Archive for June 4th, 2010

This story from Business Week warmed my heart. Switzerland’s cantons are competing to create better tax policy, and this is attracting companies seeking to escape the kleptocracies elsewhere in Europe. This shows the value of tax competition (imagine how bad taxes would be in Germany and France if politicians in those nations didn’t have to worry about taxpayers escaping over the border) and the benefits of federalism (unlike the United States, Switzerland has not made the mistake of letting the central government becoming the dominant force in fiscal policy).

“Low corporate taxes will help Switzerland attract business, but it’s also creating tension as European governments seek revenue to plug their fiscal deficits.” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin. Switzerland reported a fiscal surplus last year, and cantons from Zurich to Schwyz are lowering taxes. “There is still a clear downward trend in taxation,” said Martin Eichler, head of research at BakBasel, an economic consulting firm in Basel, Switzerland. “There is pressure to be attractive to companies and the cantons are saying that if we have to save somewhere, then it won’t be on tax.” Swiss corporate tax rates, including a federal rate of 8.5 percent, range from 11.8 percent in the town of Pfaeffikon in Schwyz to 24.2 percent in Geneva, according to tax consultant Mattig-Suter & Partner. That compares with a corporate tax rate of 28 percent in the U.K. and 35 percent in the U.S. Vaud, running east along the lake from Geneva to Montreux, persuaded Shire Plc to set up an office last month with the help of tax relief on its corporate rate of 23.5 percent, said Eric Maire, the canton’s senior project director for economic promotion. That follows the March decision of Ineos Group Holdings Plc to relocate from its U.K. base. …Tax increases in the U.K. played a “key role” in persuading firms such as BlueCrest Capital Management and Brevan Howard Asset Management LLP to shift part of their London-based operations to Geneva, said Loeffler. Smaller cantons want to emulate Zug, which used a tax rate of 15.8 percent to more than double its number of registered companies to 29,134 since 1990. The canton is home to miner Xstrata Plc and Transocean Ltd., the world’s largest offshore oil and gas driller.

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You might think I would be past the point of being surprised about excessive pay for bureaucrats, especially after narrating the new video for the Center for Freedom and Prosperity, but even I’m shocked by this New York Times story about bloated pay for bureaucrats at New York City’s Metropolitan Transportation Authority. More than 8,000 of them pull in six-figure compensation packages, and 50 of them get more than $200,000. By the way, don’t snicker and think this is just a problem for NYC taxpayers. Thanks to federal subsidies, folks all across America are paying for this taxpayer ripoff.

In an era of generous municipal salaries and union-friendly overtime rules, it may not come as a complete shock that there are thousands of Metropolitan Transportation Authority employees — 8,074, to be precise — who made $100,000 or more last year. The usual top-level managers are included in that list, but so are dozens of lower-level employees, including conductors, police officers and engineers, many of whom pulled in six figures in overtime and retirement benefits alone. One of those workers, a Long Island Rail Road conductor who retired in April, made $239,148, about $4,000 more than the authority’s chief financial officer, according to payroll data released on Wednesday. …more than a quarter of the Long Island Rail Road’s 7,000 employees earned more than $100,000 last year, including the conductor, Thomas J. Redmond, and two locomotive engineers — who were among the top 25 earners in the entire transportation authority. …Two car repairmen at the L.I.R.R. and 12 police officers assigned to the authority’s bridges and tunnels, some of whom earned more than double their base salaries, were among the 50 employees at the authority who collected $200,000 or more, the data show. …Around 60 percent of the authority’s current budget — about $7 billion — is used to pay labor costs including payroll, pensions, and overtime.

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A Washington Post columnist is understandably disgusted that Congressman Jim Moran is a corrupt thief who swaps earmarks for campaign cash, but she draws the wrong conclusion. The problem is not campaign contributions. That’s just the symptom. The real problem is that government is far too big, and politicians are auctioning off undeserved money to people who don’t deserve it. Restricting the 1st Amendment by making it harder for people to participate in the political process, as the columnist urges, won’t solve the problem because people who think it is okay to receive undeserved money will figure out another route to bribe politicians. The only real solution is to stop the corrupt redistribution that drives the process, which is the point made in the video under the excerpt:

“You don’t have to drink. You just have to pay.” Has there ever been a better summary of how Washington works — and the need for campaign finance reform — than this line from a 2007 e-mail? The context: An executive at Innovative Concepts, a small defense contractor, was balking at going to a wine-tasting fundraiser for Rep. Jim Moran. The Virginia Democrat sits on the House Appropriations subcommittee that controls defense spending — and the executive’s boss made clear that attendance had nothing to do with the quality of the cabernet. Moran raked in almost $92,000 at the event, sponsored by the now-defunct lobbying firm PMA Group. And Innovative Concepts received an $800,000 earmark in the next defense spending bill. …There is nothing necessarily illegal in the Innovative Concepts transaction, which is, of course, the scandal. Washington operates on the tacit understanding that campaign contributions grease the way for access and influence. Both sides in this transaction, lawmaker and donor, perceive, or at least present, themselves as the victim: elected officials as captives of a system that demands incessant fundraising; donors as the target of a none-too-subtle shakedown scheme. …There is a simple way out of this swamp — public financing of congressional campaigns. …The estimated cost is $2 billion to $3 billion per election.

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