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Posts Tagged ‘Scotland’

Redistribution is a bad idea primarily because of economics.

People getting handouts have less incentive to be productive and people paying taxes to finance that spending have less incentive to be productive.

That translates into less economic output, which means lower living standards.

But there’s another reason to be concerned about redistribution. I worry that it erodes societal capital (i.e., the traits such as work ethic, self reliance, etc, that are associated with successful societies).

What happens, for instance, when politicians convince people that have a “human right” to other people’s money?

It would be very difficult to be optimistic about a society where most people have that mindset.

This is why I’m very pessimistic that there will ever be a meaningful economic rebound in nations such as Greece and Argentina.

Simply stated, too many people thing they have a right to government-provided goodies. Which means, of course, that they think they have the right to live off the labor of others.

Let’s look at an example.

Remy Tumin reports in the New York Times that Scottish politicians have decided that there is a human right to tampons and sanitary pads.

Period products are now free to anyone in Scotland who needs them, nearly two years after the country’s Parliament approved a landmark piece of legislation. The initiative makes Scotland the first country in the world to provide free sanitary products, part of a global effort to end “period poverty”… The 2020 legislation in Scotland came on the heels of an earlier law that provided free access to tampons and sanitary pads in schools, colleges, universities and other public buildings. …People can find the nearest location with free period products through a mobile app… Seventeen states and Washington, D.C., have passed laws that require free access to period products for students.

As an economist, I’m irked that the story keeps referring to “free.”

Period products will still have a cost. All that’s happening is that taxpayers are paying instead of users.

I’m also dismayed (but not surprised) that there is no discussion about the potential impact of “third-party payer.” In all likelihood, producers will take advantage of this new entitlement by increasing prices.

But the most depressing part of the story is that this idea seems quite popular. So what comes next? Well, food is even more important to human existence, so why not make food “free” as well?

That’s a recipe for creating a nation filled with people like Obama’s Julia and Biden’s Linda.

And Margaret Thatcher warned us where that leads.

P.S. Here are some other not-so-great moments in human rights.

P.P.S. Today’s column revolves around the battle between what some call “positive” and “negative” rights and liberties.

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One of the great insights of “public choice” is that politicians engage in self-serving behavior just like everyone else.

But there’s a profound difference between them and us. In the private economy, we can only make ourselves better off by providing value to others. In government, by contrast, politicians oftentimes make themselves better off by providing unearned benefits to various interest groups.

This elementary insight is a good starting point for those who want to understand how Washington (mal)functions.

And these behavioral insights don’t change when you cross national borders, which is why I periodically share examples of bizarre boondoggles as part of my series on “Great Moments in Foreign Government”. Here are some examples of prior editions.

Today, we have a special version of this series from the British Isles.

We’ll start with a story, from the U.K.-based Sunday Times, about a voluntary tax scheme in a rich part of London.

Westminster city council said it would be writing to 15,000 of its wealthiest homeowners asking them to make a voluntary donation on top of their council tax. The initiative comes amid warnings that a crisis in local government funding is likely to drive five councils into insolvency within the next 12 months, with 10 running out of money within two years. …The begging letters scheme, dubbed the “Westminster community contribution”, will see letters sent to all 15,000 band H properties, worth about £1m and above. Nickie Aiken, leader of Westminster council, said she had decided to tap the wealthy for donations because “they have asked me, ‘Why can’t we pay more council tax?’ We are giving people the option. It is an opportunity to invest in their neighbourhood.” …A total of 904 people replied.

My immediate reaction is that there are 904 nitwits in Westminster.

But, to be fair, it doesn’t say they responded by sending extra money to the local council. Maybe they scrawled obscenities on the notice and returned it, which would have been my preferred response.

But I’m guessing many of them did cough up some cash, which makes them more foolish than the taxpayers of Norway. And even more foolish than hypocritical leftists in the United States.

It’s also frustrating that there’s no data in the story on why local councils are feeling a budget pinch. I’m guessing that they’re in trouble because spending has climbed much faster than inflation (similar to what happened where I live in Fairfax County, Virginia). So why reward that overspending with additional payments?

