Tag Archives: political economy

More Competition Stifling

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New tax transparency requirements between multinational corporations and European governments may be broadened further this year to encompass public disclosure of the companies’ tax arrangements in Europe.

… The bill, if approved by European governments, would oblige national tax authorities to inform each other and the commission about tax deals they agree with multinational corporations.

… Under the draft bill, which must be approved the 28 European Union governments, the disclosure of so-called tax rulings would happen every three months and would include deals going back 10 years.

Because governments lowering their tax rates—whether as competition between nations for business investments or just because it’s good for the citizens they serve—is anathema to social democrats. That would be too business friendly. Never mind that being business friendly (which cronyism most assuredly is not) is being jobs- and employment friendly, and so it’s being consumer- and citizen friendly. Social democrats just can’t read past that business friendly part.

A Number of People Predicted This

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The first stage of the Seattle-mandated $15/hr minimum wage, to $11/hr, takes effect next month, but already Seattle’s low wage workers are feeling the pain of their pay “raise.”

…the city is experiencing a rising trend in restaurant closures.

The closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.

The shut-downs have idled dozens of low-wage workers, the very people advocates say the wage law is supposed to help. Instead of delivering the promised “living wage” of $15 an hour, economic realities created by the new law have dropped the hourly wage for these workers to zero.

After all,

About 36% of restaurant earnings go to paying labor costs.

Restaurants operate on thin margins, though, with average profits of 4% or less….

The Seattle Eater offered a more itemized breakout [emphasis added]:

Bottom line, labor can only be a function of sales. If a busy restaurant at lunch serves 150 eaters during the lunch hour, and each person spends $15, the restaurant just grossed $2,250. If labor comprises significantly more than 30%, the restaurant won’t be in business for long. So that allows $675 total for labor for the day, and before the employer taxes we pay that allows $550 or so. At $15 an hour, that allows 36 labor hours, which means four people can work a full day. This assumes that everyone is making the new minimum. Now look around in a busy restaurant serving 150 people—do you see more than 4 employees? Of course you do.

The 16.2% increase in labor cost that first stage represents over Seattle’s current $9.47/hr minimum wage represents a total cost increase of nearly 6%—turning that 4% profit margin into a loss. Even taking Brendan McGill’s (Chef/Owner, Hitchcock, Hitchcock Deli and the gentleman quoted just above by the Seattle Eater) estimate of 30% labor costs, that spike in the minimum wage coming in a week or so works out to just under a 5% increase in total costs, still wiping out that 4% margin. No wonder restaurants are closing.

The question remains: are the targeted low-wage folks better off for being out of an $11-$15/hr job than they are for having a $9.47/hr job? Really?

Another question: how many other low-wage industries besides the food services one are getting hammered by this minimum wage law?

A final thought: maybe next, to cover Seattle’s minimum wage requirement, Seattle will impose a minimum business profit requirement on Seattle’s taxpayers.

 

…including AEI‘s Mark Perry, to whom h/t

Of Course They Did

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Several unions filed a lawsuit Tuesday challenging the constitutionality of a recent Wisconsin law which bans mandatory union dues as a condition of employment.

Because they claim a higher right to the fruits of a man’s labor—his wages—than the man earning those wages has.

According to The Associated Press the unions are arguing that the law violates their constitutional rights because it requires unions to act on behalf of workers who are no longer required to pay union dues.

Of course, this is nonsense. Nothing in the law prevents unions and employers from negotiating contracts exclusively for union members. Nothing in the law requires employers and non-union members to use the unions’ contracts as their own. That employers and non-union members might find the shortcut handy is irrelevant. The employers and non-union members may very well negotiate better contracts than the unions did.

And, of course, the unions have no claim on non-union members’ wages, or anything else of theirs, from those non-members’ negotiations on their own behalf. Federal law, as well as Wisconsin’s law, makes this clear. James Sherk, The Heritage Foundation Senior Policy Analyst in Labor Economics:

Federal law [the National Labor Relations Act ] does not require a union to act as an Exclusive Representative. The choice of whether to be an Exclusive Representative or Member Only remains with the union.

Crony Capitalism

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Corporate fascism is, at its core, government management of each of the several economic sectors in a nation’s economy—agricultural, manufacturing, technology, communications, transportation, and so on. This management is executed by government through otherwise privately controlled business entities. De facto corporatism also is useful for reducing opposition and rewarding political loyalty.

Crony capitalism, on the other hand, is government influence of individual businesses in a nation’s economy—agribusinesses, automobile companies, alternative energy companies, telecommunications companies, and so on. Crony capitalism also is useful for reducing opposition and rewarding political loyalty.

How is crony capitalism different from corporate fascism? So far, the individual cronies can choose whether or not to play according to their government benefactors’ rules. So far.

Typical

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In an ambitious first budget plan, Governor Tom Wolf on Tuesday proposed more than $4 billion in higher taxes on income, sales and natural gas drilling to support new spending on schools and to cut property taxes as part of an effort to overhaul the way public education is funded.

Wolf, a Democrat, is also asking the Republican-controlled Legislature to cut corporate taxes by hundreds of millions of dollars, borrow more than $4 billion to refinance pension debt and inject new money into business loans, clean energy subsidies and water and sewer system projects.

Pennsylvania already is in the hole by some $2 billion, and it’s getting an increase in allegedly mandatory spending, for the upcoming fiscal year, of $1.6 billion.

So he wants to raise taxes overall and to borrow more. Because money grows on trees in the Democratic Orchard.

Wolf’s spending plan would increase overall state spending through the state’s main bank account by about 3% to $29.9 billion from the current year’s approved budget. Counting $1.75 billion in pension obligation payments to the Public School Employees Retirement System and $2.1 billion in school property tax relief receipts, the increase is about 16%….

“Pay” for tax cuts here by raising taxes there. Borrow to cover increased spending. But raise taxes overall, and increase spending. Mandatory spending? No. There is no such thing. Some spending is harder to cut, whether fiscally or morally, than other spending, but none of it is mandatory beyond the bare minimum needed to fund what the state’s constitution—the people’s instructions—mandates is the government’s purpose.

Covering the budget shortfall by cutting spending is anathema. Covering the budget shortfall by also cutting taxes and watching the economy grow from that increase in private sector money, yielding a net increase in revenue to the government, is utterly inconceivable.

How Democratic.