Category Archives: Economics

Miscellaneous economy stuff

Taxes

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A couple of items, via the Tax Foundation:

Americans will pay $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total bill of almost $5.0 trillion, or 31% of the nation’s income.

Think about how much our economy would burgeon if we only paid, say, 20% of GDP on these taxes.  Think about how much more revenue Federal, State, and local governments would collect, despite (or because of) that lower rate, from the hugely increased economic activity and the taxes thereon.

And this graph:NecessitiesAndTaxes

Not only are we spending more in taxes than we spend on the necessities of food, clothing, and housing, we’re spending roughly the same amounts on State and local taxes as we do on food.

It’s not only the Federal government that’s overcharging us.

Good for the Senate

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And too bad for Senator Chuck Schumer (D, NY), who wanted to expand Government yet further and have it dictate business and free market decisions to businesses and customers.

Schumer tried to attach an amendment to a bill renewing a number of the FAA’s programs

would have blocked airlines from further reducing the “size, width, padding, and pitch” of seats, passengers’ legroom and the width of aisles.

Having more room on an airplane is certainly a nice idea, especially on long flights.  However, as with so many things in our lives and our economies, this is a matter for us to determine in a free market, not for Government to dictate in an increasingly government-controlled economy.

Fortunately, the Senate voted down the amendment.  Unfortunately, it was defeated by an essentially party-line vote: this sort of expansion of intrusive Government it all too typical of the Democratic Party.

Elections have consequences.

Do Your Own Work

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Currently, per a 1996 law passed by Congress, the CDC is barred from using funds to “advocate or promote gun control.”  Now, some 100 or more medical organizations want Congress to lift this ban, so they can research “gun violence.”  The letter they’ve written to four Congressional committees making this request can be seen here, and it’s signed by the American Academy of Family Physicians, the American Academy of Pediatrics, and the American Association for the Advancement of Science, among those 100+.

These groups admit that the ban on using CDC funding to conduct this research does not ban the research, but they claim that the lack of government funding amounts to such a ban.

No.  This is just cynicism: if these guys actually thought the research they propose had any value, they’d go ahead and do it.  They’re just demanding OPM so they don’t have to make the hard choices of priority setting.

Elections have consequences.

Fallout

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Pfizer Inc and Allergan PLC terminated their planned $150 billion merger after the Obama administration took aim at the deal that would have moved the biggest drug company in the US to Ireland to lower its taxes.

Yup.  Because the Progressive administration Knows Better than business leaders how those businesses should be managed.

The decision to walk away is the latest setback in Pfizer’s long-running efforts to overcome what Chief Executive Ian Read has said was the company’s competitive disadvantage with foreign rivals that faced significantly lower tax bills.

Of course, Jack Lew, the Treasury Secretary whose tax rules the center of the administration’s aim, knew this would be part of the result.

In addition, the failed deal also hurts Pfizer’s plans to break itself up. Company executives have considered splitting the company for years….

Of course, Lew knew this, too.  This pattern of abuse makes me wonder how closely Lew is coordinating his actions with Richard Cordray, the Consumer Financial Protection Bureau MFWIC.

More Governance by Fiat

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This time regarding American businesses merging with overseas companies and moving to that overseas lower corporate tax environment.  This improves profits for the businesses’ owners, never mind that.  It reduces revenue for the Know Betters in our Government.

The new [Treasury Department] rules, the government’s third wave of administrative action against inversions, will make it harder for companies to move their tax addresses out of the US and then shift profits to low-tax countries….

[Emphasis added]

The aggressive nature of this latest round also comes

from a Treasury Department that has expressed frustration at the limits of its own powers in curbing these transactions.

Because Know Betters always want more power.  It’s not mete that the plebes and commoners should be in their way.  Here’s the gist of these rulers’ latest power grab:

The rules have two main parts….  First, the government would go after what it calls “serial inverters,” large companies created through multiple inversions or takeovers of US companies. The government would disregard US assets acquired by such companies over the previous three years.

And

To reap the full benefits of inverting, the US company’s shareholders should own between 50% and 60% of the merged entity, which requires a partner of carefully calibrated size.

Because business decisions concerning the details of a merger are better made by the Know Betters of Government than they are by the owners and managers of the businesses involved.

And

Treasury’s second action would limit what is known as earnings stripping, a practice that follows many inversions and other cross-border acquisitions that helps lower companies’ effective tax rates.

Inverted companies—in fact, all non-US-based companies—can lend money to their US subsidiaries.  Those moves create deductible interest in the US, reducing the income subject to the 35% US corporate tax rate and shifting income to a lower-taxed jurisdiction.

Because business leaders can’t be allowed to honor their fiduciary duties to the business’ owners by looking to maximize profit and to maximize revenue left in the business’ hands.  No, not when doing that runs counter to the demands of Know Betters for ever more money for Government.

Jack Lew, author of the rules in his capacity as Treasury Secretary had this bit of disingenuosity in defense of his latest stab:

After an inversion, many of these companies continue to take advantage of the benefits of being based in the United States—including our rule of law, skilled workforce, infrastructure, and research, and development capabilities—all while shifting a greater tax burden to other businesses and American families[.]

Never mind that inversions could better be discouraged by lowering our existing corporate tax rates to internationally competitive levels, and which thereby would shift no burden to other businesses and American families.  Lowering taxes is anathema to a gang that sees tax revenue as another path to their political power. (Certainly, Treasury can’t lower tax rates on its own, but Lew is carefully silent on this matter.)

Elections have consequences, folks.