Now let’s head across the Irish Sea.

The Irish Times has a story about how a program that supposedly was designed to help homeless people actually is lining the pockets of well-to-do property owners.

The Government’s homeless family hub solution is not only a short-term fix for a long-term crisis, it’s a shocking deal for taxpayers that benefits private operators. …doesn’t “hub” have a cosy ring to it? There will be a total of 18 family accommodation hubs in Dublin, nine of which include hotels and B&Bs already in use being “adapted”. …Let’s take the former Mater Dei site as a prime example. Dublin City Council (DCC) earmarked €4.5 million to refurbish the former college complex to house 50 families… Sources say the project is likely to substantially overrun due to “many extras”… The problem is, after ploughing millions into a magnificent revamp, the council must hand the property back to the archdiocese in less than three years. …This is mirrored in every one of the family hubs, the longest lease being just five years. It starts to look like an incredible deal for the private owners. They get back a terrifically refurbished, furnished and equipped building, paid for by taxpayers, that can be rented out for profit. Everything goes back to the owner… On top of the deal of a lifetime, DCC is paying rent on the site, a figure it described as “nominal” but not nominal enough to make public.

Cronies getting rich(er) thanks to programs that supposedly were designed to help the poor? As Inspector Renault said in Casablanca, “I’m shocked, shocked”!

Probably as shocked as he was to learn that Obamacare cost estimates were wrong and that childcare subsidies led to higher costs in the U.K.

Sadly, insiders always figure out how to line their pockets as government gets bigger. It’s a feature, not a bug.

Last but not least, let’s travel to Scotland.

In the U.K.-based Times, we learn that the government is so incompetent that it has a hard time ripping off European taxpayers for farm subsidies.

Scottish ministers have appealed to Europe for help in heading off a looming crisis in farm subsidy payments for the second year running. Discussions have taken place with the European Commission to set up “contingency plans” in case Scottish farmers once again missed out on their payouts. An extension to the end-of-the-month deadline for processing payments is vital if the Scottish government is to avoid being hit with millions of pounds in fines. …The first minister is likely to be asked what her government is doing to make sure farmers get their payments on time. Scottish ministers came in for extensive criticism last year after an IT failure delayed European agriculture subsidy payments to thousands of farmers.

What makes this story extra depressing is that the supposed Conservative opposition doesn’t question the wisdom of handouts.

…the Scottish government had asked for a deadline extension earlier this week, prompting anger from opposition politicians. Ruth Davidson, the Scottish Conservative leader,…added: “It’s a disgrace that so many farmers are still waiting for payments, and it looks like, for the second year running, the SNP is going to have to go cap-in-hand to Europe and ask for special treatment.”

And it goes without saying that the welfare recipients…oops, I mean farmers…are anxious to know when their handouts will arrive.

Scott Walker, the chief executive of the National Farmers’ Union in Scotland, said: “Everyone who is due a payment simply wants to know when it will arrive and that is a reasonable demand.”

Sigh.

One of the reasons I was sympathetic to Scottish independence is that the entitlement mindset in the country may have been disrupted if they lost subsidies from the central government in London. Redistribution isn’t as fun when you’re taking money from your own pockets.

However, that wouldn’t have put an end to handouts from the statists in Brussels, assuming that Scotland would have been part of the European Union. So I’ll never be without things to write about. That’s good for me, bad for Europe.

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In my research and travels, I come across all sorts of strange stories about tax policy.

While I’m quite amused by these oddball examples, I actually prefer writing about overseas tax policies that provide teachable moments about big issues such as the Laffer Curve, taxes and growth, tax competition, and how higher tax burdens “feed the beast” by enabling more government spending.

Let’s look at some new examples and see what we can learn about politicians and fiscal policy.

We’ll start with a Bloomberg story from the Ukraine, where taxpayers go above and beyond to escape extortionary taxes on foreign vehicles.

