Tag Archives: economics

SALT Tax

Posted on by
Reply

Short, brief, sweet, and redundant.

One thing threatening serious tax reform—which is to say making permanent the tax rate reductions that otherwise expire near the end of this year, reducing those rates further, and flattening the rates further—is the kerfuffle over the SALT (State And Local Tax) tax deduction cap, currently at $10,000.

I sympathize with the Representatives and Senators, especially the Republican ones, in those States most impacted by the cap. Their wealthier constituents want the cap raised significantly if not eliminated. These politicians, though, must understand that as members of our national Congress, their responsibilities to our nation as a whole runs a very close second to their responsibilities to those individual constituencies.

The business of cap raising/eliminating is nonsense for a couple of reasons. One is that there is no reason at all for the rest of us taxpayers to subsidize those in States with profligate spending and already high taxes. Those Congressmen would do better using their Federal influence and bully pulpit to convince their State and local governments to mend their spendthrift ways and lower their tax rates—the latter which several States (tellingly, mostly Republican led) already have done or are doing.

The other reason is that, aside from empirical evidence that lowering tax rates actually increases revenues to the Federal government from the increased private economic activity that results from more money being left in the hands of us private citizens, revenue reductions—if any—from lowered tax rates is easily covered by reduced spending in general and reduced, if not eliminated, subsidies and tax credits for “green” energy solar and windmill farms, battery cars, federal deductions for non-federal tax collections, and other such tax engineering froo-froo.

Indeed, with sufficiently reduced spending, badly needed increased spending on national defense still could occur.

Raising the SALT tax cap wouldn’t be tax reform, it would be tax deform. In fact, reform here would be eliminating the SALT deduction altogether.

An Independent Greenland’s Budget

Posted on by
Reply

Amid President-elect Donald Trump’s (R) rhetoric regarding buying Greenland from Denmark, there is concern in Greenland about that, but maybe not so much. Greenland already is a largely self-governing island within the Kingdom of Denmark. Greenland already has been pushing for independence, and the Danish government, along with its monarch, is open to considering that, given sufficient interest in independence on the part of Greenlanders.

Greenlanders strongly want independence, they don’t want to be part of the US, but they are highly interested in a closer relationship with us than is politically possible as long as they’re part of the Kingdom—another factor underlying their push for outright independence.

One concern about independence is that with independence, the annual $600 million in transfers from Denmark to Greenland, roughly half the current Greenlandic budget, would stop. What to do about that?

Greenland is rich in a broad variety of natural resources, from oil and natural gas to rare earth minerals to graphite to uranium to precious stones, and on and on. These resources remain largely untapped. The fishing waters around Greenland and in what would become an independent Greenland’s Exclusive Economic Zone also are rich.

Extraction royalties from mining those land based natural resources would easily fill the budget gap, and more. Alaska has been paying dividends to its citizens for nearly 50 years just from oil and natural gas extraction. Texas charges a severance tax—its extraction royalty—on natural gas, oil, and condensate (a byproduct of natural gas production with its own commercial value) production. That tax covers a significant fraction of Texas’ annual budget. With proper (Greenlandic) management the fisheries (and undersea minerals) in Greenland’s EEZ would become another source of national revenue.

Greenland’s budget would more than make up for the loss of Denmark transfers with its own extraction royalties and exploitation fees—which needn’t be all that high to put the nation’s budget well into the black. A trade arrangement with the US that addressed all, or even most, of that would be highly beneficial to both nations.

Beyond that, the US is highly concerned about Russia’s and People’s Republic of China’s moves in the region and in the polar seas and so is interested in expanding existing bases and adding more. Basing rights could come with fees for Greenland, also.

A freely negotiated trade and basing arrangement with an independent Greenland would be a winning arrangement all around. That also would be more revenue positive for us than taking on Greenland as a territory, or even a protectorate.

What’s the Value?

Posted on by
Reply

Cities in the People’s Republic of China are running out of cash while their debts, already vastly excessive, are rapidly growing.

What to do?

In August, a gas supplier [Xinjiang East Universe Gas] in China’s far western Xinjiang region struck a solution to settle $25 million [¥183.3 million] of overdue gas bills racked up by a few state-owned entities in Changji city. Instead of cash, the gas supplier will effectively take over 260 unfinished apartments in a French-themed residential compound being developed by its clients.

