Category Archives: regulation

False Tax Premises

Posted on by
Reply

Edward Kleinbard, a USC law professor, had some thoughts on tax inversions, the process whereby a domestic company merges into a foreign company and moves its headquarters to that foreign company’s domicile in order to avoid high domestic taxes. The subject has come up in the last few weeks in the context of US companies doing the inversions. Dr Kleinbard, though, is proceeding from some false premises.

He argues, for instance,

Firms that invert argue that the deals are…harmless to US tax-revenue collection, and a necessary response to our anticompetitive world-wide corporate tax system. [“Harmless” is] demonstrably false…..

If allowed to continue, inversions will eviscerate the US domestic corporate tax base, because making a foreign company the parent of a US firm opens up new tax-avoidance possibilities.

The false premise is this. It isn’t the government’s money; it’s the money of the corporation’s owners. It simply isn’t possible for the government to be harmed by not receiving that which doesn’t belong to it.

Moreover, there shouldn’t be a “US domestic corporate tax base” in the first place. The corporation really doesn’t pay much of those taxes; the corporation’s customers do in the form of higher prices—which ultimately makes the American citizens doubly taxed.

Another of Kleinbard’s false premises is this:

Corporate tax reform will not be able to undo the damage done to the US tax base.

Part of this second error is simply a restatement of the first: no damage can be done to the government’s tax base by not receiving that which doesn’t belong to the government.

The larger question here, though, is the predicted failure of corporate tax reform. With American corporate tax rates lower than anywhere else in the world (their complete removal, say I) the US will be far more attractive to all companies, foreign and domestic. Including to those inverted companies, still inverted, or with the inversions undone as the more attractive alternative for the putative new senior partner company.

Besides, in the end, as always, the government doesn’t need the money; it needs to reduce spending.

The Wrong Question

Posted on by
Reply

Jim Angle, of Fox News, usually does better than this.

“Right now the savings that was projected to pay for all this spending [on Obamacare] is not being collected as originally projected,” said Charles Blahous, of the Mercatus Center. He estimated the law will eventually cost $200 billion a year by 2020.

And

“There was about $100 billion that was supposed to come in over the next 10 years from penalties on individuals, if they did not carry health insurance, penalties on employers, if they do not offer health insurance, and to date, those penalties have not been enforced,” Blahous said.

The law also counted on more than $700 billion in cuts to Medicare, including up to $150 billion in cuts to Medicare Advantage, but the president set those aside at the behest of Senate Democrats who feared angering seniors in an election year.

It’s gotten so bad that the CBO will no longer do estimates on Obamacare’s costs, Angle cites American Enterprise Institute’s Joe Antos as saying.

But then Angle goes astray:

The changes, and the overall uncertainty regarding the price tag, are raising concerns about whether the law even has enough revenue coming in to pay for the program.

This is the wrong question. The delays and alterations illustrated above show the essential capriciousness of any government effort—not just the present administration’s effort; this one is only the most active—at emulating a private business arrangement. This law shouldn’t have any revenue coming in to pay for it. This should be a private enterprise matter, with private enterprise raising the money for its private enterprise endeavor—or the endeavor fails, because the free market—American citizen participants—don’t want it. The law shouldn’t exist.

The Democrats Don’t Like Speech?

Posted on by
Reply

At least when it’s not been approved by them. This Constitutional Amendment passed out of the Senate Judiciary Committee last Thursday on a straight party line vote:

                       JOINT RESOLUTION

Proposing an amendment to the Constitution of the United

States relating to contributions and expenditures intended

                       to affect elections.