Take a close look at the cars crawling through Kiev’s traffic-laden streets and you’ll notice something odd: a surprisingly large number of them aren’t registered in Ukraine. The explanation isn’t a sudden inflow of tourists, but rather a work-around by local drivers who crave foreign-made vehicles and refuse to pay restrictively high import duties to buy them. Instead, schemes have popped up where buyers effectively acquire cars from nearby nations and bring them across the border on temporary arrangements. They must then leave and re-enter Ukraine every year, or sometimes more frequently. “It’s amazing,” said Oleksandr Zadnipryaniy, a 30-year old entrepreneur who paid about $3,000 for a second-hand Opel Vectra from Lithuania. “Taxes are exorbitant. Why must poorer Ukrainians pay three times as much as richer Europeans?”

The answer to Mr. Zadnipryaniy’s question is that they don’t pay the tax. At least not if this chart is any indication.

Needless to say, I’m on the side of taxpayers and don’t have sympathy for the politicians, who are motivated by a desire to extract revenue and curry favor with domestic interest groups.

Such cars represent a headache for the government. Dodging import duties trims budget revenue… Cracking down is also tricky. …Drivers blame the government, accusing it of pandering to local car lobbies by setting high import duties.

Now let’s shift to another story about tax avoidance, though this one doesn’t have a happy ending.

The BBC reports that a big tax hike may put an end to “booze cruises” from Finland to Estonia

The Estonian government is set to impose a 70% rise in taxation on alcoholic drinks in July, Finnish broadcaster YLE reports. It’s a blow to drinkers from Finland who, since Estonian independence in 1991, have taken the short 54-mile (87km) ferry trip from Helsinki to Tallinn to enjoy prices which are less than half of those back home. …a 12-euro crate of beer will increase to 18 euros, making the concept of the money-saving “booze cruise” much less inviting.

But fortunately Finns still have an option.

Finnish tourist Erno Sjogren said that the tax rise might make him think again – but not on giving up the concept. Speaking to Helsingin Sanomat as he loaded his car outside an Estonian supermarket, he said he would consider taking his trade to Latvia instead – a 2.5-hour drive cross-country from the ferry port in the Estonian capital. The Latvian town of Ainazi is already benefitting, Helsingen Sanomat says, with the appropriately named SuperAlko store visible from the Estonian border and offering cheaper prices than its Baltic neighbours.

Let’s toast to tax competition!

Last but not least, I’m a giant fan of decentralization and a partial fan of secession (done properly and for good reasons), but you don’t automatically get results.

Consider what’s happening in Scotland, as reported by the U.K.-based Times.

Nicola Sturgeon has given her clearest indication to date that Scots will be in line for substantial income tax rises next year. In an interview due to be published today the first minister dismissed suggestions that a high-tax agenda would deter businesses, arguing instead that paying for good public services could be just as attractive to investors and people as low taxes. Ms Sturgeon’s comments came as the Scottish parliament backed a motion calling for higher taxes to pay for public services.

Ugh. I’m sympathetic to Scottish independence, but stories like this make me pessimistic about what will happen if politicians like Sturgeon are in charge of an independent nation.

Assuming, of course, she’s actually ignorant enough to believe that investors want higher taxes.

And I haven’t written about whether Catalonia should be independent of Spain, but this blurb from the EU Observer leaves a sour taste in my mouth.

Catalonia’s regional government said Monday that increases in staff at the tax office, from 321 to 800, have made the Spanish region ready to collect taxes for an independent Catalonia if citizens vote for independence on 1 October. A law to organise the referendum will be to a vote on Wednesday, but the national government in Madrid has dismissed the bill as a way to “cheat democracy”.

Technically, this won’t be bad news if the 479 new tax bureaucrats replace a similar number (or larger number) of officials that formerly harassed people on behalf of the national government in Madrid.

But I’m automatically suspicious that politicians and bureaucrats will maneuver to be the winners of any change. This isn’t an argument against secession, but it is a warning that independence won’t yield economic benefits if there’s no reduction in the burden of government.

