Archive for June, 2009

There are more than 25 countries with flat tax system. Several states also have flat tax regimes, including Massachusetts, Colorado, Illinois, and Pennsylvania. Arizona may soon join that club. That’s the good news. The bad news is that the politicians also want to raise other taxes:

A flat income tax plan that is part of budget plans being crafted by the Arizona Legislature and Gov. Jan Brewer would take Arizona’s five personal income tax brackets down to one rate of between 2.6 percent and 3 percent and substantially cut corporate income tax rates. …The state’s personal income tax rates range from 2.59 percent to 4.54 percent, depending on income. A flat personal income tax would take those to 3 percent or likely lower, said Tom Jenney, state director of Americans for Prosperity …Jenney like the idea of a flat tax but points out the budget deal would have come into play in later years, likely 2012, while Brewer wants voters to approve a 1-point increase to the state’s 5.6 percent sales tax. “That sounds like a bad deal,” said Jenney comparing the sales tax increase to the flat tax plan. …”A flat tax would be a boon for the state’s economy,” said Steve Voeller, president of the Arizona Free Enterprise Club. “A single rate of no higher than 3 percent would make Arizona’s tax system one of the most competitive in the U.S.,” said Voeller.

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About one month ago, British banks revealed that they may reject all American customers because the IRS insists on absurdly onerous rules. Now, Swiss banks are adding to the woes of America’s global workforce by announcing that U.S. citizens are no longer welcome. Needless to say, this is a huge inconvenience for the tens of thousands of Americans who live and work abroad. The IRS and the Obama Administration argue that this is an acceptable price to pay to compel greater obedience to the internal revenue code, but the academic research shows that lower tax rates are the best way to improve compliance. Unfortunately, the politicians in Washington want to raise tax rates even higher, which will create more incentive for tax evasion and tax avoidance. Bloomberg reports:

UBS AG and Credit Suisse Group AG, the country’s biggest banks, have told Americans to move their money into specially created units registered in the U.S., or lose their accounts. Smaller private banks such as Geneva-based Mirabaud & Cie. are closing all accounts held by U.S. taxpayers. While the banks declined to say how many people are affected, more than 5 million Americans live abroad, including about 30,000 in Switzerland, according to estimates from American Citizens Abroad in Geneva. Swiss banks must register with the Securities and Exchange Commission to provide services for those customers. “My bank doesn’t want to do that, so we wouldn’t accept an investment account for a U.S. person,” said Pierre Mirabaud, chairman of Mirabaud & Cie. and the Swiss Bankers Association, during a lunch at the American International Club of Geneva. …The U.S. has also proposed increasing reporting and oversight requirements for so-called qualified intermediaries — foreign banks that withhold taxes on behalf of the IRS. That may increase the cost of compliance and the risk of violating U.S. laws, said Charles C. Adams, managing partner at the law firm Hogan & Hartson LLP in Geneva. “American citizens are starting to feel like they’re Typhoid Mary,” said Adams who hosted a 2008 fundraiser for Barack Obama that featured actor George Clooney. “The Swiss simply don’t want American customers because it requires so much infrastructure and hassle that they don’t make any money.” Sandra Dysli, an American who has lived in Geneva for 40 years, said Bank Zweiplus AG, the Zurich-based joint venture of Basel-based Bank Sarasin & Cie. and AIG Private Bank, and a Geneva branch of Raiffeisen International Bank-Holding AG refused to open investment accounts for her. …Two members of the U.S. Congress, Carolyn Maloney and Joe Wilson, wrote a May 27 letter to Treasury Secretary Timothy Geithner saying that if the QI requirements are extended to cash or deposit accounts, “taxpaying Americans living abroad will have no place to bank.” “If neither foreign nor American banks will take American customers, how will the millions of citizens living abroad bank?” wrote Maloney, a New York Democrat, and Wilson, a South Carolina Republican, who are co-chairmen of the Americans Abroad Caucus. …“The presumption is that you’re a bad person avoiding taxes if you live overseas,” according to Andy Sundberg, who founded Geneva-based American Citizens Abroad in 1978. “The IRS rhetoric is alienating and vindictive.”

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Writing for the Boston Herald, Howie Carr eviscerates the state politicians that claim the world is coming to an end merely because they have to exercise a tiny shred of fiscal discipline. His prose is delightfully denigrating:

What state budget crisis? This year the hacks had $28.1 billion to squander. In the new fiscal year they’ll have $27.4 billion. In other words, for every $39 they wasted in FY 2009, they’ll have to get by on $38 in FY 2010. …The real crisis is the tax bender they’re on at the State House. To deal with this infinitesimal cut, the taxaholics are going to jack up the sales tax 25 percent. They’re allowing local hacks to impose a new meals tax. They’ve invented a new tax for satellite TV. They’re increasing the hotel-motel tax. Registry fees are going up. The tax-fattened hyenas are hitting us with a new 6.25 percent tax on alcohol, though they and their brain-dead enablers in what’s left of the mainstream media refuse to call it a tax. They describe it as eliminating the exemption. There’s an exemption on booze taxes because there’s already an excise tax on alcohol. The tax is included in the cost of the bottle. By imposing the new, jacked-up sales tax, the solons are taxing a tax, just as they did with cigarettes a few years back. That’s been great for sales – in New Hampshire.

