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Archive for May 17th, 2011

My fight for freedom often requires great sacrifice. Last month, I went to Monaco and spoke about financial regulation and bailouts. Today, I’m in Bermuda, where I just gave a speech about tax competition.

Both jurisdictions are remarkable places, among the richest places on the planet. And remarkably scenic, as illustrated by this picture I took from my balcony.

What makes Bermuda’s success especially admirable is that it is a genuinely multiracial society, with blacks comprising a slight majority of the population and playing major roles in both politics and finance.

One would think, therefore, that leftists would see Bermuda as a role model.

But that would be a mistaken assumption. Bermuda actually is a bad place from a left-wing perspective because the jurisdiction is guilty of two unforgivable sins.

First, like Monaco, Bermuda has no income tax. This makes the small island a terrible role model for statists. After all, wouldn’t it be awful if other places learned from Bermuda’s success and abandoned class-warfare tax policy?

Second, Bermuda is (gasp) a tax haven. This means that it attracts jobs and capital from high-tax nations. Not surprisingly, this is even more upsetting to leftists since it makes it difficult for other nations to impose class-warfare tax policy.

In other words, the left wants power for government even more than it wants prosperous multiracial societies. But that’s not exactly a surprise. Prosperous people, after all, generally are not sympathetic to ideological movements based on high tax rates and bloated government.

For folks who want more information, here’s a video that explains the economic benefits of tax havens.

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This new video from the Center for Freedom and Prosperity discusses a proposal to solve Medicare’s bankrupt finances by replacing an unsustainable entitlement with a “premium-support” system for private insurance, also known as vouchers.

This topic is very hot right now, in part because Medicare reform is included in the bold budget approved by House Republicans, but also because Newt Gingrich inexplicably has decided to echo White House talking points by attacking Congressman Ryan’s voucher plan.

Narrated by yours truly, the video has two sections. The first part reviews Congressman Ryan’s proposal and notes that it is based on a plan put together with Alice Rivlin, who served as Director of the Office of Management and Budget under Bill Clinton. Among serious budget people (as opposed to the hacks on Capitol Hill), this is an important sign of bipartisan support.

The video also notes that the “voucher” proposal is actually very similar to the plan that is used by Members of Congress and their staff. This is a selling point that proponents should emphasize since most Americans realize that lawmakers would never subject themselves to something that didn’t work.

The second part discusses the economics of the health care sector, and explains the critical need to address the third-party payer crisis. More specifically, 88 percent of every health care dollar in America is paid for by someone other than the consumer. People do pay huge amounts for health care, to be sure, but not at the point of delivery. Instead, they pay high tax burdens and have huge shares of their compensation diverted to pay for insurance policies.

I’ve explained before that this inefficient system causes spiraling costs and bureaucratic inefficiency because it erodes any incentive to be a smart shopper when buying health care services (much as it’s difficult to maintain a good diet by pre-paying for a year of dining at all-you-can-eat restaurants).  In other words, government intervention has largely eroded market forces in health care. And this was true even before Obamacare was enacted.

Medicare reform, by itself, won’t solve the third-party payer problem, but it could be part of the solution – especially if seniors used their vouchers to purchase real insurance (i.e., for large, unexpected expenses) rather than the inefficient pre-paid health plans that are so prevalent today.

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