Europe Takes Another Step Toward Tax Harmonization

Even though several nations are opposed, the European Commission plans to harmonize the definition of taxable income for corporations. It is true that the current system is a hassle for multinational companies, requiring 27 different tax returns for firms operating in all EU nations. But there are good ways and bad ways to address this problem. Allowing firms the option of choosing the “common” tax base would ensure that the bureaucrats in Brussels had less of an incentive to use the new system as a way of extorting more money from businesses. Another option would allow firms to use their home country’s definition of taxable income – an approach that would promote rather than retard tax competiiton since governments would have an incentive to attract companies by using a pro-growth definition of taxable income. Needless to say, the European Commission is not using either of these approaches. The EU Observer reports:

The European Commission is set to press ahead with introducing a single EU company tax base by 2010 in only a limited number of member states, circumventing national veto power in the sensitive tax area. … EU member states are deeply divided over possible harmonization, with 12 capitals in favour, five to seven against and the rest remaining undecided. Britain, Ireland and the Baltic states fear that the next step for Brussels would be interference in the levels of their corporate taxes, an area where EU states compete with each other as well.

Five Years Is a Long Time, Part 3

Here’s what McCain-Feingold did and did not do.

1. BCRA successfully prohibited most party soft money fundraising by federal officials.

So what? 527 groups took up most of the slack.

2. Parties raised as much hard money in 2006 as they had soft and hard money in 2002.

Yes, but they did not raise as much soft and hard money as they would have in 2006 if BCRA had not been passed. This had an interesting consequence…

3. BCRA cost the Democrats 20 House seats in the 2006 election.

Here’s why.

4. BCRA made it illegal to broadcast advertising for a movie criticizing the president of the United States.

If the ads were to run 30 days before a primary or 60 days before a general election. Unless, of course, the film enjoys the media exemption.

5. BCRA criminalized attempts to get people to contact their member of Congress.

If they mention a member’s name in an ad, if it’s 30 or 60 days, you know the drill. But the Supreme Court may yet overturn this part of the law.

6. BCRA may destroy the presidential public financing system.

By raising the hard money contribution limits, thereby making it possible for presidential candidates to run outside the system. But credit must also go to the Internet for lowering the costs of fundraising.

7. BCRA enabled a majority of the Supreme Court to be cowardly in the face of a frontal assault on the First Amendment.

Did I say cowardly? I meant BCRA gave the Court the chance to show “proper deference to Congress’ ability to weigh competing constitutional interests in an area in which it enjoys particular expertise.”

8. BCRA did not prevent corruption.

Remember why congressional Republicans were in trouble in 2006? BCRA didn’t prevent that corruption. Nor did it punish the malefactors. The voters did.

9. BCRA did not restore confidence in government.

Yes, I know. People should not have too much confidence in government. But justices of the Supreme Court care about such things. The American National Election Studies trust in government index fell in 2004 after rising continuously from 1994 to 2002. No prizes for guessing whether it fell or rose in 2006, surely one of the worst years on record for people’s faith that their government is not corrupt. So BCRA passes in 2002 and trust in government falls thereafter.

10. BCRA made John McCain a credible candidate for the presidency.

For now, at least.

11. BCRA did not hurt the Republican party.

They did that all by themselves.

Undermining America’s Social Capital with Redistribution

A new report from the Tax Foundation analyzes the degree of redistribution imposed by government. According to the study:

America’s lowest-earning one-fifth of households received roughly $8.21 in government spending for each dollar of taxes paid in 2004. Households with middle-incomes received $1.30 per tax dollar, and America’s highest-earning households received $0.41. Government spending targeted at the lowest-earning 60 percent of U.S. households is larger than what they paid in federal, state and local taxes. In 2004, between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income quintiles through government taxes and spending policy.

This huge shift of resources punishes those who produce and rewards those who do not. This hurts economic performance by distorting incentives. Investor’s Business Daily identifies another problem that may be equally troublesome. Massive amounts of redistribution create an entitlement mentality. People being to think that government owes them a living. And as an editorial from IBD notes, public opinion data are trending in the wrong direction:

…the U.S. tax code is becoming more progressive, not less. No one minds helping the truly needy. But as with welfare in the pre-1996 reform era, reliance on government can become a habit — imposing huge costs on our national economy. Worse, a ‘what’s in it for me?’ attitude seems increasingly the norm. Once a nation of stoic, self-reliant individualists, America now seems full of people who think other taxpayers owe them something. They see the ‘system’ as a giant cow to be milked — and damn the cow. This is backed up by polling data. In a 1994 Pew poll, 57% agreed with the statement ‘Government should care for those who can’t care for themselves.’ Today, it’s 69%.

Moving (Government) Forward Faster

Washington, D.C., mayor Adrian Fenty released his proposed budget last week.  Titled “Moving Forward Faster,” it’s an example of the sort of thing you’d expect from a D.C. mayor who is quite fond of the nanny state.

