Military spending: USA vs rest of the world

From Stockholm International Peace Research Institute, latest military expenditure data.  But note that the USA isn't even in the top twenty in terms of per capita spending--that honor goes to the Middle East.

Intuit lobbying and the tax prep market

Matt Stoller suspects that Intuit's $9 million lobbying budget is spent in the pursuit of making it harder for people to file their own taxes.  No doubt about it.  He rightfully brings up Ready Return, a program I've mentioned before.

He includes this handy chart of annual lobbying by Intuit:

But even better, he has this from Intuit's annual disclosure:

“Our consumer tax business also faces significant competition from the public sector, where we face the risk of federal and state taxing authorities developing software or other systems to facilitate tax return preparation and electronic filing at no charge to taxpayers.  These or similar programs may be introduced or expanded in the future, which may cause us to lose customers and revenue. For example, during tax season 2010, the federal government introduced a prepaid debit card program to facilitate the refund process. Our consumer and professional tax businesses provide this service as well." 

As we well know, regulation is good for monopolies and lobbying pays off handsomely to everyone involved, but has high social costs.  

Happy Anniversary to the Canadian Charter of Rights & Freedoms

Enacted April 17, 1982, 30 years old today.  The Charter proves to be Canada's gift to world, according to a couple of American constitutional scholars.  And here it is.

Paying Taxes Makes You Feel Good

Well, or perhaps satisfied with your contribution to the greater good.  Miller McCune reports: 

“Economists generally assume that human beings get ‘zero utility’ from paying taxes,” lead author Iwan Djanali, who co-authored the study with his adviser, Daimen Sheehan-Connor,  said in an interview. “Zero utility is econ-speak for, ‘You get no benefit out of it.’ Obviously, consumption gives you a lot of utility. If you buy an apple, it satisfies your hunger.

“We believe that paying taxes also gives you some utility, even though you’re enjoying less consumption. You get some ‘soft utility’ out of it. We call this ‘the warm glow.’ You feel good about helping others, even though you don’t get a direct monetary reward out of it.”

The conclusions are drawn from an experiment in which some groups were paid a flat amount to do a task, and the others a net amount which yielded the same after tax as the first group.

The standard economic model would predict they’d work equally hard in both conditions, since the amount of money they walked away with was the same. Instead, they worked “significantly more in the presence of tax,” the researchers report.

This effect showed up across the board, but much more strongly in students whose major was something other than economics. “Economics majors apparently perceived less utility from paying taxes, which makes sense,” Djanali said. “In Econ 101, you’re taught you get zero utility from paying taxes. It’s ingrained in their behavior.”

The researchers "primed" the second group by reminding them what their taxes paid for (public service, infrastructure).  The researchers come to another conclusion that seems counter-intuitive:

Some economists suggest making taxes less visible, “so the impact on your behavior is less drastic,” Djanali noted. That argument favors value-added taxes, which are incorporated into the price of an item and thus less apparent to the consumer.

“Our findings suggest that [to the contrary] it might be better to make taxes more visible – to make it really clear what people are paying for,” Djanali said.

That's the goal of earmarking, as in the social security tax.

Bank of NY Wants IRS to bless its STARS

ProPublica reports on the Bank of New York foreign tax credit scheme called STARS (structured trust advantaged repackaged securities).  This is a Barclays creation and a $900 million dispute that will generate bad publicity for the IRS if it loses, and bad publicity for the bank, maybe either way.  From the report:

At issue is whether STARS was set up primarily to generate artificial foreign-tax credits, as the IRS contends; or was a legal way for BNY to obtain financing at rock-bottom rates.  The arguments heard this week will pose a crucial test of the U.S. government's resolve to rein in sophisticated corporate tax planning that has sapped vast amounts of potential revenue. Tax authorities worldwide, notably in the U.S. and U.K., are under mounting pressure to show that large companies are shouldering their share of the tax burden as part of a broader political debate about fairness and corporate social responsibility.

An investigation last year by the Financial Times and ProPublica first detailed how STARS produced tax benefits for U.S. banks beginning in 1999. In all, six banks — BNY (now Bank of New York Mellon), BB&T, Sovereign (now a unit of Santander), Wachovia (now part of Wells Fargo), Washington Mutual and Wells Fargo — participated in STARS deals with Barclays between 1999 and 2006.

...BNY has argued that the deal was a complex but entirely legal, allowing the bank access to low-cost financing from Barclays for its everyday business activities.

In the coming weeks, U.S. Tax Court will hear from the bankers, lawyers and accountants involved as well as a raft of experts. A final decision is not expected for at least several months.

With much at stake, BNY and the IRS appear to be digging in for a protracted battle. In its latest filing, BNY accuses the government of using "emotionally laden" arguments to try to deliver a "sweet sound bite." The IRS says "no rational person" would have participated in STARS if not for the foreign tax credits.

The authors conclude: "Let the war of words begin."  That about sums it up.  Will BNY do a better job than the Poriskys of the world?   

US: leading the OECD in low-wage workers

John Schmitt has a new paper entitled "Low Wage Lessons" [pdf] in which he says ": The United States is a Poor Model for Combating Low-wage Work," as illustrated by this chart:

"The United States has the highest share of low-wage work in the OECD countries analyzed here.  Moreover, the incidence of low-wage work in the United States has been rising for at least three decades, from just over 20 percent in 1979 to just under 30 percent in 2010."

