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Archive for September 2nd, 2009

Final Report from Mexico

Posted in Center for Freedom and Prosperity, Economics, Fiscal Policy, OECD, Organization for Economic Cooperation and Development, Sovereignty, Tax Competition, Tax Haven, Taxation, tagged , , , on September 2, 2009| 1 Comment »

I managed to stay out of jail, and was even able to sneak past security at the closing press conference in order to get headphones for the Spanish and French translations. But that’s the only positive thing to report.

Here are some preliminary thoughts (and here is a press release issued by the Center for Freedom and Prosperity):

The most noteworthy development to report is that the OECD (with lots of support from Brazil) tried to officially expand its mission so that it could fight tax avoidance. This is remarkable since tax avoidance, by definition, is completely legal. For all intents and purposes, this effort indicates that the OECD wants to restrict tax planning by multinational companies. The good news is that the OECD was forced to back down – at least in the sense that they were unable to include language in the final report. The bad news is that the OECD is an unaccountable international bureaucracy and will pursue this anti-business agenda anyhow.

The other development worth noting is that the bureaucrats at the OECD have perfected the bait-and-switch maneuver. Every time the so-called tax havens would raise good points and begin to press the OECD to live up to previous statements and commitments, the bureaucrats would assert that it was time for a new subject. Then, when the time came to publish the final report of the conference (which none of the delegates were allowed to see, much less vote on), the OECD wrote its interpretation of events. If it wasn’t for the fact that the OECD is pursuing an agenda that will reduce living standards and cause misery, one would almost have to admire their cleverness.

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Connecticut’s Fiscal Suicide

Posted in Competitiveness, Economics, Fiscal Policy, Politicians, Politics, States, Tax Competition, Taxation, tagged , , , , , on September 2, 2009| 21 Comments »

It’s hard to imagine, but just twenty years ago, there was no income tax in my home state of Connecticut (yes, we all have embarrassing things in our past). The Wall Street Journal opines about a new effort to hike the top tax rate in the Nutmeg State and explores how the income tax has led to a fiscal disaster – something that should be required reading for politicians in the nine states that so far have avoided the mistake of taxing income:

Connecticut grabs $7,007 in state and local taxes per man, woman and child resident, according to the Tax Foundation, more per capita than every state but New York and New Jersey. That’s hardly the company any state would want to keep these days, but the politicians in Hartford seem intent on following Trenton and Albany off the tax-and-spend cliff. This week Republican Governor Jodi Rell proposed a $1-billion-plus income tax hike, raising the top tax rate to 6.5% from 5%… The tax hike would be retroactive to January 1, meaning the government would snatch money that residents have already earned. Perhaps she aspires to the nether-world approval ratings of New Jersey Governor Jon Corzine. Given the size of its deficit, it’s hard to believe that for 200 years Connecticut balanced its budget without any income tax and became the richest state in the bargain. That changed in 1991 when then-Governor Lowell Weicker pushed the state’s first-ever personal income tax with a promise that the rate would remain flat at 4.5%. But the next time the state couldn’t pay its bills, in 2001, the legislature raised Mr. Weicker’s tax to 5%. …Since the income tax became law, Connecticut has experienced a long, slow exodus of jobs and people. The Yankee Institute notes the astounding fact that since 1992, the year the income tax went into effect, businesses in Connecticut have hired a grand total of zero net new workers. …What the income tax did stimulate was a spending binge and big pay raises for the state’s unionized government workers. The year before the income tax was enacted, Connecticut’s government expenditures per capita ranked right in the middle of all states; now it ranks in the top 10. Per capita real spending has nearly doubled since the income tax was enacted. …We’d suggest that Ms. Rell give Governor Martin O’Malley of Maryland a call. Two years ago he passed a similar income tax hike dressed up as tax “fairness.” Today, a third of the millionaires have vanished from the tax rolls—and the state is still in deficit. To revive growth and boost family incomes in Connecticut, Ms. Rell should be working to repeal the income tax, not expand it. It’s a failed experiment that has mostly benefited the likes of Florida and Texas.

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