Tag Archives: Taxes

California’s Housing Nightmare Is Only Getting Worse, by Tyler Durden

California has only its Democrats to blame for its housing woes. From Tyler Durden at zerohedge.com:

When historians look back on contemporary California, one thing they’ll be bound to make note of is that the state’s developers bet on the wrong model.

Endless, suburban sprawl is coming back to haunt California in ways both major and minor. In densely populated communities across the state, traffic is horrible thanks to underdeveloped public transportation (this is especially true in LA). Most residents have accepted that deadly, devastating wildfires are just part of the deal now – bound to recur endlessly until the state’s population shrinks to the point that it no longer intermingles with the state’s vast swaths of woodland.

But it’s not just the apocalyptic images of fiery doom that have some of the state’s residents rethinking their decision to settle in California. The wildfires have had all kinds of ancillary effects: In parts of the state, PG&E is essentially shutting down large portions of the power grid in disruptive distributed blackouts intended to lower the fire risk.


Denmark as a Model for American Socialists? by Lars Hedegaard

There are unique reasons why Denmark’s political arrangements work. From Lars Hedegaard at gatestoneinstitute.org:

  • Danes actually pay for their brand of socialism through heavy taxation. In Denmark, everyone pays at least the 25% value-added tax (VAT) on all purchases. Income tax rates are high. If you receive public support and are of working age and healthy, the state will require that you look for a job or it will force a job on you.
  • In Denmark, it is uncomplicated for enterprises to fire workers, which gives them great flexibility to adapt to shifting market conditions. In fact, Denmark is more free-market oriented than the US.
  • “Very high taxes and the vast public sector clearly detract in the capitalism index and reduce economic freedom. But Denmark compensates by… relatively little regulation of private enterprise, open foreign trade, healthy public finances and more. This high degree of economic freedom is among the reasons for Denmark’s relatively high affluence.” — Mads Lundby Hansen, chief economist of Denmark’s CEPOS think tank.

Here are some facts to consider before American “democratic socialists” look to Denmark for guidance, as Senator Bernie Sanders did during the 2016 presidential campaign.

First of all, Danes actually pay for their brand of socialism through heavy taxation. In Denmark, everyone pays at least the 25% value-added tax (VAT) on all purchases. Income tax rates are high. If you receive public support and are of working age and healthy enough to work, the state will require that you look for a job or it will force a job on you.

The willingness of all the Danes to pay high taxes is predicated on the country’s high degree of homogeneity and level of citizens’ trust in each other, what sociologists call “social capital.” By and large, Danes do not mind paying into the welfare state because they know that the money will go to other Danes like themselves, who share their values and because they can easily imagine themselves to be in need of help — as most of them, from time to time, will be.

To continue reading: Denmark as a Model for American Socialists?

No Free Lunches Be Damned, by MN Gordon

From MN Gordon at economicprism.com:

“There ain’t no such thing as a free lunch,” is one of the essential axioms of economics. No doubt about it, there’s no getting around this simple truth. Everything has a price.

For example, even if someone buys you lunch the lunch still isn’t free. The opportunity cost, your time to eat the lunch when you could’ve been doing something else, has a price. In addition, even if you don’t consider your time a cost, there’s no denying the fact that someone paid for the lunch. Hence, it wasn’t free.

Nonetheless, despite this simple fact, politicians promise free lunches for the many at the expense of the few. This offense is especially on display during a presidential primary election. Free college. Free drugs. Free housing. Free food.

You name it, there’s hardly a lunch out there this season’s crop of presidential candidates haven’t already laid claim to. This is what they must do to get elected. This is how presidential politics works in a democracy.

We don’t like it. We don’t agree with it. But what we think really doesn’t matter. The facts are lucidly clear. On the national level, the populace has shown for the last 80 years – or more – that they’ll vote for whatever candidate promises the most stuff for free.

Nothing for Something

The politicians know there’s no such thing as a free lunch. But they also know that modern day economic policy is predicated on financing government programs through ever expanding debt. This means someone else, perhaps you, will have to pick the tab.

The Federal Reserve makes it all possible by creating enormous amounts of central bank credit, which is then loaned to the government. This also has the secondary effect of debasing the currency. Obviously, the Treasury welcomes this ongoing dilution of value. Over time it lightens the debt burden and allows them to make good on yesterday’s promises with a currency of diminishing value.

For extended periods this may seem to work remarkably well, on the surface. Spendthrift politicians get elected. The populace collects their ‘entitlements.’ Lunches appear to be free.

When an economy’s demographics are young, and growth is strong, the price of lunches looks minimal. The miracle of getting something for nothing seems possible. But as the economy ages, and growth peters out, debt levels become unsustainable.

Eventually, the bill comes due. The lunches must be paid for. Instead of something for nothing, the populace now gets nothing for something.

