Tag Archives: political economy

Taxing the Rich

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Washington State is at it.

Washington state multibillionaires would pay a wealth tax under a proposal that got a public hearing before the Senate Ways and Means Committee.
Senate Bill 5426 would impose a 1% tax on intangible financial property such as stocks, and bonds, futures contracts, and publicly traded options. The first $1 billion of assessed wealth would be exempt from the tax, which “equals one percent multiplied by a resident’s taxable worldwide wealth.”

Leave aside questions of the legitimacy of taxing an American citizen’s foreign-held wealth, intangible or otherwise. The bill’s sponsor, State Senator Sam Hunt (D, Olympia) has given the larger game away.

This is a great attempt to bring fairness to our tax structure which is pretty upside down with the lower income paying 17% of their income in taxes and the upper 1% paying 1% or less[.]

That is pretty upside down.

Another solution would be to lower the tax rates on those with the lower income. However, that would involve lowering tax rates rather than increasing them, and lowering tax rates is completely inconceivable to Progressive-Democrats.

Update: Some have interpreted my “lower the tax rates on those with the lower income to mean lowering income tax rates. Washington has no income tax, only sales taxes (State and local), business taxes, and property taxes. Sales and property taxes are highly regressive and hit the lower income folks the hardest, the former directly through taking a far higher per centage of their income and the latter through driving up the cost of housing, whether owning or renting.

Lowering business taxes (eliminating them, I say) would foster job growth, which would benefit the lower- and no-income folks the most.

Government-Funded Pre-K Schooling

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Vanderbilt University has a longitudinal study of the effects of such a program on children’s academic success through the 6th grade.

Researchers at Vanderbilt University have been running a long-term study on Tennessee’s state pre-K program, following 2,990 low-income children. The program was oversubscribed, so researchers followed applicants who ended up in a program versus those who were turned away. This means all the children had parents motivated to sign them up for pre-K, which makes for a statistically appropriate control group.

The researchers found, in sum,

[C]hildren randomly assigned to attend pre-K had lower state achievement test scores in third through sixth grades than control children, with the strongest negative effects in sixth grade.
…
A negative effect was also found for disciplinary infractions, attendance, and receipt of special education services, with null effects on retention.

In a spate of academic integrity, the researchers also wrote,

…no distinctive characteristics of the Tennessee program have yet been identified that are a likely explanation for the disappointing findings.

The Wall Street Journal offered one possible explanation:

One theory worth a hearing is that these programs expose children to more rigid academic settings before it is developmentally appropriate.

I offer another possibility, one that is not at odds with the WSJ‘s. It may be that the parents of children who got into the Pre-K program, thinking their children’s future is secured, relaxed their close and constant oversight of their children’s schooling, performance, execution of homework, and so on relative to that of the parents whose children didn’t get in. That parental oversight and supervision also is a Critical Item in children’s academic performance, especially in those first years of school.

Either possibility, especially in combination with the study’s outcome, suggests that, particularly from the Federal level, government funding of grade school programs is at best a waste of taxpayer money.

The study itself can be found behind this paywall.

Investing in the PRC

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Some pundits are suggesting that the way in which the People’s Republic of China handles real estate company Evergrande’s default will say a lot about the utility of investing inside the PRC. The Wall Street Journal even is asking whether foreign investors are second class citizens “now.”

Last things first: foreign investors always have been second class citizens in the PRC. They’ve only recently been “allowed” to become equal partners or majority holders in established PRC companies being newly invested in or in enterprises being newly formed. It’s still the case, too, that as a condition of doing business inside the PRC, foreign companies must “share” intellectual and technology properties with their partners, and they must permit the PRC government to install back doors into those foreign partners’ primary software.

It’s also the relatively new case that, under the 2017 National Intelligence Law, companies must divulge any and all information that the PRC’s intelligence community requests.

Still, the Evergrande outcome will be informative.

Who is still standing when the dust clears will say a lot about the future of China as a place to invest more generally.

In particular, resolving this misconception will be informative:

Oaktree Capital has moved to seize a large chunk of Evergrande’s Hong Kong property, worth an estimated $1 billion, against a secured loan now in default—a property which could have potentially served an important role in Evergrande’s general offshore debt restructuring.

With the Xi Jinping government having, over the last couple of years, phagocyticly absorbed Hong Kong into the mainland body politic, that city no longer is offshore. Whether Oaktree will be permitted to seize that Hong Kong property is an open question, and a question subsequent to a permitted seizure will be the limits the PRC imposes on Oaktree’s disposition of that property.

I’m not sanguine.

Out of Touch?

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Or openly lying?

Small businesses are booming, according to the Biden-Harris administration.

President Biden’s efforts have not only helped millions of Main Street businesses keep their lights on and employees on payroll, they have enabled a remarkable rebound in small business activity, with small business demand for labor and inventories near record highs.

And

According to a leading survey of small business owners, the share of small businesses planning to create new jobs in the next three months is higher than it ever was at any point during the previous Administration. Another recent survey of small business owners found that 71 percent are optimistic about their own performance in 2022, up from 63 percent one year ago.

Carefully unidentified surveys. An openly identified survey, a Goldman Sachs survey, says otherwise.

86% of small business owners say that broader economic trends, such as supply chain issues, inflation, and workforce challenges, are having a negative impact on their small businesses

And

66% of impacted businesses say it is a problem for their business that suppliers are favoring large businesses over small businesses….

And

84% of small business owners say inflationary pressures have increased since September of 2021

And

Two-thirds of small business owners do not think the Federal government has done enough to address the economic trends

And

29% [of small business owners] think things in the US are moving in the right direction, reflecting a 38% decline since June of 2021.

That should be an embarrassing disconnect for the Biden-Harris administration, which makes me repeat my question: are the personages in this administration, from Biden-Harris on down, that far out of touch, or are they openly lying to us?

Either way, this is an incompetent administration, and it’s going to be a dangerous three years, domestically as well as globally.

Germany as Mediator?

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A Deutche Welle article cites German luminaries as thinking Germany can mediate the “dispute” between Russia and Ukraine.

For instance, here’s Christoph Heusgen, Under-Secretary for Foreign and Security Policy in the German Chancellery from 2005 to 2017 and upcoming Munich Security Conference Chairman:

Germany overall has assumed a more active role in world politics, and people are asking for this. There are lots of expectations that we play an important role, and we do this. You know, I mentioned the Ukraine crisis. We do this when you look at the Balkans where we are very active.

Reiner Schwalb, ex-military attaché for Germany in Moscow, though, gave the game away (as did Heusgen in the above).

Berlin is a point of contact between Europe and America from the American perspective. Despite our history, the German-Russian relationship has a certain stability. There is a great economic exchange, with cultural exchange and scientific exchange, and repeated attempts by Germany to cooperate more intensively with Russia.

“From the American perspective” is a cynically offered irrelevancy. What’s central are two aspects of the German-Russian relationship. One is this “great economic exchange.” That’s an exchange that’s based on and strengthened by Germany’s dependence—voluntarily entered into by the German government—on Russia for its energy.

The other aspect is that “repeated attempts by Germany to cooperate more intensively with Russia” business. Cooperate with Russia, especially with Russia holding—and having already demonstrated that it does—the whip hand on German energy.

Regarding Heusgen, his “look at the Balkans where we are very active” brag. Germany also has been very active in the Baltics vis-à-vis Ukraine—barring Estonia from transferring badly needed arms to Ukraine if those arms originated in Germany.

Germany as mediator—a risible concept.