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Archive for June 25th, 2013

I’ve never figured out why soccer is so popular in some parts of the world. What’s the point of watching people run up and down a field for 90 minutes when the result is usually a 0-0 tie?

But non-Americans generally don’t get the point of baseball, so I guess it’s all a matter of background and taste.

I mention soccer because it’s an excuse to write about competitiveness and taxation. Except I’m not going to write about low tax rates and job creation, or low tax rates and capital formation. Instead, today’s topic is tax competitiveness and French soccer.

And since the French care about soccer, maybe this will be a valuable opportunity to teach them why high tax rates are a bad idea in all areas.

Though you won’t be surprised to learn that the French government is on the wrong side.

Here’s how the New York Times begins a story.

Monaco may seem almost comically tiny, less a real country than a glorified safe deposit box festooned with palm trees and Lamborghini dealerships, but it teems with interesting statistics. Population: 35,427. Number of nationalities represented: 125. Unemployment rate: 0 percent. Income tax rate: 0 percent.

So far, so good. I’ve written favorably about Monaco and I have no objection to this description.

Monaco SoccerAnd it seems that Monaco’s fiscal policy is good for the local soccer team.

…a potash fertilizer tycoon…in 2011 expressed his support for his adopted country by buying a majority stake in its struggling soccer team, A.S. Monaco, and proceeding to aggressively vacuum up expensive European players. …Monaco is different from other countries. Rybolovlev can offer players…liberation from the petty annoyance of income tax. This is a happy prospect no matter what you earn; it begins to look like bliss when you count your income in millions.

But it seems there’s a controversy in this fiscal paradise. Or, to be more accurate, there’s a controversy in the tax hell next door.

…it puts the rest of the French league at a significant disadvantage. While Monaco basks in its special tax status, players for French teams are subject to the kind of high tax rates that recently motivated the actor Gérard Depardieu to renounce his citizenship… It’s like having a major league baseball team in the Cayman Islands.

Gee, what a surprise. The French are complaining that lower tax rates are an “unfair” form of tax competition.

So how did the French react? By engaging in their true national sport – imposing higher taxes.

The French soccer league has grumbled about Monaco’s exceptional situation in the past. But now, alarmed by the team’s sudden winning streak and unnerved by its 120 million-or-so euro (about $157 million) acquisition of three great players — João Moutinho and James Rodríguez from Porto and Radamel Falcao from Atlético Madrid — it finally did something. In March, it decreed that starting next June, any team playing in the French league would have to be based in France and subject to French taxes. For “any team,” read “Monaco.”

Naturally, their “solution” is to impose higher taxes in Monaco, not to lower taxes in France. At least the Spanish government, when confronted by competition from soccer clubs in other nations, created a special low-tax regime for soccer players.

That’s not the right answer. There should be low tax rates for all. But a special loophole for soccer players is a “far-less-worse” approach than what France is doing.

It’s also worth noting that the French approach won’t work. I’m not saying they can’t impose higher taxes on the Monaco soccer team.

But I am saying that the French soccer league will continue to lose top players so long as the government has a punitive 75 percent tax system.

Entrepreneurs are escaping France. Actors are escaping France. And now top soccer players have a big tax incentive to play other places other than France (or Monaco).

P.S. Speaking of soccer, you probably won’t be surprised to learn that ordinary people were screwed over at the last World Cup in order to benefit the rich elitists in private jets who like to lecture the rest of us about our carbon footprints.

P.P.S. It has nothing to do with public policy, but I was amused that the United States advanced farther than France at the last World Cup.

P.P.P.S. Returning to the realm of public policy, the statists in Europe have decided that free soccer broadcasts are a human right.

P.P.P.P.S. The United Kingdom also has lost high quality players because of excessive taxation.

P.P.P.P.P.S. Since I’m writing about sports, I suppose this is a good opportunity to pat myself on the back by sharing this award from last weekend’s tournament. I came to the plate 22 times and came away with two home runs, eight doubles, six singles, and a walk, while scoring 15  runs and driving in 16 RBIs.

Salem Offensive MVP

I’ve had plenty of bad softball performances over the years, but fortunately they never give awards for screwing up.

Now if I can merely convince politicians to reduce the burden of government spending, I’ll be able to say 2013 was a good year.

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If a bad person robs a bank and then uses a Chevrolet to make his getaway, do we blame General Motors?

Of course not.

If a pilot suffers some sort of medical incident, loses control of her plane, and injures people on the ground during the crash, do we blame Cessna?

No, that would be silly.

If a con artist tricks a consumer into sending money, do we blame the bank where the fraudster has an account?

Logically, the answer is no, but thanks to money laundering laws, the government actually does expect banks to know if customers are misbehaving. But that’s why experts think those laws are absurdly unworkable and expensive.

I’m asking these rhetorical questions because a couple of professors, in a New York Times op-ed, claim that gun manufacturers and gun owners should be subject to special taxes. Why? Well, because some people deliberately or accidentally cause damage with guns.

Gun manufacturers have gone to great lengths to avoid any moral responsibility or legal accountability for the social costs of gun violence… But there is a simple and direct way to make them accountable for the harm their products cause. For every gun sold, those who manufacture or import it should pay a tax. The money should then be used to create a compensation fund for innocent victims of gun violence.

They justify their plan with economics. Or, to be more accurate, they use economic terminology to sell their scheme.

This proposal is based on a fundamentally conservative principle — that those who cause injury should be made to “internalize” the cost of their activity by paying for it. …it makes sense to tax gun manufacturers directly. The result would be that those who derive a benefit from guns — for hunting, target practice, self-defense or simply for collecting — would shoulder some of the social costs of their choice as manufacturers pass along the cost of the tax to them. Such a tax might also exert at least some economic pressure on manufacturers to market especially lethal guns less aggressively, or to implement safer gun technologies, like “smart guns” that could be used only by the registered owner. Right now, they have no such incentive — they’re immune from most lawsuits, and guns are expressly exempt from regulation by the Consumer Product Safety Commission, which is supposed to protect the public from unreasonable risks from consumer products.

There are lots of reasons why I disagree with this column, but my main objection – as suggested by the rhetorical questions above – is that the professors want to improperly redistribute risk and blame.

A gun is not inherently dangerous. Indeed, gun ownership is associated with lower crime rates, so it’s more accurate to say they are inherently safety enhancing. Cops, for instance, overwhelmingly think gun control is either futile or counterproductive.

That being said, what’s the best way to deal with those individuals who deliberately or accidentally use guns in an unsafe manner?

The answer is simple. There should be criminal penalties imposed on those who engage in deliberate wrongdoing and we should rely on insurance and/or the tort system (properly focused)  for accidental misuse.

Will that system be perfect? Of course not. Criminals will always exist. All we can do is to make crime less attractive. And accidents will always happen, even if we have a good system of insurance and torts.

Let’s conclude with a statement of the obvious. I’m 99 percent certain that the professors are completely unserious about modifying how we insure against gun-related damage. They’re simply using the terminology to impose a policy that is best characterized as back-door gun control.

Which makes me all the more appreciative of the message on this young lady’s t-shirt.

I’m tired of statists, most of whom (like Rosie O’Donnell)  live very comfortable lives in safe neighborhoods, trying to tell the rest of us how to live.

P.S. Sloppy and flawed analysis seems to be a specialty at the New York Times.

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