Tax Competition Forces Lower Tax Rates in Germany

The Wall Street Journal celebrates the putative announcement of a nine percentage point reduction in Germany’s corporate tax rate. There is a dark lining to this silver cloud since there are hidden tax increases included in the proposal. The initiative also leaves in place some loopholes that could have been used to finance even lower tax rates, but it is nonetheless encouraging to see that one of Europe’s biggest cheerleaders for tax harmonization is being forced to join the tax-cutting bandwagon: 

Europe’s vibrant tax competition has finally reached Germany, which usually prefers to sit back and tut-tut while its neighbors cut taxes and grow their economies. Chancellor Angela Merkel’s cabinet today is expected to slash the top corporate tax rate to 29.8% (the average federal-municipal rate) from 38.7%. That’s still a far cry from flat-tax Slovakia’s 19% or Ireland’s 12.5%. But it would move Germany from the third-highest corporate tax rate in the OECD, after Japan and the U.S., to a more comfortable middle position. …The Finance Ministry missed the opportunity to simplify the tax system in one go. Getting rid of tax exemptions for corporations – thereby broadening the tax base – would have been a useful move. It would have had the added benefit of giving Berlin more room to cut rates beyond the planned nine percentage points. …Over the long run, the corporate tax cuts will likely increase revenues by encouraging economic activity and tax compliance.

How Dumb Do They Think We Are?

For the past six years Democrats have railed against President Bush’s gimmicky, deceptive, wildly unbalanced budgets. Now that they control Congress, they have the power to write their own budgets. And what have they come up with? As the Washington Post explains,

Senate Democrats unveiled a spending blueprint yesterday that envisions a massive expansion of the nation’s health-insurance program for children, as well as billions of additional dollars for other domestic priorities such as public education, veterans’ health care and local police. 

Despite the additional spending, Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, said the proposal would virtually erase the federal deficit within four years without raising taxes and produce a surplus of $132 billion by 2012.

It’s not true that politicians never learn anything. Conrad and his colleagues have learned a great deal from Bush and his budget spinners.

The Government Is Not the Country

The Washington Post reports,

“Three of the last five years, there’s been no budget for this country,” [Sen. Kent] Conrad said in an interview.

Actually, for the past 218 years, there’s been no budget for this country. The country is a vast, sprawling nation of 300 million people, millions of businesses, and more than 100 million households. The country is not a corporate entity, and it has no budget.

On the other hand, there is supposed to be a budget for the federal government, and Congress is indeed derelict in failing to pass one. But politicians should not forget the distinction between the country and the government.

Burning Down the Horse

Matthew Yglesias has sparked an interesting debate over the No Child Left Behind act. It’s an internecine argument among the left-of-heart as to whether NCLB is:

a)     A Trojan Horse intended to destroy public education
2)     A well-intentioned mistake, or
iii)     The inevitably disappointing result of politics as usual

Matthew takes the second of those views, citing Cato scholars’ opposition to the law as evidence that we are… opposed to it. Seems a commendably straightforward line of reasoning to me, but one of his commenters, “Neil,” disagrees:

No, the libertarian think tanks are waiting quietly inside the horse; they will come pouring out waving their policy whitepapers only when the horse is safely within the gates and American schools are deemed to have failed.

Sorry, Neil, but Matthew’s right. Libertarian and free market scholars were loudly attacking government-imposed education standards long before the NCLB was passed, and have continued to do so thereafter. See, for instance, the section in my 1999 book Market Education titled “Government Imposed Curricula: Double-Edged Cookie Cutters.” And far from “waiting quietly inside the horse,” we had a forum at Cato last week at which I argued that the law is ineffective, harmful, inimical to the policies that can achieve its goals, and unconstitutional.

Anyone who checks out the videos or pod-casts of that event will see that at least the second and third explanations for the NCLB listed above are valid. Listen to Dick Armey telling the audience that Congress voted against national standards under Clinton and for them under Bush for partisan political reasons. Listen to Susan Neuman, who helped design the law, explain how good intentions went awry under political pressure.

Yglesias is mistaken, however, when he says that Cato wants to destroy public education. The opposite is true. My colleagues and I are deeply committed to the ideals of public education – that all children should have access to good schools; that they should be prepared not only for success in private life but participation in public life; that schools should foster harmonious social relations.