Schmitt thinks the reason is the minimum wage level is too low and the EITC isn't structured properly.  He says "the EITC and minimum wage in the United States have been set too low to limit the
incidence of low pay, and the minimum wage has been set too low to prevent employers from
reaping windfalls from the eligibility structure of the EITC."  He continues with the observation that the low wages themselves are "among the least of the problems facing low wage workers':

"U.S. labor law offers workers remarkably few protections. U.S. workers, for example, have the lowest level of employment security in the OECD and no legal right to paid vacations, paid sick days, or paid parental leave.  The low level of union coverage in the United States means that contractual obligations generally don’t make up for the lack of legal guarantees. 

In the absence of legal or contractual rights, low-wage workers are the least likely to have access to core benefits. ... probably the most critical problem facing low-wage workers is the lack of access  to health care.  Rho and Schmitt estimate that in 2008, more than half (54 percent) of workers in the bottom wage quintile did not have employer-provided health insurance and more than one-third (37 percent) had no health insurance of any kind, private or public. 

The 37 percent non-coverage rate for the bottom quintile of wage earners in 2008 was up from 15 percent in 1979.

Tim Taylor comments: 

"Define 'low-wage jobs' as those that involve earning two-thirds or less of the median hourly wage: that is, those earning less than about $10/hour. As Schmitt notes: 'If low-wage work were a short-term state that helped connect labor-market entrants or re-entrants to longer-term, well-paid employment, high shares of low-wage work would be less of a social concern. Indeed, if low-wage work facilitated transitions from unemployment to well-paid jobs, countries might want to encourage the creation of a low-wage sector to improve workers’ welfare in the long term.' On the other side, if low-wage jobs are a near-permanent state of affairs for a substantial group of workers, or if such jobs even send a negative signal to potential future employers that this worker is going to have low productivity, then the prevalence of low-wage jobs may be of real policy concern."

In other words, he's saying that if low wage work is a stepping stone to a better future, then no worries, but in the U.S., it's generally not.  This ties in to ideas about social mobility in the US, ideas that are enduring yet mostly not borne out by the evidence; ideas that seem to explain the tendency of lower wage workers to vote against their economic self-interest in the U.S.

Taylor concludes "If we wish to build a society and an economy on rewarding work, it is a harsh fact of U.S. labor markets that such a reward is currently not apparent for many."

Clement Attlee on charity

"Charity is a cold grey loveless thing. If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at a whim."

Richard Murphy gives us this quote from Clement Attlee (1920) and says "In very many ways nothing has changed since then."  I agree.  It is always a point of contention for me when people laud the Gates and Bono's of the world, most especially when we too often discover that these philanthropists spent an awful lot of time and effort to avoid paying taxes on much of the fortune they are now spending on projects that bear their names in large and bold print.  That's why the protesters floated this balloon, and I wish they would float it more often:

You could float that balloon in the direction of a lot of people, I think, and you wouldn't be wrong in wondering why we should celebrate, for example, the naming of a research center after a particular individual when it's clear other taxpayers subsidized it by picking up the slack.

Addendum: a letter on the subject in the Guardian, also linked to by Murphy.

Two Tax Conferences of Note

My good friend John Prebble alerts me to two upcoming conferences of interest, one in the States and the other in Australia.  First, he recently issued a call for papers for the Victoria-Cornell Colloquium on Jurisprudential Perspectives of Taxation Law, which will be held at Cornell on Sept. 24-25 (You might like to work this in if you already planning on going to IFA Boston, to be held Sept. 30-Oct 4).   Prof. Prebble and Brad Wendel are co-convening the colloquium, and they are particularly keen to hear from authors interested in applying either or both coherence theory (such as the writing of Ken Kress) and the work of Ludwig Wittgenstein to the analysis of judicial reasoning in leading tax cases.   Heady stuff!  The conference abstract looks fascinating:

"The colloquium will focus on analytical and normative legal philosophy as applied to income tax law, examining judicial reasoning in income tax cases. Seminars will examine such questions as: do legal philosophers’ expositions of the nature of law adequately explain the nature of income tax law? What light do theories of jurisprudence that have not traditionally examined income tax law shed on this question? What is the relationship between law and morality in the context of income tax? Contributions are welcome on all topics of taxation law. (Discussion will generally not be concerned with broad topics of fiscal policy, or, for instance, on whether governments should use taxes to redistribute wealth.)"

That's an unusual set of questions and I look forward to seeing the papers.  The other conference is to be held in Melbourne on Thursday and Friday July 19-20, 2012, and is entitled Defining, Taxing and Regulating Not-for-Profits in the 21st Century.  This is a very timely topic in the U.S. and, it seems, in a lot of other places too.  Here is the conference abstract:

The aim of the conference is to enable academics and other experts to reflect, from theoretical and comparative perspectives, on the theme of defining, taxing and regulating the not-for-profit sector. The conference coincides with a very active period of not-for-profit law reform in Australia, with the establishment of a new national regulator, the statutory definition of charity and other changes to the taxation and regulation of charities and other not-for-profit entities.

The conference features an international cast of characters and should provide a very welcome addition to the comparative tax literature.  Thank John P for bringing these to my attention!

Tax protestors alive and well and living in Canada

The tax protestor movement is alive and well in Canada and getting some publicity just in time to serve as a warning to Canadian taxpayers readying their annual returns.*   I read with interest the recent case of Russell Porisky and his wife Elaine Gould, who ran a tax evasion counseling scheme out of B.C. for many years.  It seems Porisky cooked up a "natural person" argument about how Canada could not tax people acting in the capacity of natural persons, but could only tax them if they acted (presumably out of fear or ignorance) as legal persons.   Gould went along with Porisky to her detriment; both have been convicted and I believe still await sentencing.  The arguments, like those used by the darlings of the U.S tax protestor movement (led by the great Irwin Schiff, currently serving a 13 year sentence for his part in the ongoing saga), are completely nonsensical as well as spurious but make for good theatre.  

