Tag Archives: political economy

Another Reason

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…to push for lowered State tax rates, empirically observed.

There are signs home buyers in metropolitan New York are pausing to consider the effects of proposed federal tax law changes, setting the stage for a possible chill in the market, brokers say.

The changes, in versions of bills in both the House and the Senate, likely would increase the cost of home ownership and reduce after-tax discretionary income for many mostly affluent home buyers in New York and other states with high state and local income and property taxes, brokers and analysts say.

This isn’t entirely true, though.  The reduced deductibility of mortgage interest will lead to lowered house prices (and through that, downward pressure on rents, even in rent-controlled New York City) through two pathways.  One is reduced demand for house ownership.  The other is through a lesser interest deduction being factored into a house’s price—this one will impact primarily, the high-end houses bought with jumbo mortgages, contra those brokers and analysts.

Or a high-tax State can do nothing and suffer the consequences.

One couple, who looked for homes in the area last year, is coming down to see a house on an island off Miami Beach listed for $22.5 million over the summer, Mr [Jeff, a Miami broker] Miller said.

“People I have been working with were on the fence,” he said. “Now they want to move [to Florida]. The new tax bill was the nudge they needed to push them over.”

These are exactly the high-income, high-asset folks whose pockets high-tax States like New York want to pick.

TPP Light

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President Donald Trump, on taking office, pulled the US out of the not-yet-finalized Trans-Pacific Partnership, which involved nations all around the Pacific rim including the US and Canada.  The TPP was far from perfect, but international trade is more about international relations and foreign policy than it is about economics, and it was a mistake to pull out.

The economic and political power of the coalition would have been a powerful brake against an acquisitively aggressive People’s Republic of China; the remaining 11 nations still represent some 17% of all world trade—and 30% of the world’s trade runs on sea routes the go through the TPP’s region—trade that is every bit as critical to the PRC’s economy as it is to Japan’s and the US’.

It might yet be.

[T]he eleven remaining TPP members have reached an agreement on the trade pact in principle, which means a new pact—without the United States—could be put into place which could shape trade in the Asia-Pacific area for the next decade.

Of course Canada is being nearly as foolish, demanding union rights over right to work parameters and expressing a willingness to blow up the remaining TPP if they can’t have them, but at least they’re still talking.

We should support the TPP’s conclusion for its PRC-containment potential, at the very least.

Death Panels?

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The Affordable Care Act required Medicare to penalize hospitals with high numbers of heart failure patients who returned for treatment shortly after discharge. New research shows that penalty was associated with fewer readmissions, but also higher rates of death among that patient group.

Because sometimes readmission is necessary for quality care—whether that readmission was driven by later complications, by too-soon original discharge in the Medicare (which is to say Government) pressure to hold down costs first, or by some other factor—but that Government pressure to push the patient out the door also pushes against the patient’s return.  Even when necessary.

Here are a couple of numbers from a study soon to be published in JAMA Cardiology:

One in five heart failure patients returned to the hospital within 30 days before the ACA passed. That dropped to 18.4% after the penalties. Mortality rates increased from 7.2% before the ACA to 8.6% after the penalties….

In other words, an 8% drop in readmissions is associated with a 19% rise in death rates for heart patients.  That’s not a favorable trade-off.

There is a legitimate interest in improving the quality of care for all patients, including those for whose care us taxpayers are paying, but readmission rate is not an accurate measure of that quality.  Readmission rate can only measure…readmission rate.  That metric addresses neither the reasons for readmission nor the reasons for the prior discharge.

Government pressure to hold down readmissions doesn’t quite amount to death panels, but the outcomes seem dismayingly similar.  To be clear, the results of the study do not establish a causal relationship, for heart patients, between the lowered readmission rate and the higher death rate.  However, the magnitude of the apparent association between the two desperately wants further investigation.

Tax Havens

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Christian Reierman, writing for Spiegel Online, thinks tax havens are bad.

He began with the usual false premise, itself as usual unspoken: that Government is owed the money earned by private citizens or their privately owned enterprises, or that Government is somehow otherwise entitled to it.  His proximate vehicle is the Paradise Papers and their exposure of how widespread is the use of tax havens—entirely legal tax havens, mind you—by international businesses.

The German newspaper Süddeutsche Zeitung leaked a vasty number of documents—the so-called Paradise Papers—that exposed

how the rich and super-rich, international stars and companies try to avoid paying taxes in their home countries. It is a game for the wealthy.

The horror—people with money try to protect their wealth from grasping governments.  This time, they’re trying to protect the gains of the businesses they run:

The players are usually multinational corporations seeking to shrink their tax bill using convoluted structures. Tech-giant Apple once again stands accused of skullduggery, as does sporting-goods producer Nike. The accomplices are also largely the same. The deals in question invariably involve tax havens such as the Bermuda Islands, British dependencies such as the Isle of Man or Jersey, and European member states like the Netherlands, Luxembourg and Ireland.

Notice that: nothing here is illegal.  No skullduggery is present.  These business owners just are supposed to voluntarily give up what governments demand, simply because governments demand it on that false theory that the businesses’ prosperity belongs first to Government.

Here’s the game given away; here’s Reierman’s telltale question:

[W]hy are EU member states still allowed to cheat their partners within the bloc out of tax revenues?

There’s no cheating going on, of course.  It isn’t Government’s money.  And there’s nothing wrong with nations competing with each other for businesses and the employment that businesses bring–including competing on tax rates.  Full stop.

As always, the right answer is not to hold back the rich, to punish the successful with high taxes, or to cap the ability of individuals to be successful by restricting them to the performance of the weaker.  The right answer is to lower taxes all around and thereby leave more money in the pockets of the earners—including the poor.  The right answer also includes restricting government spending, which crowds out private spending by artificially increasing overall demand; which increases prices with its non-economic, inflated demand; which devalues the money left in the hands of the earner—particularly harming the poor.

The right answer begins with the clear recognition and admission of whose money is involved here.

So, What’s the Problem?

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Don Peebles, Peebles Corp CEO, is worried about the Senate and House tax reform plans currently on offer.

…the GOP tax bill will have a catastrophic impact on New York City, leading to a mass exodus of business owners and entrepreneurs.

And

State income deductions and the local pressure on taxes that [Mayor Bill de Blasio] is calling for, an increase in taxes on millionaires and a mansion tax increase. I think that’s also going to be hard on real estate[.]

And

Peebles said the financial capital of the world is becoming more of an anti-business environment with high taxes and a diminishing quality of life, forcing entrepreneurs and businesses to seek opportunities in other states.

“No deductibility of state income taxes and New York is one of the top three highest-taxed states in the country, and then when you add the New York City tax implications on it, it can be as high as 17%. I think it’s a pill that people are going to have difficulty swallowing[.]”
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“We have to impose some discipline on state and local governments, and I think responsible governors and mayors will do that,” Peebles said.

Indeed.  Instead of whining about a national-level tax plan that’s good for the nation as a whole, maybe folks in these usurious tax States, including their Senators and Representatives in Congress—especially them if they’re responsible—ought to spend a measure of that energy on working to get their State and local taxes lowered.

If businesses can’t function in a tax jurisdiction without subsidies for those taxes, they should leave; they owe it to their owners and customers, and they have no obligation to stay.