Tag: donald trump

Based on His Leaked 2005 Tax Data, Donald Trump Should Move to Italy (or the Isle of Man)

The multi-faceted controversy over Donald Trump’s taxes has been rejuvenated by a partial leak of his 2005 tax return.

Interestingly, it appears that Trump pays a lot of tax. At least for that one year. Which is contrary to what a lot of people have suspected—including me in the column I wrote on this topic last year for Time.

Some Trump supporters are even highlighting the fact that Trump’s effective tax rate that year was higher than what’s been paid by other political figures in more recent years.

But I’m not impressed. First, we have no idea what Trump’s tax rate was in other years. So the people defending Trump on that basis may wind up with egg on their face if tax returns from other years ever get published.

Second, why is it a good thing that Trump paid so much tax? I realize I’m a curmudgeonly libertarian, but I was one of the people who applauded Trump for saying that he does everything possible to minimize the amount of money he turns over to the IRS. As far as I’m concerned, he failed in 2005.

But let’s set politics aside and focus on the fact that Trump coughed up $38 million to the IRS in 2005. If that’s representative of what he pays every year (and I realize that’s a big “if”), my main thought is that he should move to Italy.

Yes, I realize that sounds crazy given Italy’s awful fiscal system and grim outlook. But there’s actually a new special tax regime to lure wealthy foreigners. Regardless of their income, rich people who move to Italy from other nations can pay a flat amount of €100,000 every year. Note that we’re talking about a flat amount, not a flat rate.

Here’s how the reform was characterized by an Asian news outlet.

Italy on Wednesday (Mar 8) introduced a flat tax for wealthy foreigners in a bid to compete with similar incentives offered in Britain and Spain, which have successfully attracted a slew of rich footballers and entertainers. The new flat rate tax of €100,000 (US$105,000) a year will apply to all worldwide income for foreigners who declare Italy to be their residency for tax purposes.

Here’s how Bloomberg/BNA described the new initiative.

Italy unveiled a plan to allow the ultra-wealthy willing to take up residency in the country to pay an annual “flat tax” of 100,000 euros ($105,000) regardless of their level of income. A former Italian tax official told Bloomberg BNA the initiative is an attempt to entice high-net-worth individuals based in the U.K. to set up residency in Italy… Individuals paying the flat tax can add family members for an additional 25,000 euros ($26,250) each. The local media speculated that the measure would attract at least 1,000 high-income individuals.

Think about this from Donald Trump’s perspective. Would he rather pay $38 million to the charming people at the IRS, or would he rather make an annual payment of €100,000 (plus another €50,000 for his wife and youngest son) to the Agenzia Entrate?

Seems like a no-brainer to me, especially since Italy is one of the most beautiful nations in the world. Like France, it’s not a place where it’s easy to become rich, but it’s a great place to live if you already have money.

But if Trump prefers cold rain over Mediterranean sunshine, he could also pick the Isle of Man for his new home.

There are no capital gains, inheritance tax or stamp duty, and personal income tax has a 10% standard rate and 20% higher rate.  In addition there is a tax cap on total income payable of £125,000 per person, which has encouraged a steady flow of wealthy individuals and families to settle on the Island.

Though there are other options, as David Schrieberg explained for Forbes.

Italy is not exactly breaking new ground here. Various countries including Portugal, Malta, Cyprus and Ireland have been chasing high net worth individuals with various incentives. In 2014, some 60% of Swiss voters rejected a Socialist Party bid to end a 152-year-old tax break through which an estimated 5,600 wealthy foreigners pay a single lump sum similar to the new Italian regime.

Though all of these options are inferior to Monaco, where rich people (and everyone else) don’t pay any income tax. Same with the Cayman Islands and Bermuda. And don’t forget Vanuatu.

If you think all of this sounds too good to be true, you’re right. At least for Donald Trump and other Americans. The United States has a very onerous worldwide tax system based on citizenship.

In other words, unlike folks in the rest of the world, Americans have to give up their passports in order to benefit from these attractive options. And the IRS insists that such people pay a Soviet-style exit tax on their way out the door.

Trump Launches Downsizing Effort

President Donald Trump signed an executive order to create a “Comprehensive Plan for Reorganizing the Executive Branch.” The order requires his budget director, Mick Mulvaney, to complete a plan recommending specific spending cuts based on input from federal agencies and outside scholars.