To avoid having to read the entire document yourself, here’s the punch-line:  Government spending – that is, expenditures financed by locally-derived revenue, not federal transfers – grows by a proposed 8.8 percent.  By way of comparison, the city’s budget under Mayor Anthony “Baseball” Williams grew by an annual average of 7.5 percent.

But the large increase can be explained by a growing DC population, right?  Nope.  The most recent Census numbers show that the city’s population fell between July 2005 and July 2006.  Even if fewer people flee to Virginia or Maryland this year – or even if more people start actually moving in the opposite direction – it’s virtually impossible that the population growth figures will spike by nine percent.  Average annual population growth since 2003, for instance, hasn’t even come close to breaching the one-percent mark.

Fenty describes his budget proposal as “fiscally conservative” in his transmittal letter to the DC Council.  Yet maybe we shouldn’t ridicule him for that.  Since he’s operating in a city where a Republican president who spends taxpayer money almost as fast as Lyndon Johnson also calls himself “fiscally conservative,” perhaps the mayor is just mimicking the local custom.

Five Years Is a Long Time, Part 2

What has the Bipartisan Campaign Reform Act accomplished over the last five years?

Not much. But don’t take my word for it. Mark Schmitt helped fund the struggle for BCRA as a program officer at the Open Society Institute. Now he has written a candid and thoughtful analysis that begins:

Judged by the most visible results on promises like getting big money out of politics or cleaning up politics, campaign finance reform has been, to put it mildly, a disappointment.

Five Years Is a Long Time, Part 1

Today is the fifth anniversary of the signing of the Bipartisan Campaign Reform Act.

Five years ago, surveys found that 79 percent of the public approved of the job being done by the man who signed McCain-Feingold, George W. Bush. Now 34 percent approve of his work. Until recently, the major sponsor of the law, Sen. John McCain, seemed the most likely candidate to win the Republican presidential nomination for 2008. Now McCain persistently trails Rudolph Guiliani in the polls, and his presidential campaign seems to be in trouble.

If September 11th explained President Bush’s high rating five years ago, the war in Iraq has caused his free fall. Signing McCain-Feingold did show a certain lack of concern about political principles in the current president, but it probably cost him no more than a point or two in his approval ratings.  (In fact, his approval rating fell on average 3 points during the two months after he signed McCain-Feingold).

The case of McCain seems different. GOP primary voters saw and continue to see his campaign finance “reform” jihad as an attack on conservatism, the Republican party, and the U.S. Constitution. He is not liked. That didn’t matter much to McCain, because he believed Republican voters would prefer him, warts and all, to Hillary Clinton.

But that is not the choice Republicans have right now, and the choice they do have in surveys suggests Sen. McCain may not make it to the “me or Hillary” stage of his plan to become president. Perhaps principles do matter after all.

Va., Md. to Require Smoking in Restaurants

As reported in the Washington Onion:

RICHMOND — Virginia governor Tim Kaine (D) proposed yesterday to require all of the state’s restaurants to allow smoking. He stopped short of seeking a wider smoking mandate for most workplaces and public spaces, as some advocates had wanted.

The Kaine proposal comes as Maryland lawmakers are pushing ahead with legislation to mandate that smoking be allowed in all bars and restaurants in that state. Lawmakers must reconcile differences between separate bills passed by the Maryland Senate and House of Delegates, including the process by which businesses could seek hardship exemptions from the law. Maryland governor Martin O’Malley (D) has said he would sign a statewide mandate.

“This is a great day for both restaurant patrons and workers,” said Kelly Bassler, president of the Mid-Atlantic Smoking Coalition. “We applaud both Maryland and Virginia for taking leadership in this very important issue.”

William Lucas, president of the Virginia Chamber of Business, warned that the smoking mandate could ”destroy commerce as we know it. We are still studying it with the recognition that free choice in the marketplace is always our preference.”

Can you believe that Virginia and Maryland lawmakers think they have the right to force all restaurant and bar patrons and workers to adopt the smoking preferences of one group of people? There are plenty of bar and restaurant entrepreneurs who are willing to provide nonsmoking establishments, and plenty of workers who are willing to staff those places, and plenty of nonsmokers (like me) who are willing to patronize them — so why is government prohibiting the market from separating into sub-sectors that cater to nonsmokers and to smokers? Why can’t we nonsmokers have our places and smokers have theirs?

It is utterly outrageous! Where’s the respect for individual choice? Where’s the respect for different preferences? How dare some people force their choice on everyone else in every bar and restaurant in the state! What rotten, dirty, no-good…

…what’s that? What’s that you say? I have it backwards — Virginia and Maryland are considering statewide smoking bans?

Well, same difference—

(My apologies to the Washington Post.)

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