Advocates of an independent Catalonia should first and foremost be making plans to unleash the private sector, to make themselves the Hong Kong or Singapore of Europe.

Assuming, of course, that they would want their new country to be highly ranked by Economic Freedom of the World.

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Seven years ago, I wrote about the “Butterfield Effect,” which is a term used to mock clueless journalists.

A former reporter for the New York Times, Fox Butterfield, became a bit of a laughingstock in the 1990s for publishing a series of articles addressing the supposed quandary of how crime rates could be falling during periods when prison populations were expanding. A number of critics sarcastically explained that crimes rates were falling because bad guys were behind bars and invented the term “Butterfield Effect” to describe the failure of leftists to put 2 + 2 together.

Journalists are especially susceptible to silly statements when writing about the real-world impact of tax policy.

They don’t realize (or prefer not to acknowledge) that changes in tax rates alter incentives to engage in productive behavior, and this leads to changes in taxable income. Which leads to changes in tax revenue, a relationship known as the Laffer Curve.

Here are some remarkable examples of the Butterfield Effect.

  • A newspaper article that was so blind to the Laffer Curve that it actually included a passage saying, “receipts are falling dramatically short of targets, even though taxes have increased.”
  • Another article was entitled, “Few Places to Hide as Taxes Trend Higher Worldwide,” because the reporter apparently was clueless that tax havens were attacked precisely so governments could raise tax burdens.
  • In another example of laughable Laffer Curve ignorance, the Washington Post had a story about tax revenues dropping in Detroit “despite some of the highest tax rates in the state.”
  • Likewise, another news report had a surprised tone when reporting on the fully predictable news that rich people reported more taxable income when their tax rates were lower.

And now we can add to the collection.

Here are some excerpts from a report by a Connecticut TV station.

Connecticut’s state budget woes are compounding with collections from the state income tax collapsing, despite two high-end tax hikes in the past six years. …wealthy residents are leaving, and the ones that are staying are making less, or are not taking their profits from the stock market until they see what happens in Washington. …It now looks like expected revenue from the final Income filing will be a whopping $450 million less than had been expected.

Reviewing the first sentence, it would be more accurate to replace “despite” with “because.”

Indeed, the story basically admits that the tax increases have backfired because some rich people are fleeing the state, while others have simply decided to earn and/or report less income.

The question is whether politicians are willing to learn any lessons so they can reverse the state’s disastrous economic decline.

But don’t hold your breath. We have an overseas example of the Laffer Curve, and one of the main lessons is that politicians are willing to sacrifice just about everything in the pursuit of power.

Here are some passages from a story in the U.K.-based Times.

The SNP is expected to fight next month’s general election on a commitment to reintroduce a 50p top rate of tax… The rate at present is 45p on any earnings over £150,000. …civil service analysis suggested that introducing a 50p top rate of tax in Scotland could cost the government up to £30 million a year, as the biggest earners could seek to avoid paying the levy by moving their money south of the border.

If you read the full report, you’ll notice that the head of the Scottish National Party previously had decided not to impose the higher tax rate because revenues would fall (just as receipts dropped in the U.K. when the 50 percent rate was imposed).

But now that there’s an election, she’s decided to resurrect that awful policy, presumably because a sufficient number of Scottish voters are motivated by hate and envy.

This kind of self-destructive behavior (by both politicians and voters) is one of the reasons why I’m not overly optimistic about the future of Scotland if it becomes an independent nation.

P.S. I’m not quite as pessimistic about the future of tax policy in the United States. The success of the Reagan tax cuts is a very powerful example and American voters still have a bit of a libertarian streak. I’m not expecting big tax cuts, to be sure, but at least we’re fighting in the United States over how to cut taxes rather than how to raise them.

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This Thursday, Scottish voters decide whether they want to break away from the United Kingdom and reclaim their independence.

Do advocates of economic liberty in America have a dog in this fight?

Well, there’s very solid academic evidence from economic historians that Europe originally became rich precisely because power was decentralized among lots of small jurisdictions that had to compete with each other.

