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Archive for August, 2009

I’m at the Denver Airport, waiting to fly to Phoenix and then on to Los Cabos, Mexico. But I’m not going for sun and fun. In part, this is because Los Cabos is facing a hurricane watch. But the main reason is that I’m going to Mexico to help low-tax jurisdictions fight against fiscal imperialism. The Organization for Economic Cooperation and Development (OECD), an international bureaucracy based in (where else) Paris, is persecuting so-called tax havens because they are attracting jobs and investment from high-tax welfare states such as France and Germany. This fight has been going on for about 10 years, and we’ve done a fairly decent job of thwarting the bureaucrats (who, by the way, get tax-free salaries). But the election of Obama has given the OECD some momentum. This raises the risk that the bureaucrats will succeed in imposing a global tax cartel – sort of an “OPEC for politicians.” To that end, the OECD is hosting a conference in Los Cabos designed to bully low-tax jurisdictions into surrendering their fiscal sovereignty.

Like most government entities, the OECD does not believe in open and fair discussion. The bureaucrats already have used their leverage to kick our delegation out of the main conference hotel (though delegation is probably an overstatement since it is just me and Andy Quinlan of the Center for Freedom and Prosperity.

Maybe the huuricane will thwart the OECD’s pernicious plans to impose bad tax policy on free-market jurisdictions. If not, keep your fingers crossed that Andy and I somehow can throw sand in the gears and defend tax competition, fiscal sovereignty, and financial privacy.

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We all know about Tim “turbotax” Geithner, our Treasury Secretary who failed to pay tax on a huge sum of money (more than the average household earns in one year). Because he’s a political insider, he got a get-out-of-jail-free card. Now another senior Democrat has been exposed as a tax scofflaw. The Chairman of the House tax-writing committee seems to have treated his personal tax bill as an optional obligation – yet he’s the guy pushing higher tax rates for the rest of us. Maybe the fact that they don’t pay their own bills is the reason Democrats think taxes have no impact on the economy? Anyhow, the Wall Street Journal has the details on Congressman Rangel’s shenanigans:

When normal people happen to “find” their own money, it might mean a twenty left in a winter coat, or discovering change beneath the sofa cushions. But if you’re Charlie Rangel, it means doubling your net worth. Earlier this month the Chairman of the tax-writing Ways and Means Committee “amended” his 2007 financial disclosure form—to the tune of more than a half-million dollars in previously unreported assets and income. That number may be as high as $780,000, because Congress’s ethics rules only require the Members to report their finances within broad ranges. This voyage of personal financial discovery brings Mr. Rangel’s net worth for 2007 to somewhere between $1.028 million and $2.495 million, while his previous statement came in at $516,015 and $1.316 million. When you’re a powerful Congressman and working diligently to increase tax rates to pay for President Obama’s health-care plan, we suppose it’s easy to lose track of one of your checking accounts. That would be the one at the federal credit union with a balance somewhere between $250,001 and maybe as high as $500,000. And when you’re crunched for time and pulling together bills to pass in a rush, we guess, too, that you might overlook several other investment accounts, even if some of them are sizable, such as the ones Mr. Rangel missed at JP Morgan, Merrill Lynch, Oppenheimer and BlackRock. Oh, and those vacant properties in Glassboro, in southern Jersey? …The Chairman probably isn’t doing a lot of dining at KFC, Pizza Hut, Taco Bell or Long John Silver’s, either, which may explain why he didn’t disclose the $1,001 to $15,000 in stock he owns in Yum Brands, the conglomerate that runs those chain restaurants. Compared to his undisclosed portfolio stake in PepsiCo—$15,001 to $50,000—that’s practically a rounding error. …Among other issues, Mr. Rangel is currently under investigation regarding his use of four rent-stabilized apartments at New York City’s tony Lenox Terrace and soliciting donations with his official letterhead for the Charles B. Rangel Center for Public Service at City College of New York, which was itself built with a $1.9 million earmark. Yet another part of the probe is his failure to report $75,000 in income from a rental villa at the beachfront Punta Cana Yacht Club, in the Dominican Republic. Mr. Rangel blamed that last one on the language barrier because he doesn’t speak Spanish. We can only imagine what language he speaks with his accountants and tax attorneys.

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I’m jealous that this video is relatively new and already has more views than any of mine, but it is quite amusing. Enjoy.

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There’s really no much commentary needed for this story. President Obama’s so-called stimulus proposals was designed to shovel money out the door in hopes that consumers would somehow jumpstart the economy. The Boston Herald reports that the politicians in Washington were so anxious to buy votes…oops, I mean to “stimulate” consumer spending…that they even sent a couple of thousand checks to criminals:

One day after the Herald reported some surprised Bay State inmates – including murderers and rapists – were cashing in $250 stimulus checks, federal officials revealed the same behind-bars bonus was mailed to nearly 4,000 cons nationwide. …It’s all part of the massive American Recovery and Reinvestment Act of 2009 – and what is becoming an accounting nightmare for red-faced feds. …Nationally, about 2,200 inmates who were mailed checks are entitled to the payments because they were not in prison and lawfully collecting Social Security at some point between November 2008 and January, Richardson said. The federal goverment is examining whether the payment was due to the remaining 1,700 inmates because they were not identified as prisoners in the Social Security system, Richardson said.

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A story in USA Today is a perfect illustration of the liberalizing power of tax competition. In an effort to attract more jobs and investment, states are competing with each – even taking the aggressive step of advertising in high-tax states. This does not guarantee that states will always use the best approach since states sometimes try to lure companies with special handouts, but tax competition generally encourages states to lower tax rates and control fiscal and regulatory burdens. The same process works internationally, which is precisely why international bureaucracies controlled by high-tax nations are seeking to thwart fiscal competition between nations:

Las Vegas is running ads in California warning businesses they can “kiss their assets goodbye” if they stay in the Golden State. In New Hampshire, economic development officials pick up Massachusetts business owners at the border in a limousine and give them VIP treatment and a pitch about why they should relocate there. Indiana officials, using billboards at the borders and direct appeals to businesses in neighboring states, are inviting them to “Come on IN for lower taxes, business and housing costs.” As states struggle to keep jobs in a continuing recession, they are no longer hoping businesses in other states happen to notice their lower taxes, cheaper office space and less-stringent regulations. They are taking the message directly to them and taking shots at their neighbor’s shortcomings. …No one does it more unapologetically than the Nevada Development Authority. The agency has picked on California before, but its $1 million campaign, launched this month, ratchets up the mockery of California’s budget deficits and IOU paychecks. “It’s all done tongue-in-cheek. But the underlying deal is, we want this business,” Nevada Development Authority President and CEO Somer Hollingsworth said. …”They do mask the nastiness of their message with humor, but this time, their ads are over the top,” said [California Assemblyman] Solorio, a Democrat from Santa Ana.

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In an important shift, the Wall Street Journal takes a more sympathetic view of bank secrecy. The WSJ’s editorial page has always been an excellent source for pro-market opinion, but the editors were not overly sympathetic to some aspects of tax competition. But Holman Jenkins’ column highlights key moral and economic reasons for financial privacy:

That’s the paradoxical virtue of Swiss banking secrecy, which has protected both greedy tax scofflaws and those merely trying to save something for the next generation when politicians are burning down the economy back home. …A decade ago, this column took a more sanguine view of this gradual erosion than we might today. Then, we noted that the world was moving toward democracy and rule of law. Governments were dismantling senseless regulations and tax rates so high they inhibited growth and collected less revenue than government would have collected with lower rates. The world was becoming more like the Swiss, we said at the time—i.e., sane. A similar judgment does not leap from our lip today, not after two years so reminiscent of the omen-filled early 1930s. …today’s IRS war on Swiss banking secrecy does not occur in a vacuum. In 1934, Swiss politicians were legislating in response to specific events abroad: a Nazi law that made it a death-penalty crime to hold assets outside the country; a scandal stoked by French socialist politicians over Swiss bank accounts held by prominent citizens. The Swiss looked out and saw a world gone mad: bank failures, depression, militarism, fascism, communism. The new law was meant to buttress the world’s confidence in the privacy and security of a Swiss bank account. Today, the world is at least slightly deranged, with the possibility of getting very much worse. Democrats in Congress, in the face of every economic lesson, want to push marginal tax rates back up to confiscatory levels.

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American politicians have learned to feather their own nests, but the European Commission must be the most self-indulgent bureaucracy in the world. In addition to lavish pay and an extravagent penion, the Commissioner from Ireland is getting the equivalent of about $500,000 to ease his “re-entry” into private life. And this is on top of two taxpayer-financed pensions from the Irish taxpayers. Geesh, nice work if you can get it. The Irish Independent has the sordid details of politicians

European Commissioner Charlie McCreevy is poised to get almost €400,000 to resettle in Ireland when he leaves his post this autumn. …The Irish Independent has learned Mr McCreevy will be entitled to a transitional allowance for a total of three years when he leaves Europe. The allowance, which aims to help commissioners with their “re-entry” into the non-EU world, is calculated as 50pc of Mr McCreevy’s €238,919-a-year salary. It is paid the day he leaves office and works out at €119,459.50 a year — with the final three-year tally in the region of €358,378. On top of this he will be entitled to receive a resettlement allowance worth €19,909.89 — equal to a month’s salary. And he will also be allowed to fly his family back to Ireland by business class and will be reimbursed for any moving costs he incurs. …Last night Mr McCreevy’s spokesman refused to answer repeated calls and emails from the Irish Independent to confirm if he would be taking the payments. He also refused to answer questions to confirm if Mr McCreevy is still taking his ministerial and Oireachtas pensions this year. Last year he was paid an Oireachtas pension of €52,213 for his time as a Fianna Fail TD for Kildare and a ministerial pension of €75,003 for serving as Finance and Enterprise Ministers.

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