This is a promising initiative. It will be up to Congress to enact the administration’s plan into law, but Mulvaney is a serious reformer who will likely use this opportunity to push for substantial terminations.

The executive order does not just ask for modest efficiency gains, but for major cuts:

The proposed plan shall include, as appropriate, recommendations to eliminate unnecessary agencies, components of agencies, and agency programs, and to merge functions.

The plan contemplates a revival of federalism:

In developing the proposed plan … the Director shall consider … whether some or all of the functions of an agency, a component, or a program are appropriate for the Federal Government or would be better left to State or local governments or to the private sector through free enterprise.

As it turns out, the federal budget includes 1,100 aid-to-state programs costing almost $700 billion a year that “would be better left to state and local governments.” As for free enterprise, we could start by weaning farmers off welfare and allowing them to earn a living in the marketplace like the rest of us do.

The executive order asks Mulvaney to consider, “whether the costs of continuing to operate an agency, a component, or a program are justified by the public benefits it provides.” This is a call for Mulvaney to initiate detailed cost-benefit analyses of spending programs. Federal law currently requires cost-benefit analyses of regulations, but there is no similar accountability for spending programs.

Consider, for example, that Congress spends $8 billion a year on farm insurance subsidies. Taxpayers are supposed to take it on faith that this is a good use of their money. Sorry, but that is just not good enough anymore in an era of $600 billion budget deficits.

So, as a first step, Mulvaney should identify a few dozen major programs that outside experts have pointed to as dubious (such as farm insurance subsidies) and subject them to a rigorous cost-benefit analysis. Such analyses would include the deadweight losses imposed by each program’s needed tax funding, as well as other sorts of damage to society.

Prior presidents have “reorganized” the government in harmful and expansive ways. George W. Bush compounded bureaucracy, wasted money, and reduced efficiency by creating a Homeland Security superstructure on top of 22 existing federal agencies.

The language of Trump’s executive order suggests that he will move in the opposite direction, and Mulvaney is the right man to lead this effort.

To understand the failings of federal bureaucracies, see here.

For a menu of high-priority cuts, see here.

Big Data Tool For Trump’s Big Government Immigration Plans

During his campaign President Trump made it clear that his administration would strictly enforce immigration law while also seeking to limit immigration. Trump’s executive orders so far are consistent with his campaign rhetoric, including a revitalization of the controversial 287(g) program, threats to withdraw grants from so-called “Sanctuary Cities,” the construction of a wall on the southern border, a temporary ban on immigration from six Muslim-majority countries, and the hiring of 10,000 more Immigration and Customs Enforcement (ICE) agents. Recent reporting reveals that these agents, tasked with implementing significant parts of Trump’s immigration policy agenda, will have access to an intelligence system that should concern all Americans who value civil liberties.

Earlier this month The Intercept reported on Investigative Case Management (ICM), designed by Palantir Technologies. ICE awarded Palantir a $41 million contract in 2014 to build ICM. ICM is scheduled to be fully operational by September of this year.

Here is The Intercept’s breakdown of how ICM works:

ICM funding documents analyzed by The Intercept make clear that the system is far from a passive administrator of ICE’s case flow. ICM allows ICE agents to access a vast “ecosystem” of data to facilitate immigration officials in both discovering targets and then creating and administering cases against them. The system provides its users access to intelligence platforms maintained by the Drug Enforcement Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Federal Bureau of Investigation, and an array of other federal and private law enforcement entities. It can provide ICE agents access to information on a subject’s schooling, family relationships, employment information, phone records, immigration history, foreign exchange program status, personal connections, biometric traits, criminal records, and home and work addresses.

Trump’s Bad Economic Reasoning on Infrastructure

Last night’s address to Congress by President Trump was devoid of detail on infrastructure investment. But in justifying his desire to harness $1 trillion of public and private funds for “new roads, bridges, tunnels, airports and railways”, the President used two lines of bad economic reasoning sadly all too prevalent in public debate on this issue.

First was to invoke the building of the interstate highway system. “The time has come,” Trump declared, “for a new program of national rebuilding.” The implication: the interstate highway system was good for the economy, so we should invest more in roads today - a common rhetorical technique, but one which confuses average with marginal.

