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Archive for February 4th, 2010

The new budget from the White House contains all sorts of land mines for taxpayers, which is not surprising considering the President wants to extract at least another $1.3 trillion over the next ten years. While that’s a discouragingly big number, the details are even more frightening. Higher tax rates on investors and entrepreneurs will dampen incentives for productive behavior. Reinstating the death tax is both economically foolish and immoral. And higher taxes on companies almost surely is a recipe for fewer jobs and reduced competitiveness.

The White House is specifically going after companies that compete in foreign markets. Under current law, the “foreign-source” income of multinationals is subject to tax by the IRS even though it already is subject to all applicable tax where it is earned (just as the IRS taxes foreign companies on income they earn in America). But at least companies have the ability to sometimes delay when this double taxation occurs, thanks to a policy known as deferral. The White House thinks that this income should be taxed right away, though, claiming that “…deferring U.S. tax on the income from the investment may cause U.S. businesses to shift their investments and jobs overseas, harming our domestic economy.”

In reality, deferral protects American companies from being put at a competitive disadvantage when competing with companies from other nations, and therefore protects American jobs. This video has the details.

The American Enterprise Institute just held a conference last month on deferral and related international tax issues. Featuring experts from all viewpoints, there was very little consensus. But almost every participant agreed that higher taxes on multinationals will lead to an exodus of companies, investment, and jobs from America. Obama’s proposal is good news for China, but bad news for America.

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Here’s another depressing column about how government workers are getting showered with high pay and lavish benefits while people in the productive sector of the economy are bearing the economic pain of financing a bloated welfare state:

…government unionized workers often have gold-plated health benefits packages that are among the most expensive in America. Several years ago, for instance, the Employee Benefit Research Institute noted in a report the growing gap in both salaries and benefits between the private and public sector, estimating that state and local governments paid on average about 120 percent more on an hourly basis for employee health premiums than private employers. …n places where government unions have the most influence, like California, New York and New Jersey, the cost of public health plans is well beyond what’s typical in the private sector because public workers in these places make little or no contribution toward premiums, often don’t have co-pays for doctor visits, and have a rich array of supplemental benefits that are rare in the private sector… Many of these benefits, by the way, don’t merely apply to current government workers but also to retirees because many states and cities now offer public workers attractive retirement packages that start at 50 for public safety workers and 55 for everyone else and which include full-health benefits until retirees reach the age that Medicare kicks in. …The health care deal, moreover, represents only the latest victory in what has been a very good period for public workers. In most places these workers have largely been insulated from the impact of the devastating recession. Hundreds of billions of dollars of the so-called federal stimulus bill actually went to insuring that state and local workers did not lose their jobs, one reason why the unemployment rate for government workers remains under four percent. …we can’t blame all of this on the Obama administration. Indeed, the Bush years were quite good for public sector workers too. In fact, the last 50 years, ever since governments began allowing widespread organizing by public workers, have been one upward arc for government workers, so that today they surpass their private counterparts in pay, benefits and working conditions. And now they’ve gotten their hands into the tax code, too.

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Proponents of sound science and economic growth certainly have many reasons to be happy. The global-warming crowd has been exposed as a bunch of fraudsters, the Copenhagen “climate change” summit collapsed in failure, and there now appears to be no chance that the US Senate will pass legislation to cripple the American economy. But while we are winning the battles, the war is far from over. As Walter Williams warns, there are many special interest groups who have invested money in the scam and they will not give up:

Mounting evidence of scientific fraud might make little difference in terms of the response to manmade global warming hysteria. Why? Vested economic and political interests have emerged where trillions of dollars and social control are at stake. Therefore, many people who recognize the scientific fraud underlying global warming claims are likely to defend it anyway. Automobile companies have invested billions in research and investment in producing “green cars.” General Electric and Phillips have spent millions lobbying Congress to outlaw incandescent bulbs so that they can force us to buy costly compact fluorescent light bulbs (CFL). Farmers and ethanol manufacturers have gotten Congress to enact laws mandating greater use of their product, not to mention massive subsidies. …Then there’s Chicago Climate Futures Exchange that plans to trade in billions of dollars of greenhouse gas emission allowances. Corporate America and labor unions, as well as their international counterparts have a huge multi-trillion dollar financial stake in the perpetuation of the global warming fraud. Federal, state and local agencies have spent billions of dollars and created millions of jobs to deal with one aspect or another of global warming.

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