Moreover, I’ve argued that we’d get better policy if Belgium split into two nations.

So would the same be true if Scotland broke off from the United Kingdom?

Niall Ferguson, born in Scotland, is opposed.

Scotland regained its own Parliament in 1999, following an earlier referendum on so-called devolution, which significantly increased the country’s autonomy. Since 2007, there has been a Scottish government, which is currently run by the Scottish National Party. So much power has already been devolved to Edinburgh that you may well ask why half of adult Scots feel the need for outright independence. The economic risks are so glaring… What currency will Scotland use? The pound? The euro? No one knows. What share of North Sea oil revenues will go to Edinburgh? What about Scotland’s share of Britain’s enormous national debt? …Petty nationalism is just un-Scottish. And today’s Scots should remember the apposite warning of their countryman the economist Adam Smith about politicians who promise “some plausible plan of reformation” in order “to new-model the constitution,” mainly for “their own aggrandizement.”

I’m sure that many pro-independence politicians in Scotland are looking out for themselves, so that’s a compelling argument.

And David Frum is similarly skeptical, arguing that the United States should worry about an independent Scotland.

A vote in favor of Scottish independence would hurt Americans…a ‘Yes’ vote would immediately deliver a shattering blow to the political and economic stability of a crucial American ally and global financial power. The day after a ‘Yes’ vote, the British political system would be plunged into a protracted, self-involved constitutional crisis. …a ‘Yes’ vote would lead to a longer-term decline in Britain’s contribution to global security. The Scottish separatists have a 30-year history of hostility toward NATO.  …a ‘Yes’ vote would embitter English politics and empower those who wish to quit the European Union.  …The United States has traditionally preferred an EU that includes the U.K. …a ‘Yes’ vote would aggravate the paralysis afflicting the European Union.

Since I’m not a fan of the European Union and I think NATO is a bureaucracy that has lost its purpose, some of these arguments don’t move me. However, I do believe the world is a better place because of the United Kingdom, so David’s core argument shouldn’t be dismissed.

But there are other voices that have a more optimistic assessment.

Here’s Ewan Watt, one of the few Scotsmen I personally know, arguing in the Daily Caller that independence will force his statist countrymen to rein in their big-government impulses.

I’ve often been asked to try and summarize the tortuous Scottish independence campaign from a libertarian perspective to an American audience. …this nicely sums up the independence campaign: Scots and other Scots fighting over who can further spread the specter of socialism, inhibit individual liberty, and, ultimately, ruin Scotland. Both sides have strived to out-promise each other on more public spending, greater economic centralization, and cradle-to-grave public services.

Statists fighting for more statism? Sort of like Bush v Obama? That doesn’t sound like someone who thinks independence will produce good results.

But keep reading.

And yet…, independence could ultimately provide a boon to the movement and rejuvenate classical liberal ideas in the land that helped give them life. Given that Scotland lacks the tools that even a U.S. state possesses to attract external investment, it’s little surprise that at times it’s been nothing but a laboratory for successive socialist experiments. …Under independence Scotland will be forced to create an economic environment that can compete with both the lure of London and Ireland’s 12.5 percent corporation tax, while also avoiding the very government largesse and fragile financial system that the Bank of England has been able to artificially prop up. Far from becoming a socialist utopia, the conditions of independence will not only force Scotland to live under strict fiscal discipline, but embrace the very free-market philosophy that she helped export to prosperous nations around the world.

And my Cato colleague David Boaz also thinks an amicable divorce will lead to more economic freedom.

Here’s some of what he wrote for USA Today.

