New Attack Planned Against Low-Tax Jurisdictions

The UK-based Observer reports that Norway’s socialist government is leading a new campaign against low-tax jurisdiction.

The premises are absurd, including the assumption that developing nations will prosper if they get more tax revenue. Moreover, the entire scheme is based on some very dubious “facts,” none of which are substantiated. Most importantly, the article fails to note the many benefits of tax competition, including better tax policy and the protection of human rights:

Plans have been drawn up for an international taskforce to crack down on tax haven abuses orchestrated in large part by bankers, accountants and lawyers in London. As authoritative evidence suggests that $1 trillion of illicit funds flow to secretive havens managed by financiers based in London, New York and Dubai, the Norwegian government is forming a global coalition to ‘facilitate the recovery of assets illicitly stacked away in tax havens’. Several countries are set to join, but Britain, recently classed as an offshore financial centre by the International Monetary Fund, is not among them.

…The imminent formation of an international tax haven taskforce comes as the World Bank, headed by Robert Zoellick, is coming under pressure to establish its first forensic study into the illicit cash flowing out of developing nations. …Exactly 10 times the $100bn spent on aid and debt write-offs by rich countries is siphoned out of developing countries, with corporations responsible for 60 per cent of that figure through a web of trusts, nominee accounts and the flagrant mispricing of goods to escape tax.

…Cracking down on tax havens and the evasion of taxes by some of the world’s biggest companies is seen as the ‘missing link’ in the poverty alleviation agenda. Investigators and lawyers at a conference on the Movement of Illicit Funds in Washington last Thursday confirmed it was corporations and not corrupt politicians in the developing world that accounted for most tax evasion.

Don’t Mess with Texas … Pitchers

Southern-born pitchers are more likely than other pitchers to hit batters in situations where they’ve just given up a home run or a teammate has been hit by the opposing pitcher, an academic study says. According to the Washington Post, business professor Thomas Timmerman was studying the impact of race on pitcher-hitter matchups.

Although he found no link between race and the number of times batters were hit by pitches, he did find an interesting geographical link.

“I found that pitchers from the South are not more likely in general to hit batters,” Timmerman said in a telephone interview, “but they are much more likely to hit batters after giving up a home run, or after a teammate has gotten hit the previous half-inning.”

Timmerman theorizes that this results from the South’s “culture of honor.” Born Fighting, Sen. Jim Webb called it in his book about the Scotch-Irish in America. He wrote about the “rednecks” and their “unique and unforgiving code of personal honor.” Webb wouldn’t be surprised at Timmerman’s findings.

Timmerman used a strictly geographic analysis: he classified pitchers by their state of birth. And he found that half of the active U.S.-born control pitchers who have hit the most batters are from 16 Southern states.

It’s just possible that an ethnic analysis would have strengthened his case. Two of the top non-Southerners on the list, Jeff Weaver and David Wells, were born in southern California. Could they be descended from Okies and Arkies or other Scotch-Irish families who kept heading west and carried the “culture of honor” with them?

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Cato@Liberty: Safe For Children

Libertarians are often associated with such out-of-the-mainstream activities as drugs, gambling, prostitution, etc., because out-of-the-mainstream activities are the very things that intolerant mainstream types try to stamp out via coercion.

But according to the web site mingle2.com, the Cato@Liberty blog you’re reading right now would be rated PG by the motion picture industry.  Evidently, the words “drugs” and “torture” kept us from getting that coveted G-rating. 

Good god, have we gone mainstream?

Last Wishes for Trade Policy

With 19 months left in the Bush presidency, June 30 marks the unceremonious end of his trade policy. Though things haven’t looked bright on the trade liberalization front for quite a while, there was a time when the agenda had promise and its keepers had enthusiasm. Tomorrow’s expiration of the president’s trade promotion authority, thus, accentuates the sadness of promise unfilled. On top of that, responsibility for trade policy is returning to a Congress that is, perhaps, more skeptical of trade than any Congress since the days of Smoot and Hawley.