It is precisely because we are committed to those ideals that we recommend the adoption of a free education marketplace coupled with financial assistance to ensure universal access. Such a system is not an alternative to public education, it is a far better implementation of public education (to borrow terminology from my software past) than the creaking, calcified monopoly we languish under today.

Our current state-run school system is only a tool, not an end in itself. And it just happens to be the wrong tool for pursuing our shared ideals of public education.

“Gun Violence”

As a new round of debate about gun control gets underway, watch out for the term “gun violence.” Stop anyone that uses the term and ask them what they mean by it. “Gun violence” lumps criminal acts and acts of self-defense together.  It obfuscates serious discussion. If the crux of the debate is pacifism, let’s get to it and not talk around it.

I should note that President Bush and his prosecutors talk about “gun violence” too. They say their vigorously enforced firearm regulations “reduce gun violence.”  They want the listener to think they’re locking up violent thugs, but the phrase once again lumps stuff together that ought to be kept apart. For example, undercover officers might buy drugs from an apartment. A few hours later, they get a search warrant and raid the place.  During the search, they find an unloaded handgun in the bottom of a closet. Prosecutors subsequently charge the drug offender with “using a gun during a narcotics offense.”  (No kidding. Go to footnote 54).

For other distortions of language, go here.  For Cato work on gun control, go here.

Bureaucrats Drunk with Power?

Last month, Justin Logan blogged about the socialist alcohol controls in Montgomery County, Maryland. For those of you not in the DC area, Montgomery County is a very wealthy, very liberal Washington suburb with our nation’s only completely government-run alcohol distribution system.

Yesterday, the Washington Post ran an excellent article that describes how this system is an absolute nightmare for the county’s restaurants.

Here’s an overview of the wine distribution process:

Let’s say the restaurant orders the wine from a private distributor on Thursday. The distributor then faxes or hand-delivers the order to the Department of Liquor Control. A county employee writes up a purchase order and faxes it back to the distributor. On Monday or Tuesday, the distributor delivers the wine to the county warehouse. On Wednesday, a white or navy blue box truck bearing Montgomery’s “Gardez Bien” county seal delivers it to the restaurant.

Now contrast that with the privately-run distribution system for restaurants in neighboring jurisdictions:

Restaurants in the District and Virginia buy wine from private distributors at wholesale prices, which includes the distributors’ markup. Placing an order is as easy as making a phone call. If an order comes up short or a large party unexpectedly drinks all the Diamond Creek cabernet, the distributor can make a delivery by the next day.

The system results in major headaches for restaurants, limited wine options for oenophiles, and, of course, greater costs for consumers:

A bottle that wholesales for $100 in the District costs Montgomery restaurants $125. If a restaurant tries to double or triple the purchase price – a standard practice – a bottle priced at $200 or $300 in a District restaurant ends up on a Montgomery wine list at $250 or $375.

You might ask why a county would subject itself to such an inefficient and expensive scheme. Well…

“We benefit financially from it,” [Montgomery County Executive Isiah] Leggett Leggett said. “But more importantly, you don’t see liquor stores all over Montgomery County like you might see in other jurisdictions, and I think citizens like that.”

Call me crazy, but I’d prefer a few liquor stores in my neighborhood over outrageously priced, government-controlled wine.

Government Hall of Shame

The Washington Post reported the other day that there are more delays and cost overruns at the new Capitol Hill Visitor Center.

In my letter in the Post today, I suggest a display case be installed in the visitor center for the most outstanding federal cost overruns: scale models of the Big Dig, the International Space Station, the Denver airport, and much more could be included (see ships, fighters, much more).

Even better would be an independent “Government Hall of Shame” built somewhere near Capitol Hill. That way visitors to Washington could find out how the government really works after they have listened to the bedtime stories about grand federal achievements heard at the usual D.C. tourist stops.

The Hall of Shame could focus not just on outstanding cost overruns, but could also include scale models of infamous pork projects such as the Alaska Bridge to Nowhere. Another display could highlight grand-scale federal failures such as high-rise public housing and the Army Corps of Engineer’s New Orleans levees. 

Madame Tussauds has announced plans to open a D.C. museum. Perhaps they could donate wax figures of Jack Abramoff, Duke Cunningham, Dan Rostenkowski, and other scoundrels to the Hall of Shame.