…whatever the benefits of union might have been in 1707, surely they have been realized by now. And independence for any country ought to appeal to Americans. So herewith a few arguments for independence. …England and Scotland are both nations with history and culture. They need not be combined in one state. …There’s some evidence that small countries enjoy more freedom and prosperity than larger countries. …Alex Salmond, the leader of the Scottish National Party and the likely first prime minister of an independent Scotland, may be a socialist, but he’s not an idiot. He knows that a tax hike in Scotland wouldn’t work. Asked in a televised debate, he responded, “We don’t have proposals for changing taxation. We certainly are not going to put ourselves at a tax disadvantage with the rest of the UK.” …With a top British tax rate of 45 percent, and 41 percent in Ireland, Salmond doesn’t want to raise the Scottish rate to 50 percent and push out top earners. …An independent Scotland would have to create its own prosperity, and surely the people who produced the Enlightenment are smart enough to discover the failures of socialism pretty quickly if they become free, independent, and responsible for their own future. …Scotland had a successful independent monetary system from 1716 to 1845,… So maybe it doesn’t need the pound sterling.

By the way, the independent monetary system David mentions was based on competitive currencies and it is perhaps the best example of a free-market monetary policy. But that’s a topic for another day.

Back to the issue of Scottish independence, a former Cato Institute expert, Patrick Basham, also writes that an independent Scotland will have no choice other than capitalism.

Scotland is an anachronistic place where leftist thinking remains in vogue. Scots strongly dislike, for example, the UK government’s introduction of market forces and fiscal discipline into the provision of health care, education, and welfare. …Although the Scots are ideologically to the left of their English neighbors, in practice their semiautonomous government is comparatively frugal. For example, Scotland has a lower deficit and lower public spending relative to GDP than the UK. …Given that Scotland’s top parties, the nationalists and Labor, are left-wing, it’s also possible that an independent Scotland will tax, spend, and regulate itself into an economic tailspin. That would be a travesty for many individual Scots, but not a national tragedy. Hitting the economic wall without a UK-size safety net would teach an invaluable lesson. It would rapidly cure Scotland’s entitlement culture, as a critical mass of taxpayers learned the true cost of fiscally unsustainable statism. …Ultimately, such a self-reliant, market-friendly political culture may transform Scotland into an international center of commerce and finance, such as Hong Kong, or perhaps into a tax haven, such as Guernsey or Jersey. The bottom-line is that, if Scotland decides to go it alone, it will become a very different place. An even better place.

I’m very sympathetic to sentiments in these columns, though I’m not as optimistic about an independent Scotland.

What happens, after all, if a newly independent Scotland goes through a five-year learning period of statism before it becomes clear that big government doesn’t work?

Does that mean Scottish voters will suddenly become libertarians? I hope so, but what if a non-trivial number of productive people emigrate during that period and the majority of those left still vote for handouts and dependency?

For instance, I certainly don’t expect the hundreds of thousands of people who get paychecks from government to turn into overnight libertarians.

On the other hand, maybe they’ll have no choice, sort of like the piglets in this Chuck Asay cartoon.

If you’re undecided on the issue, there is a very good role model for independence. Writing for the Washington Post, Professor Ilya Somin of George Mason University’s Law School adds a very persuasive argument in favor of secession.

One relevant precedent is the experience of the “Velvet Divorce” between Slovakia and the Czech Republic, whose success is sometimes cited by Scottish independence advocates as a possible model for their own breakup with Britain. Like many Scottish nationalists, advocates of Slovak independence wanted to break away from their larger, richer, partner, in part so they could pursue more interventionist economic policies. But, with the loss of Czech subsidies, independent Slovakia ended up having to pursue much more free market-oriented policies than before, which led to impressive growth. The Czech Republic, freed from having to pay the subsidies, also pursued relatively free market policies, and both nations are among the great success stories of Eastern Europe. Like Slovakia, an independent Scotland might adopt more free market policies out of necessity. And the rump UK (like the Czechs before it), might move in the same direction. The secession of Scotland would deprive the more interventionist Labor Party of 41 seats in the House of Commons, while costing the Conservatives only one. The center of gravity of British politics would, at least to some extent, move in a more pro-market direction, just as the Czech Republic’s did relative to those of united Czechoslovakia. If the breakup of the UK is likely to resemble that of Czechoslovakia, this suggests that free market advocates should welcome it, while social democrats should be opposed.