In other words, the credit expansion reaches its natural limits when the economy can no longer service the debt. That’s when a breakdown, government default, and depression, must occur to purge the debt – the rot – from the system. Prices, assets, and wages are readjusted so they are in line with the economy. Unproductive activities vanish. New, useful, undertakings rise from the ashes.

To continue reading: No Free Lunches Be Damned

From Denmark With Love, By Terresa Monroe-Hamilton

Trouble in a socialist “paradise”? From Terresa Monroe-Hamiliton, via Doug Ross, via theburningplatform.com:

An interview with a Dane for America:

Bernie and Hillary are in love in with socialism. Both of them want a romantic affair with Socialism from Denmark. However, they do not tell the American people the parts of the romantic deal that will ruin many American families financially.

Jonas Christensen is a Conservative Dane, who has lived all his life in Denmark. He does not recognize the paradise-like picture that is painted by Bernie and Hillary concerning Denmark. Nothing in Denmark is free, regardless of what Bernie has stated several times. Jonas goes on to say that they do not have free healthcare and they do not have free education. These institutions are paid for by taxes… taxes that are defined by the OECD as the highest taxes in the world.

We have not heard from Bernie or Hillary on how they will pay for the healthcare system or the educational system they have in Denmark. Let’s look at how the Danes pay for those systems. Here are some of the taxes Americans are going to pay, so the Democratic love affair can become a reality:

– 180% car tax. If you want to buy a car in Denmark, you have to pay 180% more than the actual price.

– Death tax. If you die, your heir must pay a tax to inherit.

– 25% consumption tax on all goods. When you go to the supermarket and buy groceries, you have to pay 25% more than the actual price.

Those are just some of the taxes that you are going to pay if Bernie or Hillary is elected president. Income taxes are also very high. Danes pay an average of 45% in taxes and some of the wealthiest pay up to 70%.

Jonas says, “I want to send this warning to the American people, so they do not choose Hillary or Bernie as President. I love Denmark. However, I hate Socialism.


Here’s the Next Crisis “Nobody Saw Coming” by Charles Hugh Smith

The next crisis “nobody saw coming” is the most easily foreseeable crisis of a whole slew of lurking crises: the crisis in state and local government finances. Actually, it’s already started; check Puerto Rico. From Charles Hugh Smith at oftwominds.com:

When borrowing become prohibitive (or impossible) and raising taxes no longer generates more revenues, state and local governments will have to cut expenditures.

Strangely enough, every easily foreseeable financial crisis is presented in the mainstream media as one that “nobody saw coming.” No doubt the crisis visible in these three charts will also fall into the “nobody saw it coming” category.

Take a look at this chart of state and local government debt. As we noted yesterday, nominal GDP rose about 77% since 2000. So state and local debt rose at double the rate of GDP. That is the definition of an unsustainable trend.

As noted earlier in the week, state and local taxes have soared 75%. While this would be no big deal if wages and salaries had risen by 75% in the same time frame, but earnings have barely kept pace with inflation (38% since 2000).

So state and local taxes have risen at a rate twice that of wages/salaries. State and local governments can keep raising taxes, but where’s the money going to come from?

To continue reading: Here’s the Next Crisis “Nobody Saw Coming”

Greece is being taxed to death, by Alan Reynolds

For all the discussion about Greece the last several months, one subject rarely gets mentioned: the Greek tax burden. It is high, punitive even, and the recently agreed deal will make it even higher and more punitive. From Alan Reynolds, at politico.eu:

No debtor ever became more creditworthy by being forced to accept less income.

More than five years have passed since May 2010, when Greece was enticed to borrow €73 billion from the International Monetary Fund (IMF), European Commission (EC) and European Central Bank (ECB) with painful strings attached.

That 2010 program, said the IMF, “had two broad aims: to make fiscal policy and the fiscal and debt position sustainable, and to improve competitiveness.” There was no emphasis on improving domestic economic growth or employment — just “competitiveness” in trade. The IMF speculated that “restoring confidence” would “lead to a growth recovery” in 2012. When that didn’t happen, another €154 billion in loans was provided. And the IMF blamed the bad “investment climate” on a “lack of confidence,” rather than any lack of after-tax income.
Prominent U.S. economists blame the seven-year depression in Greece on savage cutbacks in government spending. “The contraction in government spending has been predictably devastating,” wrote Joseph Stiglitz in February. And Paul Krugman later criticized the period “from 2009 to 2013, the last year of major spending cuts” in Southern Europe. In reality, however, Greek government spending rose from 44.9 percent of GDP in 2006 to 53.7 percent from 2009 to 2012 and to 60.1 percent in 2013. That 2009-2013 “fiscal stimulus” was precisely when the economy contracted — by 4.4 percent in 2009, 5.4 percent in 2010, 8.9 percent in 2011, 6.6 percent in 2012 and 3.9 percent in 2013. By contrast, the economy grew slightly in 2014 when government spending was “only” half of GDP. That is, the economy fell when government’s share rose, and the economy rose when government’s share fell.

