, regulations, price controls, subsidies, a great deal of red tape, and a wide variety of other interventionist devices. Not surprisingly, Iran ranks near the bottom—145th out of 183 countries—in the World Bank’s Doing Business 2013 Ranking, which measures the vitality of free markets and the ease of doing business.

You might wonder, with all this sand in the gears, how has the Iranian economy been able to sustain itself and grow (until recently)?  The answer is—you guessed it—oil.

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A Senate Subcommittee chaired by Senator Carl Levin heard from three panels of witnesses today on Apple Inc.’s corporate tax payments.

Democratic senators and some news stories are making it sound like some vast tax cheating has been going on, but that’s not what the hearing actually revealed. My sense in listening for four hours is that Apple pretty well does what many or most U.S. multinationals do to legally minimize their tax payments on foreign income. No one at the hearing said the company is doing anything illegal.

The basic story seems to be that Apple uses a holding company to gather all the after-tax profits from its sales outside of the Americas. Those sales may or may not be subject to tax in the countries where they occur, but that first layer of tax is up to those particular countries. The holding company is apparently not taxed as an entity in any country, but Apple says that its investment earnings are taxed in the U.S. to the Apple parent company.

The purpose of Apple’s corporate structure that the senators focused on seems to be to avoid double-taxation of its foreign earnings. That goal makes sense because the U.S. is one of few major countries left that does not have a territorial corporate tax system. Essentially, Apple and many other companies are trying to create a home-made territorial tax system so that they can remain competitive in foreign markets. Thus, they are doing the job that Congress should have done in reforming the U.S. international tax system.

Note that Apple holds such a big pile of cash abroad in a holding company mainly because the U.S. applies such a high corporate tax rate to profit repatriation. A major goal of tax reform is to slash America’s absurdly high corporate tax rate so that companies can bring home their piles of foreign cash and invest it here. With such a reform, the issue of whether or not investment earnings of foreign holding companies were taxed would become far less important.

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I have to start this post with a big caveat.

I’m not a fan of the Paris-based Organization for Economic Cooperation and Development. The international bureaucracy is infamous for using American tax dollars to promote a statist economic agenda. Most recently, it launched a new scheme to raise the tax burden on multinational companies, which is really just a backdoor way of saying that the OECD (and the high-tax nations that it represents) wants higher taxes on workers, consumers, and shareholders. But the OECD’s anti-market agenda goes much deeper.

• The OECD has allied itself with the so-called Occupy movement to push for bigger government and higher taxes.
• The OECD, in an effort to promote redistributionism, has concocted absurdly misleading statistics claiming that there is more poverty in the United States than in Greece, Hungary, Portugal, or Turkey.
• The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.
• The OECD supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”
• The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

Now that there’s no ambiguity about my overall position, I can admit that the OECD isn’t always on the wrong side. Much of the bad policy comes from its committee system, which brings together bureaucrats from member nations.

The OECD also has an economics department, and they sometimes produce good work. Most recently, they produced a report on the Swiss tax system that contains some very sound analysis, including a rejection of Obama-style class warfare and a call to lower income tax burdens.

Shifting the taxation of income to the taxation of consumption may be beneficial for boosting economic activity (Johansson et al., 2008 provide evidence across OECD economies). These benefits may be bigger if personal income taxes are lowered rather than social security contributions, because personal income tax also discourages entrepreneurial activity and investment more broadly.

I somewhat disagree with the assertion that payroll taxes do more damage than VAT taxes. They both drive a wedge between pre-tax income and post-tax consumption. But the point about income taxes is right on the mark.

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