Another Example

…of government regulatory failure.  The Financial Industry Regulatory Authority, which regulates, among other financial institutions, brokerage houses, has its own investment portfolio.  FINRA charges fees from those it regulates for their privilege of being regulated.  And

In years when FINRA’s fee revenue exceeds forecasts and investment gains are strong, the regulator can rebate fees paid by firms it regulates.

Investment gains are strong.  However, FINRA turns out to be a crappy investor, getting just two-thirds of the return since 2004, when the regulatory body’s investment portfolio was created, that a simple-minded standard portfolio mix of 50% each of bonds and stocks would have gotten in the same period.  Its return shortfall, 3.4% vs that standard portfolio’s 6%, is a real money shortfall: $440 million for a portfolio of $1.6 billion.

Some Early Thoughts on the Tax Reform Proposal

…triggered by Laura Saunders’ piece in Wednesday’s Wall Street Journal.

Beginning with the headline and thesis of her piece: Winners and Losers Under the Trump Tax Plan. Because Government should be about picking winners and losers instead of just protecting a level free market for all.  Sure.

Now a couple of specifics.

People with large medical or disaster deductions. Each of these write-offs on Schedule A has significant hurdles and is only available to taxpayers with large unreimbursed expenses

Hacks and Hack Disclosures

Equifax took six weeks to get around to bothering to tell us about it so we individual consumers could begin to take our own corrective and defensive action.  That’s unconscionable, Equifax isn’t alone in delaying telling us about hacks into personal information those companies are holding for us, and it’s giving impetus to legislation that would force companies to disclose such hacks much sooner.  One such proposed bill is Congressman Jim Langevin’s (D,RI) reintroduction of the Obama era’s Personal Data Notification and Protection Act.

Hacking

Germany has been struck by a wave of hackers from the People’s Republic of China as the PRC moves to steal from cutting-edge manufacturers.

The German government

is now moving to shield companies from state-backed hackers and criminal gangs, offering to pay to harden the defenses of Germany’s most vulnerable firms.

This is a start, but it’s insufficient.

Hacks like this, originating as they do from a fundamentally autocratic nation, can only be taken as state-sanctioned, if not outright -directed, as such they are overt acts of aggression, and so they require commensurately serious responses.

The Not Good Enough Legacy

Here are some stats regarding Obamacare’s impact on our poor, courtesy of The Wall Street Journal.

More than one in three of taxed [via the individual mandate penalty] households earned less than $25,000, which is roughly the federal poverty line for a family of four.

And

More than 75% of penalized households made less than $50,000 and nine in 10 earned less than $75,000.

And

Fewer families paid the tax in 2015 than in 2014, yet government revenues increased to more than $3 billion from about $1.7 billion, as the financial punishment for lacking coverage increased.

Some Thoughts on Graham-Cassidy

These are…triggered…by Thursday’s Wall Street Journal piece on how the Graham-Cassidy Plan Would Change Health Coverage.

The Congressional Budget Office has said that, without a rule requiring insurers to charge all customers comparable premiums, health plans could become prohibitively expensive for some people with pre-existing conditions.

The plans wouldn’t be insurance plans, either, since the premiums wouldn’t have anything to do with the risk being transferred.  The plans would be welfare plans.

Separately, states could also waive a requirement that insurers provide a set of medical benefits like mental-health services and prescription-drug coverage. If those benefits aren’t required, people with costly medical conditions could have difficulty buying insurance with the relevant services or medications.

Raise Taxes, Don’t Lower Them

That’s what the European Commission says is the correct thing to do.

The European Commission said the EU should proceed with an overhaul of taxes on digital firms even if the rest of the rich world did not follow suit, a draft report said.

And to the point:

The document is part of an EU push to tap more revenues from online multinationals such as Amazon and Facebook, who are accused of paying too little tax in Europe by routing most of their profits to low-rate countries such as Ireland or Luxembourg.

Tax Reform and Legislation

Business CEOs want tax reform.  They’re right, even though to an extent their wish is self-serving.  Or because of that—Adam Smith’s invisible hand, and all that, where every economic actor seeing to his own self interest aggregates to the benefit of all the actors, including those not party to a particular arrangement among particular actors.

Which brings me to a (not very) tangential point regarding a remark by Business Roundtable President & CEO Joshua Bolten regarding target tax rates:

15% would be terrific….  But it doesn’t have to end up at 15% for Business Roundtable companies to be happy about it.

Tax Incentives and Taxes

New York City is offering almost $10 million in tax breaks to get Aetna Inc to move from Connecticut to Manhattan, and this is in addition to $24 million the state is offering.

It’s a good deal, for Aetna, but it’s not a good deal for the people of New York City, or for the citizens of New York State or for the citizens of the United States.  The reason is hinted at by Anthony Hogrebe, Senior Vice President of Public Affairs for the New York City Economic Development Corporation:

False Premise

Budget mavens, politicians, and the NLMSM have one regarding our national tax code.  The Senate is considering a budget that sets an outer bound on the size of Federal tax cuts.

A budget with a tax plan that is revenue-neutral would effectively pay for itself, meaning any reduction in tax rates would be offset by reducing breaks or other revenue-raising measures.

No.  “Revenue neutral” must also consider what’s done with the revenue collected.  Revenue neutrality can be achieved, also, with sufficient spending cuts so that revenue collected meets or exceeds spending outflows.