The main goal of the administration’s trade policy was a multilateral trade agreement. That proved elusive, and now the Doha Round lies in a cryogenic state. The administration did bring home some bilateral and regional deals that are important, but relative to what could have and should have been accomplished, it ain’t much.

As we enter the post-TPA period, there are four trade agreements that have been signed, but not yet approved by Congress. The congressional leadership today finally came out and said they will not support the deals with Korea or Colombia (as expected). They offered support for Peru and Panama, but we’ll see whether the rank and file goes along. I’m skeptical.

Regrettably, we may have to endure a dark period on trade policy as members of Congress work to outdo each other with ridiculous, self-defeating legislation. The last responsibility of the Bush administration on trade policy, then, is to hold the line against the onslaught of anti-trade, anti-China legislation and make sure none of those bills becomes law.

Raise Your Own Darn Taxes

In a Politico story about what appears to be push-polling (“a political campaign technique in which an individual or organization attempts to influence or alter the view of respondents under the guise of conducting a poll”) by Hillary Clinton is this gem:

Freeman Ng, a software designer in Oakland, Calif., reported getting a call late in the morning of May 5.

He wrote on DailyKos that day that he was asked how the fact that “Barack Obama failed to vote in favor of abortion rights nine times as a state senator” might affect his vote.

He said he was also asked a question that associated Edwards with tax hikes.

“A lot of the statements struck me as being very conservative and moderate in orientation, like the tax thing,” said Ng, who stands well to the left of center. “To me, that was a plus that he’s going to raise my taxes.”

Hey, you wanna pay more taxes? Fine, pay more taxes. Nobody’s stopping you. But leave me out of it.

Warren Buffett’s Faulty Tax Math

Class-warfare activists were delighted when Warren Buffett recently complained that his tax rate was too low and that his secretary was subject to a higher effective tax rate. The various news reports, including the excerpt below from Tax-news.com, do not provide any detail on Buffett’s taxes, but he almost certainly was being either dishonest or ignorant.

It is probably safe to assume that Buffett receives lots of dividend income and that he also declares a considerable amount of capital gains, both of which are subject to a 15 percent tax rate on an individual tax return. What he did not mention, however, is that corporations pay a 35 percent tax before distributing dividends to shareholders, so the actual effective tax rate on that portion of Buffett’s income is closer to 50 percent.

The capital gains tax is another example of double taxation. An increase in the value of a stock is a reflection of an anticipated increase in the future income stream from that stock. Yet that income stream will be taxed (usually two times!) when it occurs. The real effective rate on that portion of Buffett’s income is harder to calculate, but it certainly will be far higher than 15 percent.

Shifting gears, Buffett’s calculations almost surely include Social Security payroll taxes, which only apply to the first $90,000 of income in exchange for not providing huge benefit payments to rich retirees. Indeed, the overall program is highly progressive once benefit payments are added to the equation, so Buffett’s secretary gets a better deal than he does from Social Security (though both would be better off with a system of personal retirement accounts).

Last but not least, if Buffett really thinks he is not paying enough to government, he can write a check to George Bush, Ted Kennedy, and Nancy Pelosi. But he should not try to assuage his feelings of guilt by seeking higher taxes on other people:

Warren Buffett, perhaps the most successful investors of modern times and one of the world’s wealthiest men, has spoken out against the U.S. tax system which allows him to pay proportionately less of his multi-million dollar annual income in taxes than his cleaning lady. Addressing attendees at the $4,600-a-place fund-raising dinner for the Hilary Clinton presidential campaign, Buffett, who runs investment group Berkshire Hathaway and is reputedly worth $52 billion, told the 600 Wall Street bankers and money managers that: “(We) pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.” According to Buffett, he makes no use of tax shelters to mitigate his tax liability, but still managed to pay an average tax rate of 17.7% on his $46 million income last year. By comparison, his secretary, who earned $60,000, paid tax at 30%.