Check out this exchange documented by the judge in the case:

At the close of the Crown’s case I asked Mr. Porisky and Ms. Gould whether they wished to call any evidence.  Mr. Porisky said he could not make that decision unless he understood whether he was to give evidence in his “inherent personality as a natural person with no intent to profit”.  He wanted to tell the truth in the stand but the capacity he was to testify in would make a difference to his evidence.  A few minutes later in the dialogue he said 

I need to know if I make the decision to get into the stand, from which perspective can I speak?  Like therefore I need to know, in the eyes of the law, if one man is two persons, the natural or the legal, okay, which one can I speak as, or does it matter -- am I have the liberty to speak the truth and qualify it so I can speak to everything?  Because what it -- they have commingled a lot of stuff, and for me to properly address it, I'm going to have to be able to speak to everything to properly address it. 

And later:

Again, I feel like I'm being railroaded because I'm asking for clear answers.  I came here with a full intention on defending my -- my rights and -- and not having things being converted into something they're not, and I don't know how to do that if nobody's going to give me a straight answer.  I thought Crown had a duty -- I read their web page and they talk about honour and integrity, and now I'm been led one thing -- and for me to speak to everything, I'm going to need to be able to speak to it from my starting point of my existence. 

I didn't make it up.  Sir John Salmond I think is a highly respected man.  The Supreme Court relies on him.  I didn't make it up that one man's two persons in the eyes of the law.  And so from that perspective, I need -- that's why I tried to be as honourable and as open in the development of this, so that I could speak the truth and the whole truth from the proper perspective, so it does not get misconstrued or mislabelled or presumed to be something it's not.  And that's what I need to know.  If I make the decision and I go in that box, which person, in the eyes of the law am I? 

THE COURT:  You are Mr. Porisky. 

THE ACCUSED PORISKY:  Am I Russell Anthony Porisky in my inherent personality as a natural person, or am I a sovereign-granted personality? 

THE COURT:  You're Russell Porisky. 

THE ACCUSED PORISKY:  That's fairly misleading because that's not clear enough for me, Your Honour. …. 

THE COURT:  … Let's assume you get into the stand… and the Crown asks you, "What did you have for breakfast today?" Would it make a difference as to what capacity you were in? 

THE ACCUSED PORISKY:  For me, it would, Your Honour, yes.

Priceless.   The Court concludes, as it really must, that

"Mr. Porisky’s theory not only does not bear any legal logic but it also fails to accord with common sense.  It is a failed attempt at word magic and has no validity."

Tax protestors and dupes thereof, you've been duly warned.

In a similar case, a Manitoba chiropractor and tax protestor named Rosalie Chobotar was recently sentenced to six months in jail plus a fine of $162,513 for failing to pay her taxes from 2002 to 2007--she signed all her returns with "to the best of my knowledge without understanding."  That's rich!  And so, apparently, was she.  Chobotar seems to have been a “zero income” return filer—someone who filed annually but simply put zero on all of the lines, which she may have learned through the infamous work of Irwin Schiff.  His fraud on the public still lives on at paynoincometax.com even though the man himself is out of commission until 2016.  I do not advise calling the toll-free number for more information.

Note that both Porinsky and Chobotar defended themselves in court.  You know what they say about the clients of lawyers who defend themselves.  Chobotar actually absconded, apparently by physically leaving the court mid-trial, saying the court or Revenue Canada or both had no jurisdiction over her.  Again, good theater!  But bad outcome.  Lawyers who don't stick around to present their case don't usually win.

* Americans have until this Tuesday to file but north of the border they have until April 30.

"Geithner made me do it"--The viral nature of cheating on your taxes

If you see your neighbor cheat and prosper, you will be more likely to try to follow suit, says Dan Ariely, based on an experiment he conducted in which the test subjects were exposed to blatant cheating and adjusted their behavior accordingly.  He points to the Tim Geithner case as an example of widespread public exposure to blatant cheating--Geithner clearly got away with tax evasion and taught the public a lesson that it's ok to cheat since if you get caught, you just pay up, no harm, no foul.

Ariely says his study shows:

"Seeing someone cheat for their own benefit and then get away with it clearly has an impact on our moral behavior—loosening it to a substantial degree.

So, what does this experiment means for paying taxes? It means that the more we see politicians—the people who make our laws—fudge their taxes (which seems to happen continually), the more likely the rest of us are to adjust our understanding of what is right and wrong about paying our taxes, and do the same."

But, he says, there is hope if you can psychologically distance the test subjects from the cheater: "if we don’t think that we belong to the same social group we might not feel more justified in our own moral indiscretions, and instead be extra careful not to be confused with this other, not so moral, social group."

He concludes that we just need to not identify with our cheating politicians, in order to avoid acting like them.   That's going to be tough since identifying with "us" is what politicians typically have to do to be politically successful.

Controlling policy debate on trade & development

UNCTAD has issued a letter decrying attempts by the OECD to silence it as a voice in the international economic development debate:

"Since its establishment almost 50 years ago at the instigation of developing countries, UNCTAD has always been a thorn in the flesh of economic orthodoxy.  Its analyses of global macro-economic issues from a development perspective have regularly provided an alternative view to that offered by the World Bank and the IMF controlled by the west.

Now efforts are afoot to silence that voice.  It might be understandable if this analysis was being eliminated because it duplicated the work and views of other international organizations, but the opposite is the case - a few countries want to suppress any dissent with the prevailing orthodoxy. 

...At time when pluralism is finally being meaningfully discussed in the election of the  President of the World Bank, it is ironic that OECD countries are endeavouring to stifle  freedom of speech within another multilateral organization."

