Scant Evidence? That’s Voter Fraud Calling

One of the more clever country song titles I ever heard was If the Phone Don’t Ring, You’ll Know It’s Me.

That’s something like the predicament of searchers after the menace of voter fraud, who can’t seem to find much of it. The New York Times today reports that “scant evidence” exists of a significant problem.

Voter fraud is the idea that individuals might vote multiple times, in multiple jurisdictions, or despite not being qualified. This is distinct from election fraud, which is corruption of broader voting or vote-counting processes. While voter fraud (and/or voter error) certainly happens, it is apparently on a trivial scale. It probably has not changed any election results, and probably will not do so if ordinary protective measures are maintained.

This is important because voter fraud has been used as an argument for subjecting our nation’s citizens to a national ID. The Carter-Baker Commission found little evidence of voter fraud, but went ahead and called for adopting REAL ID as a voter identification card. One of the Commission’s members apparently retreated from that conclusion, having learned more about REAL ID.

For proponents of a national ID, if the phone’s not ringing, that’s voter fraud calling.

A Good Tax Increase?

Fannie Mae and Freddie Mac are quasi-private mortgage companies that receive huge implicit subsidies from taxpayers. So it is difficult to know how to react to a deal between the Bush Administration and Congressman Barney Frank (D-MA) that would skim some money from Fannie and Freddie and use the money for so-called affordable housing. The bill would curtail the ability of Fannie and Freddie to use their subsidized status to expand into new markets, which is good. The bill also would make Fannie and Freddie shareholders unhappy, which is good (or at least amusing) since they have been implicitly profiting from government rather than market forces. But the deal also means more money for politicians to redistribute, which is akin to giving an alcholic keys to a liquor store. The Wall Street Journal reviews the good and bad of the deal:

[Rep Frank’s] bill would tax Fannie and Freddie to the tune of 1.2 basis points of their total book of business – or just over 1/100th of 1% of all the mortgages Fannie and Freddie have bought and packaged to sell to investors. That’s more than $500 million a year, with potential to grow. The Bush Administration has insisted that the fund be disbursed based on non-political criteria, but, c’mon, this is Washington. While the first year’s payout is supposed to go for housing on the Gulf Coast, a honey pot this sweet will soon be passed out based on the interests of the most powerful Members. The larger political danger is that such a fund gives Congress an even greater stake in seeing Fan and Fred grow. The fund amounts to an annual dividend payout to Congress. The Fannie Tax would thus make it even less likely that these “government-sponsored enterprises” (GSEs) will ever be weaned off their implicit taxpayer subsidy and act like normal private companies. Congress could also look at this earmarked tax precedent and try to apply it elsewhere – say, on the profits of energy companies for a “global warming fund.” …the current meltdown in the subprime and Alt-A mortgage markets has led to calls – by the same people now dunning Fan and Fred – for all kinds of new lending oversight, rules and restrictions. Mr. Frank’s latest brainstorm is to stick investors in mortgage-backed securities with the losses when subprime borrowers default. It’s hard to imagine a measure better designed to cut off credit to those Mr. Frank claims to want to help. If investors don’t have legal certainty about the debt they are buying, they won’t lend the money.

Does the Public Understand Causality?

Thankfully, Ezra Klein admits that an L.A. Times op/ed I co-authored with Mike Tanner is not inaccurate. (Phew!) However, he still accuses us of misleading readers.

Klein writes, “The [Levy and Meltzer] study says the evidence suggests [that health insurance improves health], but causality is difficult to discern” [emphasis added]. Seems to me that the Tanner/Cannon claim to which Klein objects – that Levy and Meltzer “were unable to establish a ‘causal relationship’ between health insurance and better health” – positively flows from Klein’s characterization. So tell me again what the fuss is about?

Ah, yes. Klein believes that our characterization misleads the reader. He presumes that “most readers understood that passage to say that the researchers couldn’t establish a relationship between health insurance and health.”