1 Resolved by the Senate and House of Representatives

2 of the United States of America in Congress assembled (two

3 thirds of each House concurring therein), That the fol

4 lowing article is proposed as an amendment to the Con

5 stitution of the United States, which shall be valid to all

6 intents and purposes as part of the Constitution when

7 ratified by the legislatures of three-fourths of the several

8 States:

1                          “ARTICLE—

2 “SECTION 1. To advance the fundamental principle

3 of political equality for all, and to protect the integrity

4 of the legislative and electoral processes, Congress shall

5 have power to regulate the raising and spending of money

6 and in-kind equivalents with respect to Federal elections,

7 including through setting limits on—

8          “(1) the amount of contributions to candidates

9 for nomination for election to, or for election to,

10 Federal office; and

11         “(2) the amount of funds that may be spent by,

12 in support of, or in opposition to such candidates.

13 “SECTION 2. To advance the fundamental principle

14 of political equality for all, and to protect the integrity

15 of the legislative and electoral processes, each State shall

16 have power to regulate the raising and spending of money

17 and in-kind equivalents with respect to State elections, in

18 cluding through setting limits on—

19         “(1) the amount of contributions to candidates

20 for nomination for election to, or for election to,

21 State office; and

22         “(2) the amount of funds that may be spent by,

23 in support of, or in opposition to such candidates.

1 “SECTION 3. Nothing in this article shall be con

2 strued to grant Congress the power to abridge the freedom

3 of the press.

4 “SECTION 4. Congress and the States shall have

5 power to implement and enforce this article by appropriate

6 legislation.”.

Sections 1 and 2 are identical other than Sect 1 addresses Congress’ power, and Sect 2 addresses States’ power. The key phrase is this: shall have power to regulate the raising and spending of money and in-kind equivalents with respect to Federal elections, including through setting limits on together with its applicability to limiting contributions. It’s open-ended. A party in the majority would be fully empowered by this Amendment, were it to pass, to set the limit at zero regarding candidates of the opposing party. Even were the limits found required to be applied equally to all candidates, the incumbents would have the critical advantage of already having, for instance, name recognition and the bully pulpits of their elected offices to spread their messages—advantages denied the other candidates by their inability to purchase air and newspaper time, or to stump.

This is a guaranteed incumbency amendment, and nothing else.

The EU, Immigration, and National Sovereignty

Posted on by
Reply

Germany can’t require the spouses of Turkish immigrants to show a basic knowledge of the German language before granting them visas, the European Union’s top court ruled on Thursday, overturning a condition aimed at preventing forced marriages and at promoting integration.

Foreigners, after all, shouldn’t be expected to assimilate into the culture and country to which they emigrate; they should continue to live apart from their new community, leading in the aggregate to the fractionation of their new “country.”

There are complications in this particular case (there always are when law is involved), but that’s the thrust of this ruling. The court went on:

A new restriction might be permitted if it were justified by an overriding public interest, and didn’t “go beyond what is necessary in order to attain it,” the court said.

However, Germany’s language requirement didn’t meet those conditions, the court said.

Because assimilation and integration into the host society, the host and sovereign nation, isn’t an overriding public interest. But then, the EU doesn’t want its constituent members to be unified and sovereign countries, anyway—fractionation facilitates the current push for political union of the European Union into one nation by weakening government’s ability to resist the push.

Gina “Joe” McCarthy

Posted on by
Reply

…is at it again. Operating carefully in the proverbial dead of night, burying its new rule in the 80,000 page Federal Register and unadorned by any other announcement,

The Environmental Protection Agency has quietly floated a rule claiming authority to bypass the courts and unilaterally garnish paychecks of those accused of violating its rules….

The EPA also has fast-tracked passage of this rule in an effort to get it into effect before anyone knows it’s there. Until it’s applied. The EPA has justified the fast-tracking by claiming, with an absolutely straight face, that this isn’t a “significant regulatory action.”

On top of that, Gina “Joe” doesn’t feel any need to explain herself.

EPA officials did not respond to repeated questions by The Washington Times about why they thought it was necessary to garnish people’s wages.

The explanation she’s reluctant to say out loud, though, clearly is, “Courts? We don’t need no courts! I don’t have to take you into any stinkin’ courts!”