The letter is signed by a long list of people, including Dani Rodrik.  The Tax Justice Network posted the letter along with this disturbing addendum:

John Burley, who worked for UNCTAD for many years in senior positions, and who coordinated the letter, gave a presentation in Geneva in which he provided some background information (supplemented with a couple of comments in an email):

"An attempt is going to be made there, on the basis of what we hear ... at the moment, to change UNCTAD's mandate by denying the organisation the right to continue – and I emphasise: to continue – to analyse and report on global macroeconomic issues, including the role of global finance in development.
. . . This is not a matter of money: it is an attempt to dilute the mandate of UNCTAD to work on macro-economic and global finance issues."

... Why is the UNCTAD message so unwelcome? The fact that UNCTAD has no formal responsibility for the global management of the international economy and none of its own funds to dispense means that its analysis is free of vested interests. ... 

... And it is precisely in its analysis of interdependence that UNCTAD brings added value to an understanding of how the functioning of the global economy impacts on the majority of the world's population who live in developing countries. Given the current pressure on the organisation and its secretariat, that contribution could now be gone for good (our emphasis).
. .
The developed countries in Geneva have seized the occasion to stifle UNCTAD's capacity to think outside the box. This is neither a cost-saving measure nor an attempt to "eliminate duplication" as some would claim."

This is not about tax policy per se though quite clearly tax policy is a major part of trade-based development initiatives.  So it is worth connecting this to the OECD's control of rhetoric over international tax.  The OECD likes to call itself a "market leader in tax policy," a self-assessment I often refer to as an understatement because there is not much competition in this market, if any, and the OECD seems to work rather diligently to ensure that remains the case.  India's response to the OECD's position on transfer pricing is a current example, as TJN notes in their post; they also point us to this guest post by David Spencer that outlines the ongoing tension between the OECD and UN tax committees.

There are high barriers to entry in the international tax policymaking market--you've got to have the right infrastructure and resources so you can hold conferences in attractive locations and get important people to show up and network together, and you need to be able to display some indication of your ability to influence national legislatures to adopt norms you develop.  The institutions that can do that, like the OECD, can only keep doing that so long as people don't start to think they fail to represent consensus, sufficiently to erode the influence of their ideas in political discourse.  As we know, high barriers to entry are good for the established monopoly, and the case seems no less true for the production of ideas, judging by the many efforts to eliminate competition.

10 Biggest U.S. Corporations: 1812 vs 2012

In 1812, they were mostly banks:

1. Bank of the United States
2. Bank of America
3. State Bank
4. Bank of Pennsylvania
5. City Bank of New York
6. Farmers Bank of Virginia
7. Philadelphia Bank
8. Manhattan Company
9. American Fur Company
10. Boston Bank

NPR has the story.  Of these, the Bank of America is still hanging in there, 200 years later--here is the list for 2011 from Forbes:

1. Wal-Mart Stores
2. Exxon Mobil
3. Chevron
4. ConocoPhillips
5. Fannie Mae
6. General Electric
7. Berkshire Hathaway
8. General Motors
9. Bank of America
10. Ford Motor

Of these, three were bailed out in 2009-2010: Fannie Mae ($400 billion), General Motors ($50 billion), and ...wait for it...Bank of America (about $120 billion).

In 2012, which of these will be off the top ten list?

The Lobbyists are Winning: Corporate Tax Transparency edition

The activist-led movement to increase multinational tax disclosure is proving to be a full-employment program for natural resource industry lobbyists.  The money and energy available for fighting against transparency seems limitless.  We have seen the effects of this in the US, where Dodd-Frank's section on extractive industry transparency has been completely undermined and consistently sidelined as a result of lobbyists.  We have seen the effects in Canada, where the industry managed to kill transparency legislation all together by means of a tidal wave of lobbying by the energy industry there.  Today the FT tells a similar tale unfolding in the EU.

There is a perhaps not obvious but very pernicious undercurrent in this transparency contest.  It is that in each country, lobbyists are using the success of the lobbyists in the other countries to bolster the cause for their own success.  No matter we may like to think about the nature of tax policy as somehow a sacred and protected space for purely national politics, that hallowed chamber of sovereign entitlement, it's clear that lobbying is fully globalized and therefore tax policy is, too.

Today's FT story provides a case in point.  First, the FT notes that the EU's work on transparency was prompted by the inclusion of new corporate tax information disclosure standards for resource extractors (think oil, gas, etc):

The European Commission last year proposed a scheme that allowed for payments for specific projects to be tracked, with reporting requirements that broadly matched the US approach enacted in the Dodd-Frank Act.

Just by putting the possibility of corporate tax transparency into legislation, even though it could not and still cannot be implemented without further action through federal regulations, Dodd-Frank put extractive industries transparency on the map of legislative possibilities, and therefore cleared some space for the policy to spread to other nations (I analyze this more thoroughly in my forthcoming book chapter on global tax activism).

The FT reports that industry in the EU responded by protesting the new rules as unnecessary, onerous, etc.--in other words, a set of self-serving arguments with which those of us who have been following this issue in the US and Canada have become all too familiar and most of which do not hold up under scrutiny.  But lobbying works very well, and so the EU is considering a much less transformative version of the proposal, one that would not require very much disclosure if any at all.

The FT closes the circle by concluding that:

If the compromise passes in Brussels, it will bolster industry arguments that the US rules being drawn up to implement Dodd-Frank should be watered down to match the EU approach and ensure a level playing field.