What is rarely or never mentioned in the typically one-sided misperception of spending “austerity” is the other side of the budget — namely, taxes.

The latest Greek efforts to appease creditors would raise corporate tax again to 28 percent, raise the 5 percent “solidarity surcharge” on personal incomes, and discourage tourism by raising the VAT on restaurants and island shopping.

Looked at separately, each of these suffocating tax rates might appear almost reasonable. Looked at together, they are totally unreasonable. To offer a Greek employee an extra €100 requires that €42 be first subtracted for Social Security tax, and then up to €46 more subtracted for income tax. Out of the original €100 of marginal labor cost, the remaining €14 of after-tax income going to a skilled worker could only buy about €10 worth of goods after value-added tax is paid.

The tax wedge between what employers pay for labor and what workers have left to spend, after taxes, is 43.4 percent for a Greek family of four with average earnings — the highest in the OECD and more than double the comparable U.S. wedge of 20.6 percent. This demoralizing tax wedge, which grows even larger at higher incomes, clearly depresses hiring and working in the formal economy. It also helps explain why a third of the Greek labor force is self-employed (making tax avoidance easier).

Little wonder that Greece has been suffering a massive brain drain — with hundreds of thousands of the best and brightest emigrating in recent years, including many doctors. At least a fourth of the remaining Greek economy survived by going underground, but that “shadow economy” ran on cash and banks are now sternly rationing cash withdrawals and transfers to delay capital flight.

To continue reading: Greece is being taxed to death

1000s Of American Jobs Could Be Lost If This…, by Mark Nestman

The problem with the hyper-expansion of international organizations the last few decades is that it’s almost impossible to keep track of all the things they’re doing to “improve” planet earth and its citizens’ lives. Here’s the latest bad idea from the Organisation for Economic Cooperation and Development (OECD), which has had a string of them, from Mark Nestman on a guest post at theburningplatform.com:

Leave it to bureaucrats to decide that while some competition is good, too much is bad. In a nutshell, that’s what the Organisation for Economic Co-operation and Development’s (OECD) ongoing campaign against lower taxes is all about. And now, they’re taking it to a whole new level.

Back in 1998, the OECD’s Committee on Fiscal Affairs (CFA) released a report outlining what it perceived as a dangerous trend: more and more countries were reducing taxes. The OECD called this trend “harmful tax competition.” It was dangerous, according to the OECD, because it had the potential to reduce tax revenues in nations that didn’t wish to engage in tax competition.

To help fight harmful tax competition, the OECD proposed that low-tax countries be forced to cooperate in tax investigations by high-tax countries. It also called for sanctions against jurisdictions engaging in harmful tax competition.

While it hardly seemed possible in 1998 that the OECD would get its way, that’s exactly what happened. Fast forward to 2015, and the OECD’s “global information exchange standard” is nearly in place. The Obama administration gave the effort a big boost by enacting the Foreign Account Tax Compliance Act (FATCA) in 2010, with the end result that more than 60 countries, including several low-tax jurisdictions, have agreed to exchange information on foreign customers in local banks, trust companies, etc., in order to avoid possible sanctions.

However, the OECD is just getting started. It’s a bit like the old saying, “Give an inch and they’ll take a mile.” Its latest campaign is to crack down on a practice it calls “base erosion and profit shifting” (BEPS). Essentially, the “War on BEPS” is designed to prevent companies from routing profits through low-tax countries. The aim is to put a stop to the global erosion in corporate tax rates, which have declined from an average of almost 50% in the early 1980s to 25% today.

For instance, Apple Computer pays tax on its global income at a rate of less than 10%, less than one-third of the top US corporate tax rate (35%). To the bureaucrats at the OECD, that’s simply an intolerable situation.

The BEPS initiative is designed to put an end to this kind of legal tax avoidance. It would force companies to cough up mountains of data on their structure and operations. Based on an analysis of this data, national tax authorities would then apportion corporate taxes based on concepts such as “location of the economic activity” and “value creation.”

The Obama administration, which seems never to reject an idea that could lead to higher tax revenues, eagerly signed on to the BEPS initiative. But in the (unlikely) event that Congress goes along, the US is likely to experience a jobs drain unlike anything it’s ever experienced.

That’s because once BEPS is in place, the only way for US multinational corporations to take advantage of lower tax rates in other countries is to relocate “economic activity” and “value creation” to those countries. Perhaps the most reliable way for a company to demonstrate adherence to these concepts is to move jobs to those countries.

To continue reading: 1000s of American Jobs Could Be Lost