Saturday, February 06, 2016

high taxation and cartels

A Primer on Tax Havens (Dan Mitchell)
What we’re seeing throughout the world today are international bureaucracies and politicians from high-tax nations launching a very coordinated attack against these jurisdictions. In effect, what’s happening is that the high-tax nations of the world want to set up something equivalent to OPEC. But instead of a cartel to keep energy prices high on behalf of oil producing countries, it’s an effort by politicians in high-tax nations to create a cartel that will keep taxes high.

Most economists recognize that cartels are a bad idea. And if it’s a bad idea for there to be cartels in the private sector, it’s a horrible idea to have cartels among governments; and yet that’s what the Organization for Economic Cooperation and Development (OECD), the European Commission, and various politicians from high-tax nations are trying to do.

The problem is, politicians for the most part don’t like low-tax policies. How do politicians win elections, how do they reward contributors, how do they steer money to their supporters? They do it by imposing high tax rates and then using the money to divvy up among those that are on their side. So why are they trying to attack tax havens? Because tax havens are the most powerful instrument of tax competition. (...)

Today, labor and capital are a lot more mobile, which means that taxpayers around the world have options to move either themselves or their money across borders if governments are trying to impose high tax rates. (...)

The number-one thing on the OECD’s list is no or nominal taxes. So if you are a free-market, laissez-faire jurisdiction with a low tax burden, the OECD wants to punish you. There is no blacklist from the OECD of high-tax countries—the countries that are actually punishing growth and impoverishing people with bad policy. No, there’s only a blacklist of jurisdictions that are doing the right thing. But it’s not just the OECD. The European Commission has all sorts of various anti-tax competition, pro-tax harmonization schemes.

By the way, I can’t resist pointing out the irony of something. If you work for the OECD, you get a very generous salary, and you work in an elaborate chateau over in Paris. And guess what? By international treaty, you pay no tax. So we have these well-fed bureaucrats working at the OECD in the nice chateau—with its own private wine cellar—and they fly around the world in business class telling jurisdictions with low taxes that they’re doing something wrong and should be blacklisted, and yet these bureaucrats pay zero tax. (...)

When you listen to the politicians, what do they always say? “We’re trying to stamp out tax evasion.” Well, all the academic evidence out there says one thing: tax evasion is linked to one variable—tax rates. You can shut down all the low-tax jurisdictions, but it’s not going to affect tax compliance so long as tax rates are high.

Security paper tigers (2)

Time to close the TSA
When the Transportation Security Administration dispatched undercover investigators last spring to test the effectiveness of airport checkpoints, the results were deplorable. Agents posing as passengers were able to smuggle weapons and mock explosives through 67 out of 70 TSA checkpoints — a failure rate of 95 percent. Following that debacle, the TSA’s acting administrator was given the boot, and the Department of Homeland Security announced that it had “immediately directed TSA to implement a series of actions, several of which are now in place, to address the issues raised in the report.”

That was in June. In July, a new TSA chief pledged to lawmakers that within 60 days “we will have trained the failure out of the front line” of airport screening personnel. So how do things stand four months later? The House Oversight and Government Reform Committee held a hearing on that question last week, with Homeland Security Inspector General John Roth as the key witness. Roth reported the final results of the the undercover testing at US airports, and he didn’t beat about the bush. “The test results were disappointing and troubling,” he said. “The results were consistent across every airport. . . . The failures included failures in the technology, failures in TSA procedures, and human error. We found layers of security simply missing.’’ (...)

Fourteen years after the creation of the TSA, there is still no indication that the agency has ever caught a terrorist, or foiled a 9/11-type plot in the offing. Conversely, there are reams of reports documenting the inability of TSA screeners to spot hidden guns, knives, bomb components, and other dangerous contraband as they pass through airport checkpoints. It’s doubtful that anyone is still capable of being surprised by a fresh confirmation of the TSA’s incompetence — even if members of Congress do sometimes feign alarm for the sake of the folks back home.