The idea that tax policy is in any sense a purely national project could not be more clearly debunked.  The EU's imminent adoption of a more lax standard arms lobbyists in the US with a fresh round of anti-transparency ammunition.  Their ability to use this to further the anti-transparency cause in the US will in turn re-invigorate lobbying in Europe and elsewhere.  This will continue until transparency is uniformly killed, unless the pro-transparency lobby gains a similarly viral foothold from which to reinvigorate the campaign for transparency.  It is an international game with fascinating network aspects and effects.  Too bad then that in the meantime, a policy that really ought to be implemented, not least because it is in fact written into the rule of law here in the US at least, will be stalled indefinitely.

On a related note, it is worth recognizing that a new euphemism is emerging in international tax policy that is steadily gaining ground through casual and unexamined use.  That is the idea that this or that tax policy is necessary to "ensure a level playing field." Both sides of the transparency issue have used the term to support completely opposing goals in the past, so it would seem that the term means very little.  That means a translation is in order when people use the term to score political points.

Let us be clear then that when used by opponents of transparency, "ensuring a level playing field" is what people say when they mean that the lobbyists are winning.  That is because a level playing field would quite obviously exist when the market has full information--that is, when all multinational companies engage in full disclosure of their tax payments in all countries, and all stakeholders--shareholders, taxpayers, governments, and watchdog groups--have the same information about how generous tax policies support industry all over the world (this is how the pro-transparency crown use the term).  When what is sought is a market with little or preferably no publicity of this kind of information, "the level playing field" means something very close to the current status quo--the product of all that successful lobbying to date.

Water: a Public Good?

Is water a public good?  Privatizing water has led to all kinds of traumatic consequences in poor countries, with many complaints aimed at IMF conditionality-imposed schemes.  India is considering a draft bill to privatize water there, where shortage seems particularly imminent: "India has more than 17 percent of the world's population, but has only 4% of world's renewable water resources with 2.6% of world's land area."  There is plenty of worry about what the bill will mean in terms of pricing for profit-oriented industry and long-term infrastructural consequences.  In a post last month I suggested that I thought waste disposal likely ought to be a public good because a private market would tend to want more garbage (more volume, more profit), while a public system might try to minimize garbage in order to reduce costs or meet other social goals such as conservation--the same principle seems to hold for water.

Visual News has a story (and of course a great infographic) on America's water crisis:

Basically we consume too much, both directly and indirectly, we waste a lot due to aging infrastructure, and we otherwise contaminate it with chemicals.  A startling stat: municipal water in 71% of U.S. cities has too much hexavalent chromium in it. If you don't remember why you should worry about that, you just need to think Julia Roberts:

Here is the CIA World Factbook's page on water resources, showing " the long-term average water availability for a country in cubic kilometers," i.e., the total water available to the country in an average year.

The 10 countries with the most water on average:

1. Brazil--8,233 cu km
2. Russia--4,498 cu km
3. Canada--3,300 cu km
4. United States--3,069 cu km
5. Indonesia--2,838 cu km
6. China--2,830 cu km
7. Colombia--2,132 cu km
8. Peru--1,913 cu km
9. India--1,908 cu km
10. Venezuela--1,233 cu km

And the 10 countries with the least:

1. Kuwait--0.02 cu km
2. Saint Kitts and Nevis--0.02 cu km
3. Maldives--0.03 cu km
4. Malta--0.07 cu km
5. Bahrain--0.1 cu km
6. Qatar--0.1 cu km
7. Antigua and Barbuda--0.1 cu km
8. Barbados--0.1 cu km
9. United Arab Emirates--0.2 cu km
10. Cape Verde--0.3 cu km

Links

An argument that consumers--not workers or shareholders--pay for the extra costs borne by socially responsible corporations.

A 20 minute long video on the Occupy Movement...from Al Jazeera by way of Naked Capitalism.

A stinging indictment of tax accountants as perpetrators of poverty in poor countries, "deliberately ensuring that tax is not paid in developing countries by promoting the systems that they espouse" and benefit from.

The Right to Justification

Larry Solum recommends Rainer Forst, The Right to Justification: Elements of a Constructivist Theory of Justice (New Directions in Critical Theory):

Contemporary philosophical pluralism recognizes the inevitability and legitimacy of multiple ethical perspectives and values, making it difficult to isolate the higher-order principles on which to base a theory of justice. Rising up to meet this challenge, Rainer Forst, a leading member of the Frankfurt School's newest generation of philosophers, conceives of an "autonomous" construction of justice founded on what he calls the basic moral right to justification.

Forst begins by identifying this right from the perspective of moral philosophy. Then, through an innovative, detailed critical analysis, he ties together the central components of social and political justice—freedom, democracy, equality, and toleration—and joins them to the right to justification. The resulting theory treats "justificatory power" as the central question of justice, and by adopting this approach, Forst argues, we can discursively work out, or "construct," principles of justice, especially with respect to transnational justice and human rights issues.

As he builds his theory, Forst engages with the work of Anglo-American philosophers such as John Rawls, Ronald Dworkin, and Amartya Sen, and critical theorists such as Jürgen Habermas, Nancy Fraser, and Axel Honneth. Straddling multiple subjects, from politics and law to social protest and philosophical conceptions of practical reason, Forst brilliantly gathers contesting claims around a single, elastic theory of justice.

... Forst's master idea is that people have a right and duty of reciprocal justification in the domain of shared institutions and that testing for the justice of such arrangements means testing for how far they are indeed justifiable. 

This is useful in thinking about the rise of global tax activism, where it is not necessarily clear that what people seek is rule or regime change, but rather an accounting of what the rules and regimes have wrought, and a justification for the status quo and its systemic continuation through the construction of international institutions and epistemic communities.

Virtually Everyone Pays Federal Taxes: It's Really True.