Note that Klein drops the word causal. That’s because he assumes that readers of the L.A. Times’ op/ed page would equate were unable to establish a ‘causal relationship’ ” with were unable to establish any relationship.” That is, either readers of the L.A. Times’ op/ed page don’t know what the word causal means, or they have a blind spot for it when it appears in print. (I do not exaggerate. Klein writes explicitly of “the public’s unfamiliarity with the concept of ‘causality.’”)

That assumption about readers of the L.A. Times’ op/ed page means that Klein is not denouncing what Tanner and I actually wrote (note the substantial agreement above), but what he assumes was the readers’ misinterpretation of what we wrote. Perhaps he should direct his ire at them.

Two conclusions are possible:

  1. Klein, Tanner, and I all have a dim view of readers of the L.A. Times’ op/ed page. Tanner and I are trying to deceive them, while Klein is their savior.
  2. Klein is the only one with a dim view of the readers of the L.A. Times’ op/ed page, and he is willing to slight them if that’s what it takes to defend the idea of universal coverage.

Whatever the case, it’s nice to think that if readers of the L.A. Times’ op/ed page do understand causality, then any attempt Tanner and I made to deceive them would have failed, and Klein would have nothing to criticize.

(Another oddity…Klein accuses my initial response of avoiding his chief criticism regarding causality by “focus[ing] mainly” on the issue of cost-effectiveness. Actually, I spent 600 words on his main criticism and only 131 words on cost-effectiveness. Que peut-on dit dire?)

England Contemplating Territorial Tax Regime

The core principles of good tax policy are low tax rates, taxing income only one time (no more double-taxation of saving and investment), no special loopholes (which also means simplicity), and territoriality (only tax income inside national borders). The Anglo-Saxon world is often guilty of violating the last principle, generally imposing worldwide taxation. Fortunately, tax competition is eroding the ability of nations to impose bad tax policy. The United States, for instance, approved the Homeland Investment Act a couple of years ago, which temporarily allowed companies to repatriate foreign-source income at a much lower rate of tax. The United Kingdom is now considering a a much better solution – a permanent change that would move much closer to a territorial tax regime. As is so often the case, tax competition is the impetus for the reform. British policy makers are afraid that companies are moving abroad to escape the anti-competitive burden of having foreign-source income subject to tax by both the nation where it was earned (which is appropriate) and the British Exchequer. Tax-news.com reports on this potentially important development:

The United Kingdom government is reportedly working on proposals that would allow British-based multinationals to repatriate billions of pounds in profits earned overseas free of tax. According to a report by the Financial Times, the Treasury is preparing to launch a consultation document this Spring which will discuss a number of options, including an European-style “participation exemption” for foreign dividends, as well as a different approach to the anti-avoidance rules that impose tax on profits generated in low-tax jurisdictions. The move by the British government is being viewed as part of its effort to improve the corporate tax regime, after several warnings from business groups that recent additions to UK tax legislation are making the country increasingly uncompetitive compared with its economic rivals. Seemingly heeding these calls, Chancellor of the Exchequer Gordon Brown announced in his budget statement last month a 2% cut in corporate tax to 28%, bringing the UK below the OECD corporate tax average. …it is anticipated that the change would be welcomed by companies, as they would no longer have to apply complex tax strategies to minimise taxes on repatriated profits.

Kurt Vonnegut, Libertarian?

No, probably not. He called himself a socialist. But his satires of war and government often sounded libertarian themes. One libertarian argues that his 1952 novel Player Piano, though usually understood as a critique of technology and automation, can also be seen as a prescient criticism of “neocon America,” in which “the centralization of corporate/government power over the economy and security forces is a legacy of the last war, which was largely responsible for putting engineers and managers in charge of a command economy.”

And he did write one of the great libertarian short stories, “Harrison Bergeron,” the story of a world in which the U.S. Handicapper General gives everyone “handicaps” in order to make us all equal–masks for the beautiful, weights for the strong or fast, buzzers in the brains of the smart. The tagline of the 1995 Showtime movie starring Sean Astin and Christopher Plummer was “All men are not created equal. It is the purpose of the Government to make them so.”