On a more serious note, he exposes the typical ploy of politicians, many of whom will deliberately try to cut the small handful of things voters actually like rather than the wasteful programs that fatten their friends and campaign contributors:

Whenever a town wants to scare the voters into increasing their own property taxes, they begin to cut services, in the order in which taxpayers care: fire, police, high school football, garbage, libraries. Now it’s the state’s turn to play Chicken Little. They’re going to close a dozen Registry of Motor Vehicles branches – places everyone has to visit at least occasionally. That’ll teach a good lesson to those taxpaying bastards who actually have to work for a living! Whatever the state is saving by closing the RMV branches, they could have saved five times as much by closing the sleepier district courts, and no citizen would have noticed. But they’d never shut down those plush payroll patriot palaces, because that’s where the solons have stashed all their unemployable friends and kinfolk.

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I call for the elimination of the Department of the education in this debate on CNBC (and remark that the building should be torn down and a foot of salt put on the ground so nothing can ever spring forth again).

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A thorough new study of 30 nations from the Institut Constant de Rebecque in Switzerland reveals serious shortcomings in America’s tax system. The report, entitled “Tax burden and individual rights in the OECD: an international comparison,” creates a Tax Oppression Index based on three key variables: the overall tax burden, public governance, and taxpayer rights. The good news is that the United States has a comparatively low aggregate tax burden, though America’s score on this measure would be much better in the absence of a punitively high corporate tax rate. The bad news is that corruption and inefficiency in Washington drag down America’s score for public governance. The ugly news is that America has a very low rating for protecting taxpayer rights – largely because politicians have tilted the playing field to favor the IRS, including the fact that taxpayers lose the presumption of innocence provided in the Constitution. Here is a brief description of the study:

The OECD’s campaign against “harmful tax competition” and “tax havens” has overshadowed the essential issue, namely the important roles that both tax competition and “tax havens” play for capital preservation and formation, leading to higher prosperity and better protection of individual rights throughout the OECD. The tax oppression index is based on 18 representative criteria measuring fiscal attractiveness, public governance and financial privacy in the 30 member states of the OECD. Switzerland appears as the country with the lowest tax oppression – due to a relatively low tax burden and a more [classical] liberal institutional order, including its citizens’ right to veto legislation, political decentralization, and protection of financial privacy. Germany and France, on the other hand, whose governments have supported the OECD’s efforts, are among the most questionable states in terms of safeguarding their residents’ individual rights. …The tax oppression index evaluates the 30 OECD member states on three complementary dimensions quantified by 18 representative criteria, on the basis of OECD and World Bank data. The index enables relevant conclusions about the tax burden and individual rights among those countries.

Switzerland earns the top ranking in the report, followed by Luxembourg, Austria, Canada, and Slovakia. Italy and Turkey have the worst systems, follwed by Poland, Mexico, and Germany. The United States is tied for 19th, behind even the welfare states of Scandinavia. With Obama promising the raise tax rates and increase the power of the IRS, it may just be a matter of time before the U.S. is competing for the world’s most oppressive tax regime.

February 2017 Addendum: Here’s the relevant table from the study.

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The class-warfare crowd in Washington wants bigger government and higher tax rates, so it’s a bit shocking to see that a group of Northeastern Democrats are slashing tax rates. Yet that is exactly what Maine’s politicians are doing. The Governor even makes the common-sense observation (that so far has escaped President Obama’s attention) that there won’t be any jobs without investors and entrepreneurs. The Wall Street Journal approves:

This month the Democratic legislature and Governor John Baldacci broke with Obamanomics and enacted a sweeping tax reform that is almost, but not quite, a flat tax. The new law junks the state’s graduated income tax structure with a top rate of 8.5% and replaces it with a simple 6.5% flat rate tax on almost everyone. Those with earnings above $250,000 will pay a surtax rate of 0.35%, for a 6.85% rate. Maine’s tax rate will fall to 20th from seventh highest among the states. To offset the lower rates and a larger family deduction, the plan cuts the state budget by some $300 million to $5.8 billion, closes tax loopholes and expands the 5% state sales tax to services that have been exempt, such as ski lift tickets. This is a big income tax cut, especially given that so many other states in the Northeast and East — Maryland, Massachusetts, New Jersey and New York — have been increasing rates. “We’re definitely going against the grain here,” Mr. Baldacci tells us. “We hope these lower tax rates will encourage and reward work, and that the lower capital gains tax [of 6.85%] brings more investment into the state.” …One question is how Democrats in Augusta were able to withstand the cries by interest groups of “tax cuts for the rich?” Mr. Baldacci’s snappy reply: “Without employers, you don’t have employees.” He adds: “The best social services program is a job.” Wise and timely advice for both Democrats and Republicans as the recession rolls on and budgets get squeezed.

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Since politicians get to spend other people’s money, and use that process to raise campaign cash and buy votes, there is no limit to the stupid things they are willing to fund. The new study on condom use is merely the latest example. Foxnew.com has the details:

The federal government is spending $423,500 to find out why men don’t like to wear condoms, a project government watchdogs say is a nearly-half-a-million-dollar waste of taxpayer money. Researchers at Indiana University’s Kinsey Institute, with funding from the National Institutes of Health, are investigating why “young, heterosexual adult men” have problems using condoms. The study will include “skill-based intervention” to teach grown men how to use protection. …it has government watchdogs rolling their eyes at what they say is a clear waste of taxpayer money. “This government is so out of whack with what the priorities are that this actually makes sense that we’d be wasting money on a condom study rather than the real problems facing the country,” said David Williams, vice president for policy at Citizens Against Government Waste, which tracks wasteful spending in the federal budget. For American men — many of whom have already undergone years of awkward sex ed in the care of gym teachers — the study might not offer much of a boost, Williams said.

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