It really is too bad that this has to be spelled out yet again, and that nevertheless the myth will perpetuate.  Taxprof links to The Hamilton Project, The Truth about Taxes: Just About Everyone Pays Them:

A popular myth swirling around Washington, DC, and throughout the media these days is that many Americans do not pay taxes, and are therefore free-riding off of our society without contributing themselves. This has even been referred to by some as a “new orthodoxy.”  The origin of this misconception is the observation that only about 54 percent of American households paid federal income taxes during recession-affected 2011.  But that statistic is misleading because it provides an incomplete picture of the overall tax burden on American families, and because it incorporates individuals who naturally shouldn’t be paying taxes because of their age or economic circumstances due to the Recession. A closer look reveals that nearly all Americans do, in fact, pay taxes.

They have a few charts and graphs but its this sub-heading that catches my eye:

"Other Forms of Taxes Also Count"

Yes, indeed.  There is a federal income tax that is called the federal income tax, and it is true that not everyone has to pay it, such as when they earn very small amounts of income (or, perversely, very large amounts of income...that's a different story).  Then there is another federal income tax that is called the social security tax.  Yes, it's a tax, and it's imposed federally as a percentage of income...it's a federal income tax.    The part imposed on companies is called an excise tax.  But that part on individuals?  Its a Federal.  Income. Tax.  Somehow it matters not how many times or ways we say it, people will still insist that only that tax that's actually called the federal income tax "counts" as paid, so a person who only pays the social security tax and not the income tax is a freeloader, while the person who only pays the capital gains tax and neither the FIT or the SST is not.  Never mind the other federal excise taxes, these are simply and routinely ignored because they are not "federal income taxes."

Rhetoric strikes again, and again.  Roosevelt may have been right to preserve the social security safety net by linking it to its own earmarked tax, but we too often see how this has become a sleight of hand that effectively undermines a great deal of thinking about tax policy.

Taxing Amazon, an amazingly taxing task.

Taxprof links to Travis Cavanaugh (J.D. 2012, Iowa), Note, Iowa Can do Better Than the Affiliate Tax, in which the author suggests how states could get to Amazon and make them withhold and pay over sales tax.  I don't know why sales to customers can't be seen to generate the necessary nexus if the provision of a platform for resale could--probably I need to re-read International Shoe or something in addition to this Note.   In international tax we learn that the U.S. does not typically consider sales alone to be sufficient to justify source-based taxation but this is mostly based on historical thought that nexus had to involve some sort of physical presence; exceptions have been made and someone could likely make the case that sales alone ought to suffice for international tax purposes.  Mostly the impediment is not theoretical but practical, how to catch the thief.  

$1 Trillion In Tax Loopholes

I don't call these loopholes, since my definition of a loophole is a way to avoid taxes that is likely not intended by congress (i.e., an exploitation of an unintended structural weakness); these are, rather, tax expenditures as Steve Dean noted in his post yesterday, and as NPR explains.  

NPR invites us to:

Imagine a program where the government sent an annual check to homeowners with mortgages. The bigger the mortgage, the bigger the check. Checks for rich people would be bigger than checks for the middle class. Also: Checks for people with mortgages on vacation homes! 

It's hard to imagine a program like that getting much support in Congress these days. But, through the mortgage-interest tax deduction, the government does something like this every year. 

...Tax expenditures will cost the government somewhere around $1 trillion this year. That's more than the government will spend on Medicare or defense. The graphic ... lists just a few tax expenditures; this report (PDF) from the Congressional Joint Committee on Taxation has a much longer list.

Then NPR proposes that "If economists ran the tax code, there would be far fewer of these loopholes. Taxes might be higher or lower than they are now. But either way, the tax code would be simpler."  This is preposterous.  It imagines economists as some mythical sector that is completely devoid of social, cultural, political, or philosophical thought.  I often link to Dierdre McCloskey's work as the best antidote to both the proposed existence of such a sector and the idea that anyone would invite the rule of such sector should it possibly exist.

NPR concludes with the adage that tax expenditures are unnecessary and inefficient because the government could just hand out money to those it wished to help, through direct spending.   Let us be clear.  The government in America will not hand out cash, even if it is the equivalent of a tax expenditure, and even if by anyone's view, even (gasp) an economist's, the outlay would be desirable from an economic, political, social, and cultural perspective.   The direct spending well is completely poisoned in America.  A NY Times weekend story on the ever-diminishing welfare rolls is the latest illustration of this cultural phenomenon.

Cultural implications of maximizing shareholder value

What happens to the workplace when managers focus solely on meeting share price targets?  This blogger thinks it causes managers to make stupid decisions that destroy the culture:

...If the company stock price were to hit a specified target and maintain it for a specified number of weeks, the CEO stood to gain serious remuneration. Sounded like a fine idea to me. He had to hit a target of perceived value and make it stick for a while. I'm sure the people who thought it up patted themselves on the back for it.  

Life on the ground began to deteriorate. A friend of mine was working in a part of the company that interfaced with customers. He was working with a great bunch of people, but the pressure somehow kept ratcheting up. He couldn't point to anything specific, but everybody started saying things like "We've just got to hit these deadlines and then we can relax a little." They hit those deadlines. Somehow, the crisis wasn't over. It actually got worse. By the time one crisis would end, the next was already in full swing. Then came the first wave of layoffs... 

Once the layoffs started, nobody complained about the new normal -- crisis time all the time. People started saying "We've got to hit these deadlines..." full stop. No one talked about relaxing in the future anymore. Eventually it became apparent that this new normal emanated from a high level personnel change intended to "improve the numbers," as I was told. Improve them it did. Their numbers were better than ever. Their lives were hell.  