Socialist or not, we could use more satirists and fewer red team/blue team party-liners. We will miss Kurt Vonnegut.

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European Bureaucrats Want Massive Expansion of Savings Tax Cartel

Appeasement generally is not a good strategy since it encourages an aggressor to make additional demands. This certainly is the case in Brussels. The European Commission is gearing up for a campaign to expand the size and scope of the so-called savings tax directive. This cartel seeks to prop up bad tax policy by making it easier for high tax nations to double-tax income that is saved and invested. The bureaucrats in Brussels are upset that the current version of the directive, which was implemented in 2005, is riddled with loopholes, enabling most taxpayers to protect their assets from an additional layer of tax. So now they want to expand the directive, both in terms of the types of savings and investment that would be subject to double-taxation and the number of countries asked to be in the cartel. Hong Kong and Singapore already have told the Europeans that they have no desire to sabotage their economic interests by helping Europe’s welfare states track - and tax - flight capital. This resistance is good news, but the bureaucrats learned from the first round of this battle that it is possible to badger low-tax jurisdictions into making foolish decisions. The Financial Times reports on the European Commission’s radical agenda:

has launched a drive to close the gaping loopholes in a two-year-old European savings law… early evidence is that the directive is failing to bite. Switzerland, the world’s biggest offshore financial centre, only raised €100m in the first six months of the law’s operation. Meanwhile Mr Kovacs is worried that some savers have moved to Hong Kong and Singapore – not covered by the directive – and he is trying to arrange reciprocal deals with them. …Whether he can persuade EU member states and third countries to give their unanimous agreement is questionable: diplomats say big offshore financial centres like Switzerland, Luxembourg and Austria only agreed to the directive precisely because it contained so many loopholes. …A Commission working document…proposes…extending the directive’s reach to include companies and trusts. It also floats the idea of blocking the deliberate routing of interest payments through branches of banks located in jurisdictions not covered by the directive, whose reach also includes several Caribbean islands, the Channel Islands and the Isle of Man. The working paper suggests that the tougher definition of “beneficial ownership” used for anti-money laundering obligations should be adopted for the savings directive. This would bring discretionary trusts and companies into its scope. It suggests imposing a new obligation on EU banks to report – or withhold – interest payments made through non-EU branches. …It suggests reconsidering whether interest-generating securities “wrapped” within life insurance, pension or annuity contracts should be exempt from the directive.

Will Growing Government Turn America into a European Welfare State?

If left on auto-pilot, government spending is going to consume larger and larger shares of America’s economic output. But many people already know about this entitlement-driven crisis. What is less well known is that the tax burden is scheduled to rise significantly as well. In part, this is because the Bush tax cuts are scheduled to disappear at the end of 2010 and the AMT is projected to trap more taxpayers. But the biggest factor is that economic growth leads to “real bracket creep,” meaning more people will face higher tax rates because of rising income levels. Kevin Hassett of the American Enterprise Institute warns that America is at risk of becoming like France if steps are not taken to reduce the tax burden and dramatically curtail the growth of spending:

The U.S. has consistently outgrown its European allies for many years. There is little dispute among economists that the U.S.’s big advantage is its relatively small government. Federal government outlays take up about 20 percent of U.S. gross domestic product; in France, it’s almost 55 percent. …The latest budgetary maneuverings in the U.S. have virtually guaranteed that a good bit of that advantage will disappear, at least if Democrats remain in power. The current laws, as written, have put the U.S. on the road to France. The primary culprit is our programs for retirees. According to the latest long-run outlook of the Congressional Budget Office, government spending may take up fully 50 percent of GDP by 2050. Yet revenue will increase tremendously over the same time period. Revenue relative to GDP, currently a smidgen more than 18 percent, will climb to 23.7 percent by 2050 and extrapolate out to a whopping 27.5 percent by 2075. A spending binge is coming, and a good chunk of the revenue needed to pay for it is coming as well. The bad news for fans of small government is this: Even if spending were reined in enough to keep it equal to revenue, the size of the government will increase by about 50 percent in the coming decades.