Previous economic research has indeed found that the construction of the interstate highway system substantially boosted productivity for industries associated with road use. But the same research finds those benefits to be largely one-offs, meaning this analysis does nothing to inform us about new decisions. In fact, more recent work has found that too many new highways have been built between 1983 and 2003, and that marginal extensions to the highway system tend not to increase social welfare, because the cost savings of reducing travel times are small relative to incomes and prices.

In other words, building a highway system can boost growth. Building a second highway system? Not so much. Rather than appealing to grand projects based on historical experience, all new government projects should stand up on their own merits – ideally having high benefit to cost ratios and being things that would not be undertaken by the private sector.

The second mistake was to highlight “creating millions of new jobs” as an aim or positive of any infrastructure spending. When the government is investing to build something, it should aim to do so most efficiently. “Jobs” in this sense are a cost, not a benefit, and ones “created” only come through the diversion of resources and opportunities in other parts of the economy.

Upon visiting an Asian country in the 1960s, Milton Friedman is frequently quoted as reacting to the absence of heavy machinery in a canal build by asking why the project was being undertaken by men with shovels. Upon being told it was a “jobs program,” he is said to have remarked: “Oh, I see. I thought you were trying to build a canal. If you really want to create jobs, then by all means give these men spoons, not shovels.”

If one is concerned with improving the economic growth potential of the economy, then you would base both the selection of projects and the means of undertaking them according to that objective. Sadly, when governments are involved, other ambitions (be it stimulating particular regions, appeasing certain interests, obtaining political prestige or facilitating observable jobs) tend to interfere with the stated aim. The constant talk of the benefits of wise, productive investment is an ambition, rather than something we should expect.

Early Returns on President Trump

During Trump’s surprising presidential campaign, pundits became fond of pointing out that Trump’s supporters took his often-shocking rhetoric seriously, but not literally, whereas his opponents took his rhetoric literally, but not seriously. Today, however, it is obvious that one should take Trump’s words both seriously and literally. In his first month Trump has been busy matching actions to words, temporarily banning immigration from seven Muslim-majority nations and ordering sanctuary cities to detain illegal immigrants, launching work on the U.S.-Mexican border wall, and preparing to lift the ban on the CIA black sites where the United States carried out “enhanced interrogation techniques.”

For those who voted for Trump this first month must surely be a heady viewing experience. For much of the country, however, Trump’s efforts are taking things in the wrong direction, as even his most extreme campaign proposals become reality. From the perspective of the polls, Trump’s first month has met decidedly mixed reviews.

On immigration, for example, Trump signed a short-lived executive order threatening to halt federal funding to so-called “sanctuary cities” that offer protection to illegal immigrants if they do not detain illegal immigrants and turn them over to federal authorities. And before signing two executive orders directing the construction of the U.S.-Mexican border wall, Trump argued that the United States is “in the middle of a crisis border” and that “A nation without borders is not a nation.”

Most Americans see things differently. When asked about illegal immigrants currently living in the United States, a CBS News Poll this month found that 74% of the public thinks they should be allowed to stay, while just 22% thinks they should be required to leave. 61% believe illegal immigrants should eventually be allowed to apply for citizenship. The same poll found that 59% oppose Trump’s plan to build a wall along the U.S.-Mexico border, with 37% favoring it.

Trump Administration Begins Threat Inflation on Iran

In an op-ed for the Boston Herald last week urging the Trump administration to uphold the Iran nuclear deal, I noted that the precise posture that the Trump White House will have toward Iran is not yet known. Today, we got our first insight into just how confrontational that posture will be. And it doesn’t look good.

Trump National Security Advisor Michael Flynn said in a White House briefing that, “As of today, we are officially putting Iran on notice.” According to Flynn, Iran’s recent test of ballistic missiles, which he said is “in defiance of UN Security Council Resolution 2231,” along with an alleged attack on a Saudi naval vessel “conducted by Iran-supported Houthi militants” in Yemen, serve as evidence of “Iran’s destabilizing behavior across the entire Middle East” and make clear that the nuclear agreement signed by Iran and the P5+1 has “emboldened” Iran to act nefariously in the region, “plac[ing] American lives at risk.”