The culture became unrecognizable. People started backstabbing, maligning each other sometimes in meetings. Other things happened to friends of mine -- things that would have seemed ludicrous just a year earlier. 

and this:

The company was so focused on small things like tax-deals that it had lost perspective on long term development. It was as if Company X were wearing blinders. This is exactly what research predicts.  

He goes on to discuss the candle experiment originally from Duncker's 1945 work on problem solving, and concludes that giving financial incentives to managers restricts their ability to think coherently and solve problems creatively, so they start making poor decisions to the detriment of everyone.

What Americans Buy

This is another interesting visualization of things Americans buy, depicted in terms of market saturation over time.  The Atlantic charts 100 years of technology by showing what percentage of homes had what as innovations emerged:

So that in 1900 five percent of households had a telephone; by about 1950 half of households had one, and the market is saturated by somewhere around 1970, when most households have one.  Cell phones come along in the 80s, reach half of households by early 2000s, and are very close to 90% by 2005.  Interesting--it took 50 years to go from none to half of all households having a telephone, while it took 20 years to do that for the cellphone.  But look at the microwave and the VCR: each looks like it took only about 10 years to do the same thing.  I'm surprised the VCR hasn't dropped off more.  I'd love to see a chart that showed U.S. purchases of vinyl, 8-track, cassette, cd, and digital music over time.

Related, here is another installment in Planet Money's series on the topic of U.S. consumption patterns.  The visualizations are well done as usual.

How Americans currently allocate their cash:

 
Compare to how they spent their cash 60 years ago:

Planet Money points out that food & clothing are cheaper due to productivity increases, while people are buying much bigger houses (about 1000 sq ft in 1949, about twice that in 2011) and more cars.  Medical care goes up for all kinds of reasons.  

Academic Fields of Study, by "Realness"

Gawker writes a list of academic fields of study by "realness" designed to provoke. What is realness? Gawker says "Don't act like you don't know. Come on."  The list:


1. Physics
2. Astronomy or other Space Science
3. Philosophy
4. Engineering
5. Math
6. History
7. Chemistry
8. Biology or other Life Science
9. Foreign language (Useful type)
10. Computer Science
11. Agriculture
12. Geology or other Earth Science
13. Architecture
14. Literature
15. Law
16. Geography
17. Music
18. Economics
19. Study of Some Foreign Place or Culture
20. Archaeology
21. Anthropology
22. Religion or Theology
23. Art
24. Education
25. Foreign Language (Useless type)
26. Political Science
27. Drama or Film
28. Phys Ed, Sports Management or other Major Designed For Athletes
29. Journalism or "Communications"
30. Business
31. Psychology
32. Sociology


Sociology clearly does not belong last, and should be close to anthropology; economics is way too high on the list.  Religion and theology should be last even though incorporated in the arts.  Speaking of which, why is literature ahead of music and art (which must mean visual arts, but not drama or film) so far behind them both and drama and film yet lower?  Any of these fields include subfields that are more or less real.  Take law for instance: I would put tax law near the top of the list, but of course I'm biased.

On the to-read list

2 books to read:

Lea Ypi, Global Justice and Avant-Garde Political Agency:.

Why should states matter and how do relations between fellow-citizens affect what is owed to distant strangers? How, if at all, can demanding egalitarian principles inform political action in the real world? This book proposes a novel solution through the concept of avant-garde political agency. Ypi grounds egalitarian principles on claims arising from conflicts over the distribution of global positional goods, and illustrates the role of avant-garde agents in shaping these conflicts and promoting democratic political transformations in response to them. Against statists, she defends the global scope of equality, and derives remedial cosmopolitan principles from global responsibilities to relieve absolute deprivation. Against cosmopolitans, she shows that associative political relations play an essential role and that blanket condemnation of the state is unnecessary and ill-directed. Advocating an approach to global justice whereby domestic avant-garde agents intervene politically so as to constrain and motivate fellow-citizens to support cosmopolitan transformations, this book offers a fresh and nuanced example of political theory in an activist mode. Setting the contemporary debate on global justice in the context of recent methodological disputes on the relationship between ideal and nonideal theorizing, Ypi's dialectical account illustrates how principles and agency can genuinely interact.

and

Johnathan Schlefer, The Assumptions Economists Make:

Economists make confident assertions in op-ed columns and on cable news—so why are their explanations often at odds with equally confident assertions from other economists? And why are all economic predictions so rarely borne out? Harnessing his frustration with these contradictions, Jonathan Schlefer set out to investigate how economists arrive at their opinions. 

While economists cloak their views in the aura of science, what they actually do is make assumptions about the world, use those assumptions to build imaginary economies (known as models), and from those models generate conclusions. Their models can be useful or dangerous, and it is surprisingly difficult to tell which is which. Schlefer arms us with an understanding of rival assumptions and models reaching back to Adam Smith and forward to cutting-edge theorists today. Although abstract, mathematical thinking characterizes economists’ work, Schlefer reminds us that economists are unavoidably human. They fall prey to fads and enthusiasms and subscribe to ideologies that shape their assumptions, sometimes in problematic ways. 

Schlefer takes up current controversies such as income inequality and the financial crisis, for which he holds economists in large part accountable. Although theorists won international acclaim for creating models that demonstrated the inherent instability of markets, ostensibly practical economists ignored those accepted theories and instead relied on their blind faith in the invisible hand of unregulated enterprise. Schlefer explains how the politics of economics allowed them to do so. The Assumptions Economists Make renders the behavior of economists much more comprehensible, if not less irrational.

Freedom of Religion? from Mandates?