That’s become the go-to technique for city governments to welch on settle their debts.

Starting last year, Monalisa Group, a Guangdong-based ceramic tiles manufacturer, accepted apartments as payment instead of cash from its real-estate clients. By September, it had accumulated $19 million [¥139.3 million] worth of investment properties on its balance sheet.
…
More recently in June, Shanghai Urban Architecture Design proposed to take over 115 apartments from developer Greenland Holdings—a Fortune 500 company that defaulted on its bonds in 2023—to settle some $10 million [¥73.3 million] of debts. In December, Sunfly Intelligent Technology, a producer of LED lighting and other electrical equipment, settled $50 million [¥366.6 million] of debts with a group of developers including Country.
In the past three months, three unusual debtors emerged—the county-level police departments in China’s poor, mountainous Guizhou province.

The PRC already has accumulated as many as 90 million empty housing units, units still unsold after all this time.

For companies like Xinjiang East Universe that provide services to China’s cash-strapped local governments, getting half-built apartments “is better than getting nothing[.]”

But only if those structures actually get sold. These unsold apartments are unsold for a reason. How does using them to pay debts make their creditors whole? All the move does is unload the borrower’s white elephant onto the creditor, leaving the creditor still out in the cold with no functional, practical repayment.

White elephants, indeed: most of those apartment structures aren’t even completely built. It’ll cost those creditors additional money to finish them and make them habitable. With that glut of finished housing units already clogging the market, peddling these for less than anything like what might pass for market rates, a depressed price necessary to get them sold, or even rented, will only further depress the PRC’s housing market.

That’s not good for an economy where so much private wealth—family wealth—already is tied up in real estate from the housing boom of a few years before the Wuhan Virus Situation. Residential property represents some 25%-30% of the PRC’s GDP.

So What?

Posted on by
Reply

Fred Krupp, President of the Environmental Defense Fund, is worried that if the incoming Trump administration cuts off subsidies for battery cars, we’ll be ceding battery car leadership to the People’s Republic of China.

Leave aside the fact that our battery car component supply chain (as with so many other of our industry production) remains dependent on the PRC. Pushing battery cars on Americans will increase our dependence on that enemy nation.

Be that as it may, Americans don’t want battery cars. This is demonstrated by the continued need for government subsidies—the tax monies us average Americans remit to our Federal government—in an ongoing effort to con us into buying them anyway, along with outgoing Biden administration efforts to dragoon us into buying these white elephants by raising fuel and emission “standards” to usurious levels intended to ban ICE vehicles.

More than that, satisfying the so-called need for battery cars, the blandishments of left-wing climate Know Betters like the EDF notwithstanding, will not have any material effect whatsoever on slowing the non-existent existential climate crisis that the climatistas are on about.

The subsidies are a waste of our tax money and badly want elimination.

Let the PRC be saddled with—dare I say hobbled by—that transportation dead end and its enormous costs.

Retreating from Net-Zero?

Posted on by
Reply

That’s the claim of The Wall Street Journal editors.

The climate policy retreat is accelerating as Citigroup, Bank of America, and Morgan Stanley this week joined an exodus from the Net-Zero Banking Alliance. Energy reality can bite.

The “retreat” consists of five banks out of the 140 that are members of the NZBA, a gang of banks sworn to refuse the business of any enterprise that isn’t sufficiently climate-sensitive and -activist enough to suit the syndicate. It’s true enough that the five are major players in the world of banking, but they’re still only five.

The editors wrote, also, that mutual fund manager Vanguard had pulled out of the Net Zero Asset Managers pledge. That’s one out of 350 enterprises that took that pledge. The editors wrote further that JPMorgan Asset Management, BlackRock, and State Street Global Advisors have left Climate Action 100+, a collection of some 600 investors who pressure businesses to comply. Three are part of this “retreat.”

However.

Leaving these syndicates and changing their ways of climate-woke behaviors are two different things. We need to see these banks’, investors’, and business’ altered behaviors over some period of time before it’s believable that they’ve changed more than their public rhetoric.