Flynn’s statement amounts to heated, combative rhetoric over rather trivial issues. Only one of the incidents cited by Flynn was an Iranian action. While it’s true that Iran supports the Houthi rebels in Yemen, it has never been clear exactly how much support they give and it is doubtful Iran has the kind of leverage over the militants that make them qualify as strategic proxies. At the end of the day, whatever instability is caused by Iranian support for the Houthis, it doesn’t hold a candle to the regional instability caused by Sunni jihadists, like al-Qaeda-linked groups and ISIS, that have been supported with funds coming out of Saudi Arabia and other Arab Gulf states. Rather than berate the Saudis with threatening bombast in a White House briefing, though, Washington continues to aid the Saudi military as it relentlessly bombs Yemen, killing thousands of civilians, putting millions at risk of starvation, and committing acts that a United Nations panel said could amount to crimes against humanity

With regard to Iran’s ballistic missile test, the reality is far less alarming than Flynn’s words suggest. The nuclear deal itself doesn’t prohibit these missile tests. And as Dan Joyner, professor of international law at the University of Alabama School of Law, explains, “the assertion that Iran’s ballistic missile tests…violate UN Security Council resolutions is incorrect because, as of Implementation Day, all UNSCR’s adopted prior to that date regarding Iran are terminated except for Resolution 2231. And the language that Resolution 2231 employs in addressing Iran’s ballistic missile activity is legally nonbinding language…[T]here can thus be no violation of a legal obligation that doesn’t exist.”

As The Wall Street Journal reports, “UN Security Council Resolution 2231, which endorsed the deal, ‘called upon’ Iran to avoid any activity related to missiles designed to be capable of carrying nuclear warheads.” It’s hard to confirm one way or the other, but for what it’s worth Iranian Foreign Minister Javad Zarif told the Journal that none of Iran’s missiles are designed to carry a nuclear warhead and the tests involved “conventional warheads that are within the legitimate defense domain.” Given that Iran has verifiably rolled back its nuclear enrichment program over the past year, it makes sense that they would have little interest in designing missiles that can carry nuclear warheads, especially given the added international scrutiny it would needlessly attract.

Flynn’s statement indicates an eagerness to stir up tensions with Iran over relatively innocuous issues. This will undoubtedly be perceived in Tehran as threatening, thereby bolstering the more hawkish voices in Iran and undermining the future viability of the Iran nuclear deal, despite the fact that, as the International Crisis Group recently reiterated, “It has delivered so far on its narrow objective: effectively and verifiably blocking all potential pathways for Iran to race toward nuclear weapons.” 

Trump Looking to Local Police for Immigration Enforcement

Last Friday, President Trump issued a misguided executive order affecting migration from seven majority-Muslim countries. In December 2015 Trump called for a “total and complete shutdown of Muslims entering the United States,” until (as his fans never tire of pointing out) elected officials “can figure out what is going on.” News from last week confirms that Trump’s rhetoric related to Muslims was not just campaign bombast; it was a serious policy proposal. Another immigration proposal touted during the campaign was also codified into policy by executive order last week, with Trump directing the Department of Homeland Security (DHS) to expand an interior immigration enforcement program that will grow the federal government’s role in state and local law policing while harming police departments’ relationships with the communities they are tasked to serve. 

Under §287(g) of the Immigration and Nationality Act, local and state police departments can enter into agreements with Immigration and Customs Enforcement (ICE) to enforce federal immigration laws. Thirty-four law enforcement agencies in 16 states are now taking part in the 287(g) program. Up until 2013 this program included “task force” agreements, which allowed participating officers to arrest suspected immigration law violators in the field, and “jail enforcement” agreements. Under “jail enforcement” agreements officers at state and local correctional facilities can seek to identify aliens via interviews and checking their biographic details against DHS databases.

Currently, only jail enforcement agreements are in place. The Obama administration abandoned the “task force” agreements at the end of 2012 amid worries about their negative effect on police-community relationships and accusations of racial profiling.

Trump said that he would “expand and revitalize” 287(g) during a speech last August. An executive order signed last week makes it clear that the Trump administration is serious about such a revitalization and expansion, including a reinstatement of “task force” agreements.

Pages