Jurisdictional Competition Forcing Switzerland to Lower Tax Rates

While Switzerland generally is a low-tax country – at least by European standards – the tax rate on hedge funds if far too high and London dominates the European market. Thanks to this tax competition, Switzerland is moving to lower its tax rate, showing that even tax havens sometimes need jurisdictional rivalry to control the burden of government.

Tax-news.com reports:

The Swiss government is reportedly mulling a plan to improve the tax regime for hedge funds in a bid to lure more fund managers away from London, which currently dominates the European hedge fund industry. … One of the key proposals that has been floated includes a special 10% rate for the fund industry, amounting to an effective cut in the marginal tax rate of 35%. “The financial marketplace is of enormous importance to our country,” Merz was quoted as observing in the report. “I know that we have a disadvantage in taxes. We understand the problem, and we have to solve it.” … Switzerland had been overtaken by competitors which offered more flexible regulatory structures, lower taxes, and access to the lucrative EU market on preferential terms. However, Merz told Bloomberg that the new policy was not designed as a “frontal attack” on London’s hedge fund dominance, but was aimed at stimulating greater jurisdictional competition for fund business in Europe.

Over-Taxed Canadians

Having just survived tax day, Americans may not be in the mood to feel lucky, but at least they should be thankful they do not live in Canada. According to a new report from the Fraser Institute, the average Canadian family is paying 45 percent of its income to the government. Since medieval serfs only paid a third of their income to the Lord of the Manor, Canadian taxpayers need an old-fashioned tax revolt. The National Post reports on the new study:

Taxes are eating into Canadians’ incomes more than ever, costing the average family more than food, clothing and housing combined, suggests a new survey. … The average Canadian family earned $63,001 in 2006 and paid taxes equalling $28,311, almost 45 per cent of its income, while spending 35.6 per cent of its income on food, clothing and housing. According to the institute, 45 years ago that same family earned $5,000 and paid $1,675, or 33.5 per cent of its total income, in taxes. In 1961, the average family spent 56.5 per cent of its income on the necessities of life.

Ron Paul and the Establishment

You get a sense of Ron Paul’s challenge in the Republican presidential race when you look at this Washington Post graphic about early fundraising. Not only is Paul running way behind the frontrunners in the money race, but the Post tells us who some of the notable donors to each candidate are. Mitt Romney is supported, for instance, by Mormon motel mogul J. Willard Marriott. Giuliani has Yankees boss George Steinbrenner. McCain draws support from Henry Kissinger and a managing director of the Carlyle Group. (Can you guess which one is the candidate of the Republican Establishment?) And apparently, the most notable contributor to Ron Paul is … Rob Kampia, director of the Marijuana Policy Project. It’s going to be a long campaign.

For the Democrats, interestingly, the Post eschews listing corporate moguls; instead, it tells us that supporters of the various candidates include Laurence Tribe, Steven Spielberg, Zach Braff, and Paul Newman. Democrats are just so much cooler. And I guess Clinton, Obama, and Edwards just didn’t get any money from The Rich. Funny thing, though, Hillary’s top five zip codes are all in Manhattan, and Obama’s are all in Manhattan or Chicago. Who knew all the hip young TV stars lived in such places? Edwards, however, did pull in a bundle from Beverly Hills 90210.

The Border … Is You

Tomorrow, the House Homeland Security Committee is hosting a “Border Security Tech Fair.”

Vendors scheduled to participate include: Sightlogix, Scantech, Wattre, Hirsch, Bioscrypt, Cogent Systems, Cross Match, L1 Identity, Sagem Morpho, Motorola, L3 Communication, Authentec, Privaris, Mobilisa, and Lumidigm.

I don’t know all of these companies, so I made some educated guesses about the links (and I may have gotten the wrong division of Motorola), but it appears that fully 11 of the 15 participants are in the biometrics industry.

If you think for a minute that this is about the boundary line dividing the United States from its neighbors, I have a bridge to sell you. No wait - I have a “biometric solution” to sell you.  Mobilisa, for example, is being used to run background checks on the citizens of Clermont County, Ohio.

Participants in the Homeland Security Committee’s lunch briefing are all in the biometrics industry.  One of them, James Ziglar, wrote an op-ed in favor of a national ID in Monday’s New York Times. He claims it’s not a national ID, but then, he’s got a biometric solution to sell you.

Sounds Appealing

Jonathan Rauch’s piece on Dwight Eisenhower and the foreign policy vision he handed down to a generation of foreign policy practitioners, includes this little gem:

Eisenhower’s staff secretary and closest aide, Gen. Andrew Goodpaster, once said of his boss, “He was an expert in finding reasons for not doing things.”

Sounds like a good attribute in a president to me.

Is This Libertarian Paternalism?

From the Washington Post:

Other experts are considering more creative ways to improve tax compliance. One idea is to take advantage of people’s desire to get a refund at the end of the year.

“What some people do when they are doing their taxes is they do a first draft and see how much they are getting back,” said Richard Thaler, a University of Chicago economist who studies how people think about money. “If they owe money, then they do a second draft. They keep finding deductions until the refund is positive.”

Thaler said mandatorily increasing withholding levels so more people get refunds could increase compliance because taxpayers would no longer have to go to great lengths to get a refund.

Thaler is one of the leading advocates of “libertarian paternalism,” which Will Wilkinson roundly pummeled the other day.

So is withholding more money from people’s paychecks in order to make the poor dumb sheep think they’re getting money back 16 months later an example of libertarian paternalism? No, it’s just old-fashioned sheep shearing.

Volunteer Today!

This is National Volunteer Week – which is really appropriate, since it’s also the week our federal income taxes are due, and the income tax system is based on “voluntary compliance.” No, really, it says so right on the 1040 packet and throughout the IRS website. Indeed, the friendly folks at the IRS acknowledge (.pdf) that some people get the wrong idea because the IRS itself tells taxpayers in the Form 1040 instruction book that the tax system is voluntary.” But if you take their little online test of “Your Role as a Taxpayer,” they explain to you that it is True that “IRS publications state that the tax system is voluntary,” but it is also True that “The government has the right to force me to pay my taxes and charge me penalties for not paying taxes.” Go figure.

Anyway, if you have any time or money left after paying your taxes, consider doing some volunteer work.