Ilya is right. The Czech Republic and Slovakia have better policy as separate nations. And I say that even though I’m very disappointed that both nations recently repealed their flat tax systems.

Last but not least, let’s add a bizarre voice to the debate.

It seems that the crazies from North Korea support an independent Scotland.

North Korea is quietly backing the Yes vote in Scotland and would be keen to increase trade with a newly independent Edinburgh, according to officials of the Pyongyang regime. “I think that independence would be a very positive thing for Scotland,” Choe Kwan-il, managing editor of the Choson Sinbo newspaper, told The Telegraph. …”I believe that every person has the right to be a member of an independent nation, to have sovereignty, to live in peace and to enjoy equality,” he said. “And I believe that a majority of Scots feel the same and will vote for independence.”

There’s nothing objectionable in those words, but they come from someone who almost surely is a puppet of one of the most malignant regimes on the planet, so you can’t trust him or his statements.

This doesn’t necessarily mean Scottish independence is a bad idea, to be sure, but I surely would understand if an undecided person voted no simply because North Korea wants a yes.

But now let’s see what a true public policy expert has to say about the topic. Here’s Groundskeeper Willie from The Simpsons.

And since I’m sharing videos, here are the Scots in a very un-European display of patriotism. Gives these Americans a run for the money.

That’s almost enough to make me think they’ll vote yes. But my prediction, for what it’s worth, is that Scottish voters will get cold feet and vote no by a 56-44 margin.

And if my prediction is right, I’ll offer my two cents on what should happen next. The U.K.’s politicians should agree on a plan of radical decentralization. Sort of what’s already been happening, but on a much bigger scale.

The national government should maintain the military, but almost every other function of government should be devolved. England, Northern Ireland, Scotland, and Wales should each decide how much to tax and how much to spend.

Sort of like Switzerland, but even better. And what I’ve already recommended for Ukraine.

And if it works in these places, maybe we can reclaim our constitutional heritage and do it in America!

P.S. Walter Williams argues we should resuscitate the concept of secession in the United States.

P.P.S. If you’re intrigued by Walter’s idea, you’ll probably enjoy this bit of humor about a national divorce in the United States.

P.P.P.S. The tiny nation of Liechtenstein is comprised of seven villages and they have an explicit right to secede if they become unhappy with the central government in Vaduz.

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The United States, Canada, and Switzerland are the only developed nations that have some degree of genuine federalism (Germany and Australia don’t count by my standards), and Switzerland is the only country where the central government is smaller than the local/regional governments. This is one of the reasons why Switzerland is so admirable, as partly explained in this Center for Freedom and Prosperity article on the Swiss tax system.

But perhaps other nations are learning from Switzerland’s success. The United Kingdom is devolving some power to Scotland, as reported by the Irish Times. This is just a small step, and it’s unclear how it will work since Scotland leans left and is heavily subsidized by England. But the value of federalism is that jurisdictions compete with each other and cross-regional subsidies are reduced. So if Scotland wants to use its new powers to make the wrong choices, at least only the Scottish people will suffer.

Scotland is to get substantial new powers to set its own income tax rates and win new rights to borrow money in phase two of the devolution of greater autonomy to the Scottish parliament. The measures were described by Scottish secretary Michael Moore as the most significant transfer of financial power out of London since the formation of the UK more than 300 years ago, making Holyrood more accountable to voters. …The proposals form the centrepiece of a new Scotland Bill drafted by the UK government, which will allow the Scottish government to increase or cut income tax rates by up to 50 per cent for basic rate taxpayers, and by 20 per cent at the highest rate. The measures also go further than expected by offering the Scottish government much greater borrowing powers, and more quickly, than originally recommended by a cross-party commission on devolution chaired by Kenneth Calman. …In addition, Holyrood will be allowed to introduce new, Scotland-only taxes, with Westminster’s approval, and have control over stamp duty and landfill tax. In all, the powers will give Holyrood control over about £12 billion or 35 per cent of its current spending: its block grant from the treasury, worth £29 billion a year, will be cut by an equal amount.

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