Perhaps the funniest aspect of the challenge to the healthcare mandate is that just last year, the Supreme Court gave short shrift to the Establishment Clause—which protects freedom of religion by enforcing the barrier between church and state—because an Arizona law used a tax to subsidize religious schools rather than a direct subsidy. Let's hope the Court remains willing to ignore threats to liberty (then government subsidizing religious education; now the mandate) whenever lawmakers call the threat a tax! Sadly, it may be that tax expenditure analysis applies only to policies supported by the left…

Mandates vs Incentives

What's the difference between a mandate and a tax incentive?  Nothing but rhetoric.  Martin Sullivan created this table:

He says

The only difference between the mandate and your common tax incentive is that Congress framed the incentive as a tax penalty instead of a tax break. I recognize there might be a legal difference between the two approaches that is beyond my comprehension. But the Court, Congress, and the public should understand that economically the two approaches are exactly the same. Any tax penalty can easily be redesigned as a tax incentive. So, for example, a $1,000 tax penalty for not doing X could be replaced by a tax policy whereby all individuals' taxes are raised by $1,000 and then they are given a tax credit of $1,000 for doing X.

Catherine Rampell picked this up and likes the idea that if ACA is unconstitutional, then all tax incentives might be unconstitutional too--

It seems unlikely that the entire tax incentive system would crumble should the mandate be struck down. That would go a long way toward simplifying the tax code, though, and probably help curb lobbying, too.

Of course, there is no curbing lobbying.  There is always another way to frame one's goals.

Want to move to IKEAland?

Maybe not quite as exciting as Sealand, but with infinitely better street names, one can only imagine.  Marginal Revolution links to this globe & mail article about IKEA's designs on designing urban living:

The people who run the Swedish home-furnishings behemoth are launching a bold push into the business of designing, building and operating entire urban neighbourhoods. Where once they placed a couch in a living room, the Swedes now want to place you and 6,000 neighbours into a neglected corner of your city, design an entire urban world around you, and Ikea-ize your lives. Their bold, high-concept notion of an urban 'hood could be an important solution to the housing-supply shortages that plague many large cities – but it could take some getting used to.

...It is a far more appealing design than most of the centrally-planned urban neighbourhoods that have blighted British cities for the last 60 years, and it promises the sort of pleasant population density – on a piece of wasteland that had once been considered uninhabitable – that could help Britain’s dire housing shortages.

The Ikea people promise that this will not be an Ikea...so, maybe no creative street names after all.  If not, the appeal seems considerably diminished.  It could be a premium to have an address on Fågleboda Drive,  or to take Förhöja Böülevård to the Förträfflig Öffice.

The homes will all be rentals, since this is an income-producing project for Ikea: “We don’t like to sell income-generating assets.”  But Ikea would like to stress that this will prevent speculation-driven boom and bust cycles, thus preserving affordability.  Check out the controls Ikea will exert:

“We’d have a very good understanding of rubbish collection, of cleanliness, of landscape management,” Mr. Cobden says. “We would have a fairly firm line on undesirable activity, whatever that may be. But we also feel we can say, okay, because we’ve kept control of the management of the commercial facilities, we have a fairly strong hand in what is said in terms of the activities that are held on site.”

Now it starts to sound like a gated community in Florida...not anything near as exciting as Sealand.  Instead of expanding into consumer credit, Ikea's just expanding into rental properties.

That's a Fryken shame.

What is FATCA not as bad as?

FATCA seems unobtrusive compared to this:

One million British travellers planning to fly to Canada, the Caribbean and Mexico this year face the risk of being turned away at the airport – at the insistence of the US Department of Homeland Security.

...Now the US is demanding passengers' full names, dates of birth and gender from airlines, at least 72 hour[s] before departure from the UK to Canada. The initial requirement is for flights to Toronto, Ottawa, Montreal and the Nova Scotia capital, Halifax – 150 miles from the nearest US territory. A similar stipulation is expected soon for the main airports in western Canada, Vancouver and Calgary.

Any passenger who refuses to comply will be denied boarding. Those who do supply details may find their trip could be abruptly cancelled by the Department of Homeland Security, which says it will "[m]ake boarding pass determinations up until the time a flight leaves the gate ... If a passenger successfully obtains a boarding pass, his/her name is not on the No Fly list." In other words, travellers cannot find out whether they will be accepted on board until they reach the airport.

Any objections?

 

Kickstarter Links

What works in development?  I'm pledging to find out, how about you?

How about pledging money to impact a documentary on how money impacts politics?

Too late: an illustrated guide to Income in the U.S., but it's already funded.

The simple math that can save cities

It's about density and using downtown spaces in a Jane Jacobs kind of way.  You want this:

and not this:

That's the same building; consider which it would be more exciting to move into or next to.  The author talks about Joe Minicozzi, director at real-estate developer Public Interest Projects, "who has now made something of a traveling road show with these photos":

We tend to think that broke cities have two options: raise taxes, or cut services. Minicozzi, though, is trying to point to the basic but long-buried math of our tax system that cities should be exploiting instead: Per-acre, our downtowns have the potential to generate so much more public wealth than low-density subdivisions or massive malls by the highway. And for all that revenue they bring in, downtowns cost considerably less to maintain in public services and infrastructure.

Related old: Jane Jacobs, Death and Life of Great American Cities
Related new:  Edward Glaeser, Triumph of the City

links

An interesting discussion on the nature of public goods and the need for the state to provide them on behalf of the public.

a protest on a pasty tax.

austerity's social impact is scary.

austerity's economic impact is scary.

How do we spend our money: US vs. rest of the world

American consumers spend more on health care and housing, less on food and clothes than consumers in Canada, Britain, and Japan..  From the NYT's Catherine Rampell, economix blog:

As we know, it's a lot more on health care: