A Cautious Cheer for French Tax Cut Package

President Sarkozy’s Finance Minister has unveiled a set of tax cuts. Some of the tax cuts, such as lower death taxes and reducing the income tax so that it never exceeds 50 percent, are well designed. But the pacakge also contains gimmicky proposals such as eliminating tax on overtime (one wonders whether every French worker will seek to work 80 hours one week and zero hours the following week, though the government will probably have a plethora of rules restricting the definition of overtime). The government also wants a tax preference for some mortgages, a silly policy that will probably undermine long-term growth by misallocating capital. While Sarkozy’s package leaves something to be desired, the fact that the French government is seeking to cut taxes rather than the other way around is worth applauding. But before popping champagne corks, the Tax-news.com story includes a worrisome mention that these tax cuts may be accompanied by offsetting tax hikes:

French Finance Minister Christine Lagarde has presented an EUR13.6 billion package of tax cuts to the national assembly… The measures, which will cost up to EUR11 billion in 2008 alone, include the removal of taxes on overtime, reducing taxes on inheritances, capping income tax at 50% and the introduction of tax deductibility on some mortgages. …The package places much emphasis on reducing taxes on the wealthy, a measure sure to spark debate that the government is putting the interests of the rich before looking after its more vulnerable citizens. Lagarde however, argued that such measures are vital if France is to be a place of wealth creation. “All you have to do is go to Gare du Nord on Friday night to Eurostar and Thalys arrivals to understand that these French bankers, who have gone to work in the City, those tax exiles in Belgium, want one thing, to come back to France,” she told lawmakers. …However, it remains unclear from the government’s plans whether some or all of the cost of the tax cuts will be recouped with tax increases or spending cuts elsewhere.

Hearing on the Drug Enforcement Agency

This morning there is a congressional hearing about the DEA’s campaign against pain doctors.  The drug war is a disaster in so many ways–but this aspect of the war is particularly cruel.  Siobhan Reynolds of the Pain Relief Network will give members of Congress an earful as to what the government is actually doing.

For Cato work on this DEA campaign, read this and this.

This Could Be the End of 007’s Aston Martin

Motivated primarily by climate change hysteria (with a bit of hate-the-rich envy probably in the mix as well), a British member of the European Parliament wants to ban cars that go more than 101 miles per hour. A Bloomberg columnist dismisses this silly notion and makes a more serious point about how limits on energy consumption are a threat to people in poor nations:

driving a sports car anywhere but on a racetrack might be relegated to history’s dustbin. Fast, powerful cars within a few years may be outlawed in Europe, an idea that has been raised ostensibly because Ferraris and Porsches produce too much carbon dioxide. … Chris Davies, a British member of the European Parliament, is proposing one of the most-extreme measures – a prohibition on any car that goes faster than 162 kilometers (101 miles) an hour, a speed that everything from the humble Honda Civic on up can exceed. … The folks against sports cars in Europe and big sport utility vehicles in the U.S. often are same ones who hate McMansion-sized homes, corporate jets, jumbo freezers, yachts, 60-inch flat-screens TVs, overnight-delivery services and other trappings of Western-style wealth and energy use. … Outside of a handful of command economies, few today would agree that a central authority ought to regulate who owns what. … Calls for limits on carbon dioxide ignore a basic point. People are likely to be better judges of the benefits of fast cars, TVs, air conditioners, and jets than government planners. Besides, the brunt of government limits on energy use may well fall on the world’s poorest nations, which need more energy – thus generating more carbon dioxide – to provide lighting, refrigeration, harvesting, water purification and transportation. What right do environmentalists in rich countries have to deny residents of poorer ones the benefits of higher living standards?

Topics:

Science, Values and Politics

Today’s NYT features a front page, above-the-fold story about former surgeon general Richard Carmona’s charge that the Bush administration interfered with his office by (in the words of the NYT) ”repeatedly [trying] to weaken or suppress important public health reports because of political considerations.” He made the charge yesterday in testimony before the House Committee on Oversight and Government Reform.

Carmona described Bush administration behavior that ranged from petty (urging him not to attend Special Olympics events because of the Kennedy family’s connection to the program) to outright worrisome (directing him, again in the words of the NYT, “to put political considerations over scientific ones”). His claims add to the image of a Bush White House in which political considerations and ideology trump all others.

However, Carmona’s prepared statement suggests that the Bushies aren’t the only folks caught up in ideology.

Carmona considers himself a person of science, and scientists have an important role in policymaking. They try to determine the existence of various empirical relationships (e.g., certain emissions trap heat in the atmosphere; exposure to tobacco smoke increases the risk of cancer) and use those determinations to make predictions about the future (e.g., ongoing emission of greenhouse gases at certain levels will affect the climate; reduced tobacco use will decrease the incidence of cancer). In this way, science informs policymaking by predicting the outcomes of various policy choices.

But though science informs policy choices, it cannot make those choices. Science is a non-normative endeavor, and cannot answer such questions as whether climate change should be avoided, and whether reducing tobacco use should be used as a means to reduce the incidence of cancer. Those are the subject of value judgments — and, for public decisions, of politics.

Many “people of science” do not appreciate this limit on science’s role in policymaking. They assume that once a relationship is established scientifically, policy choices cogently follow. In making this assumption, they enter their own value judgments as suppressed premises in their analyses. Many doctors see bad health outcomes as not just undesirable, but so undesirable that they should be avoided even at high costs; many environmental scientists have the same opinion about environmental damage. Hence, they would argue that “objective, nonpartisan science” calls for policies to limit greenhouse emissions and reduce smoking. In fact, science can do no such thing; value judgments call for (or against) various choices.

To better understand this, consider the role of a doctor. Five separate times in his testimony, Carmona refered to the surgeon general as “the nation’s doctor” (conjuring the image of 300 million Americans sticking out their collective tongues and saying “ahh”). I trust my doctor to make a scientific determination of the state of my health and to lay out various courses of action concerning my health (e.g., lose weight, take medication, exercise more, quit smoking). But I am the one who sets policies concerning my health — I decide whether the costs of some course of action (e.g., the side effects of some drug, or the pleasure forgone by dieting) is worth the health benefits. Likewise, public health policy should be set by elected representatives who are directly accountable to the citizenry, not by “the nation’s doctor.”

But Carmona apparently wants the surgeon general to become a policymaker. He told the House committee:

[T]he Surgeon General [should] speak and act openly and as often as necessary on contemporary health and scientific issues so as to improve the health, safety, and security of the nation.

Indeed, that role may be too modest for Carmona’s surgeon general; he repeatedly argued that the surgeon general should “serve the people and the world.” He offered lawmakers a five-point plan for the U.S. Public Health Service that included the following:

  • Recognize and plan for the fact that tomorrow’s best hope to achieve millennium goals, extinguish asymmetries, eradicate social injustices, and make the world [a] healthier, safer and more secure place may be the newer, softer force projection of health diplomacy via prospective ongoing sustainable missions globally.

So, instead of just being the nation’s doctor (with policymaking power), Carmona’s surgeon general would be a force projector for the world.

Carmona is correct that politicians should not interfere with the scientific analysis of the surgeon general — the surgeon general should follow an empirical question wherever the science leads. And he may even state his personal opinion — couched as such — on the value judgments that ensue from the science. But the surgeon general should not supplant the politicians in making public policy decisions, nor supplant private individuals in making personal health decisions. And, of course, the surgeon general should not doctor scientific findings to conform them to his own value judgments.

Regulatory Madness

In researching my new bulletin, Milk Madness, the weirdest document I came across was this 2003 note from then New York Attorney General, Eliot Spitzer.

Spitzer was going after retailers of milk for “price gouging,” or charging prices that were “excessive.”

Talk about regulatory chutzpah. The federal government runs a milk cartel system, called “marketing orders,” which has the direct goal of raising prices. A federal price support program and import barriers are designed to raise milk prices. It has been federal policy for 70 years to screw milk consumers for the benefit of milk producers.

And the government of New York is going after retailers for overcharging? 

Hillary the Neocon

Don’t miss Ed Crane in today’s Financial Times: “Is Hillary Clinton a neocon?” (Subscribers only, alas; you may have to run out and buy a copy.) Here’s a taste:

“You know, when I ask people, ‘What do you think the goals of America are today?’ people don’t have any idea. We don’t know what we’re trying to achieve. And I think that in a life or in a country you’ve got to have some goals.” Senator Hillary Clinton, MSNBC, May 11 2007

Senator Hillary Clinton’s worldview, as formulated above, is starkly at odds with that of America’s founders. The idea that the American nation had “goals”, just as individuals do, would have been wholly alien to them. For them the whole undertaking of government was to protect our “self-evident” rights to life, liberty and the pursuit of happiness. This emphasis on the primacy of the individual is the essence of true American exceptionalism.

National goals are a euphemism for concentrated national political power. The “Old World” was full of nations with goals, almost all pernicious. The concept of national goals is not so much un-American as it is non-American. But Mrs Clinton persists in promoting the concept, saying at a recent campaign speech in New Hampshire that rather than an “ownership society” she would “prefer a ‘we’re all in it together’ society”. She frequently invokes the notion that Americans want “to be part of something bigger than themselves”.

She has an unusual ally in this. The one other powerful political force in the US today that shares her frustration over the lack of national goals is neoconservatism.  …

UPDATE: Read the whole piece here.

German Corporate Tax Cut is Now Official

Now that the German Senate has given its approval, the corporate tax rate will drop to less than 30 percent beginning next January. Not surprisingly, tax competition was the motivating force. The Tax-news.com story also reveals that Germany will be implementing a lower-rate tax on capital income. The 25 percent rate on interest, dividends, and capital gains will still be too high, but it is an improvement over the current system, which has rates as high as 42 percent:

German lawmakers have given their approval to a key corporate tax reform that will reduce the overall corporate tax burden on companies in Germany by almost 10%, placing the country in the middle of the European corporate tax league table. …

In urging the lawmakers to approve the bill, Peer Steinbrueck, German Finance Minister, argued that the tax cut represents “an investment in Germany as a business location”, making domestic and foreign investments more attractive. …

Germany currently has one of the highest corporate tax burdens in the world, and the business community has long called for rates to be reduced to help breathe life into Germany’s stagnating economy. The new law effectively cuts the corporate tax rate from the current 38.65% to 29.83%. …

The ruling coalition parties have also agreed to introduce a 25% capital gains tax from January 1, 2009. This will replace the current system, whereby capital gains are subject to personal income tax, which can be as high as 42%. This will apply to income from earned interest and dividends, and private investors’ share sales.