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Archive for May 9th, 2010

Here’s some more good polling data from the Resurgent Republic website. All demographic groups, including Democrats, agree that excessive pay for federal bureaucrats is a bad thing. Maybe, just maybe, this means the productive people in society are fed up and will successfully fight back:

Voters think higher average pay and benefit packages for federal government workers than for private sector workers is a bad thing for our country. Overall, voters say having higher average pay and benefit packages for federal workers than for private sector workers is a bad thing by a 62 to 19 percent margin, including a 47 to 30 percent margin among Democrats, a 65 to 14 percent margin among Independents, and a 77 to 12 percent margin among Republicans.

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Okay, the title of this post is an absurd exaggeration, but I am not optimistic about the future of the United Kingdom. Government spending has exploded over the last ten-plus years (the largest expansion in the burden of government spending among developed nations), and this unsurprisingly has led to punitive class-warfare policies. I saved this article from the Daily Mail from a couple of months ago because I was curious to see whether predictions about talent fleeing London would prove accurate:

London will become the most highly taxed financial centre in the world when the new 50 per cent income tax rate for those earning £150,000 or more comes into force next month. Taxes will be higher than for financial workers living in the other key centres of New York, Paris, Frankfurt, Geneva, Zurich, Dubai and Hong Kong, KPMG calculated. The findings will raise fears that Labour’s levies are driving businesses and bankers overseas and threatening Britain’s competitiveness. …Tullett announced last December that it will help employees move abroad if they want to avoid the top rate of tax, and Mr Smith said workers are already looking at relocating. Graeme Leach of the Institute of Directors said: ‘The 50 per cent rate is a policy that should never have been announced. The indirect impact on entrepreneurial aspiration, business confidence and foreign investment is likely to be significant.

As we can see from this Bloomberg article, it appears that the feckless big-government policies of all the major parties are driving productive investors and entrepreneurs to jurisdictions with better tax law. Switzerland seems to be the biggest beneficiary. As you read the details below, one thing to keep in mind is that at least Brits are free to emigrate. The U.S. government imposes repugnant Soviet-style exit taxes designed to ransack successful people who want the freedom to move someplace with more liberty:

…more than 100 bankers, hedge fund managers and wealthy retirees are gathered on a cold March night to plot their escape from Britain. Swiss government officials and Geneva-based financial advisers have come to London to lure rich residents with glowing descriptions of the country’s low taxes, safe streets, private-banking options and convenient ski weekends. …Next door, an overflow crowd of 50 more attendees enjoys wine and canapes as they watch the presentation on closed- circuit televisions in a mahogany-lined library, which includes a chart showing the prevalence of English as a language for doing business in Switzerland. A JPMorgan Chase & Co. banker who declined to be identified confides he’s planning to relocate next year. His main complaint: higher U.K. taxes, a theme the Swiss delegation has pounced upon. “Some people think it’s morally wrong to be working for the government for more than half the year,” says Jonathan Ivinson, a Geneva-based tax partner at international law firm Hogan & Hartson LLP… London’s highest earners must now pay a 50 percent tax on incomes above 150,000 pounds ($227,200) that came into force on April 6, replacing a 40 percent top rate. …During the campaign, both Brown and Cameron said they backed additional curbs on the U.K. financial industry — including a bank transaction levy — and agreed that Britain’s dire financial state would lock in higher tax rates for the foreseeable future: …As the taxman’s take grows larger, Switzerland is shaping up as the most-welcoming alternative for British exiles. Light- touch regulation and the willingness of cantons, as regional governments are called, to negotiate special tax rates for both individuals and businesses have prompted at least 30 London hedge fund managers to consider moving to Geneva in the past year, says Shelby du Pasquier, a Geneva-based partner at Lenz & Staehelin, a Swiss law firm. Investment management and advisory services aren’t regulated in Switzerland, apart from anti-money laundering rules, and the federal government and several cantons last year reduced taxes on dividend payments for entrepreneurs, including owners of hedge fund firms, he says. …Geneva has already attracted some of London’s top talent. Alan Howard, co-founder of Brevan Howard Asset Management LLP, Europe’s largest hedge fund firm, has rented office space in Geneva for 60 traders relocating from London. …BlueCrest Capital Management Ltd., Europe’s third-largest hedge fund firm, has opened a Geneva office for as many as 70 traders and analysts who have worked in London on its two biggest funds. They’re being joined by BlueCrest co-founder Michael Platt and Leda Braga, manager of the $9 billion BlueTrend fund, according to people familiar with the firm’s transitional plans. …The departures of those principals prove that the threat to London’s prominence as a financial center is real, says Stuart Fraser, head of policy at the City of London Corporation, which runs the financial district. …U.K. top tax rates will exceed those in Germany and France for the first time since 1989, according to a study by accounting firm KPMG. A banker earning 1 million pounds a year in London will now take home less than his counterparts in Frankfurt, Hong Kong, New York, Paris, Singapore and Zurich, KPMG says. “The U.K. has abandoned one of its key principles when it comes to tax, which is predictability,” says Bertrand des Pallieres, founder of SPQR Capital LLP, a London-based hedge fund firm with about $700 million in assets as of April. He left the U.K. last year and opened an office in Geneva after the new tax rate was announced. It’s not only funds looking at leaving. Broker Tullett Prebon said in December it would allow its 700 employees in London to move to “more certain tax regimes.” Several of Tullett Prebon’s major desks are now planning to move key personnel, the company says. …London Mayor Boris Johnson estimates that up to 9,000 bankers, hedge fund managers and private-equity executives could leave the city, according to a letter he sent to the Labour government in January. …Marcel Jouault is working to make sure that agitated Britons wind up in Pfaeffikon, a village on the shore of Lake Zurich. Pfaeffikon’s 11.8 percent corporate tax rate and 19 percent personal income levy are both Switzerland’s lowest, helping the village lure funds that handle about $100 billion in investments, according to hedge fund research firm Opalesque Ltd.

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We should always remember that the federal government may be the biggest problem, but that does not mean that state and local governments should be exempt from scrutiny. A good (or perhaps I should say bad) example of bone-headed stupidity by bureaucrats and politicians outside of Washington comes from Texas. A local school bureaucracy has given a student detention for the horrible offense of eating a piece of candy her parents packed in her lunch. That clearly was a stupid move by the local official, but don’t forget that state officials also deserve some blame for a state law that limits so-called junk food in schools. I can understand if states (or, more preferably, local governments) try to serve healthier foods in cafeterias, but the foods that parents prepare for their own kids are not any business of politicians and bureaucrats. Period. Case closed:

A third-grader at Brazos Elementary was given a week’s detention for possessing a Jolly Rancher. School officials in Brazos County are defending the seemingly harsh sentence. The school’s principal and superintendent said they were simply complying with a state law that limits junk food in schools. But the girl’s parents say it’s a huge overreaction. “I think it’s stupid to give a kid a week’s worth of detention for a piece of candy,” said Amber Brazda, the girl’s mother. “The whole thing was just ridiculous to me.” Leighann Adair, 10, was eating lunch Monday when a teacher confiscated the candy. Her parents said she was in tears when she arrived home later that afternoon and handed them the detention notice. According to the disciplinary referral, she would be separated from other students during lunch and recess through Friday. Jack Ellis, the superintendent for Brazos Independent School District, declined an on-camera interview. But he said the school was abiding by a state guideline that banned “minimal nutrition” foods. “Whether or not I agree with the guidelines, we have to follow the rules,” he said. The state, however, gives each school discretion over how to enforce the policy. Ellis said school officials had decided a stricter punishment was necessary after lesser penalties failed to serve as a deterrent.

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