Saturday, April 14, 2007

Bjorn Borg, Come Home

Wealth taxes used to be de rigueur in Europe, where there are only a few holdouts. France's is between 0.5% and 1.8% on assets above $1 million. In Spain, it's 0.2% to 2.5% on assets above $223,000.

But rather than transferring wealth, wealth taxes transfer the wealthy. In Sweden, tennis star Björn Borg, ABBA's Björn Ulvaeus and Ikea founder Ingvar Kamprad are among the mega-rich who have fled the country, taking their money with them.


From today's WSJ editorial "Björn Borg, Come Home."

Quotes of the Day: Milton Friedman

"Fair" is in the eye of the beholder; free is the verdict of the market.

The word 'free' is used three times in the Declaration of Independence and once in the First Amendment to the Constitution, along with 'freedom.' The word 'fair' is not used in either of our founding documents.

~ Milton Friedman, Wall Street Journal, Mar. 7, 1996


What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself.

~ Milton Friedman, Wall Street Journal, May 18, 1961

The Simpsons: Outsourcing and India

The Singhsons: Hilarious Indian version of the Simpsons, featuring Bartinder, Omar, Mar Ji, Mugglie, and Lisajit


The Simpsons: Kiss Kiss Bang Bangalore: The Simpsons Dance in India

Simpsons: Nuclear Power Plant is Outsourced to India

Homer Dresses Up As Lord Ganesha to try to stop Apu's arranged marriage

Bonus: Burger King Outsources


(HT: Sanil Kori)

Friday, April 13, 2007

Tax Quotes

New York Times editorial in 1909: "When men get in the habit of helping themselves to the property of others, they cannot be easily cured of it." AMEN!

Historian Charles Adams: "From the earliest records of civilization, tax laws have taken away liberty more often than foreign invaders."

WSJ's Stephen Moore: "The complexity of the tax code, the cost it imposes on the economy simply to comply with it, and the civilian army of agents needed to enforce it continues to grow like cancer cells attacking the healthy ones. At the same time, common sense reforms like the flat tax or the national sales tax remain politically stalled -- perhaps because there are so many vested interests in keeping it complicated. Even conservative Republican presidential candidate Mitt Romney of Massachusetts recently came out against a flat tax arguing that it might be unfair. To whom? Tax accountants and lawyers? Meanwhile, just last week the Czech Republic announced plans to become the next former communist nation of Eastern Europe to adopt a flat tax. Everywhere this idea is catching hold, except in Washington."

From today's WSJ "Those April Blues" by Stephen Moore.

Protect Us From Tiger Woods?

A powerful and dangerous force has been unleashed on the global economy. It’s a new source of skilled labor that has put American workers at a competitive disadvantage — and no one knows just how many jobs have already been lost because of it. The U.S. is running a huge trade deficit with this force; every year we’re spending millions more on what it produces than it spends on American goods and services. And to top it all off, this entity has built a massive currency reserve, investing large sums of it on U.S. government securities and thus enabling America’s fiscal profligacy.Why, oh why, won’t the U.S. government do something to protect us from . . . Tiger Woods?

You thought I was talking about China, and I was. But I’m also talking about the modern-day golf legend. You see, China and Tiger Woods are a lot alike.

Go here to read more of Donald Luskin's excellent article "Before You Tee Off on China . . .. . . Answer this question: What is China doing that’s any different than what Tiger Woods is doing?"

(HT: Society and Money)

Thursday, April 12, 2007

American Idol Odds


Sanjaya's odds to win American Idol have improved on Intrade.com, rising to 9% currently, from less than 1% a month ago (see chart above - right scale for odds, click to enlarge). Melinda's odds hold steady at about 55% (see chart below), making her the clear favorite to win, based on actual trading in the "prediction market." Current volume is 8700 contracts for Melinda and more than 10,000 contracts for Sanjaya.



Trade Works Both Ways

We hear a lot of complaining about exports from China to the U.S., but don't hear as much about our exports TO China, fueled by the increasing wealth and purchasing power of China's consumers. As China's economy grows, the middle and upper class there will continue to grow, and China will become an increasingly important consumer market, to the benefit of U.S. businesses.

In today's WSJ there is an article
Rich Chinese Fancy Luxury Cars, about the growing demand in China for luxury cars, including Cadillacs and Buicks.

In the 1990s, many in China considered Volkswagens high class. But today, well-to-do Chinese are hankering for Bentleys, Ferraris, Mercedes, Audis, deluxe Cadillacs and even Rolls-Royces, reflecting the nation's growing wealth -- and a new boldness about showing it off.

"The rapid growth of affluence in China and the increasing desire for individuality and expressiveness" are making China "the most dynamic market in the world," says Ulrich Walker, chairman and CEO of DaimlerChrysler's Northeast Asia operations.

Engineers and designers for General Motors Corp. labor to make Buicks and Cadillacs sold in China more luxe than their North American counterparts. Cars have leather upholstery, lacquered wood trim and technical bells and whistles, such as in-seat TVs and remote controls for the audio and video systems. This week, GM launched the Park Avenue sedan, the top of its Buick line, here (see photo above). The price tag: $65,000 and up.

Bottom Line: Exports and imports are two sides of the same coin of international trade.

Indoctrination

In a campaign without peacetime precedent, the media-entertainment-environmental complex is warning about global warming. Never, other than during the two world wars, has there been such a concerted effort by opinion-forming institutions to indoctrinate Americans, 83% of whom now call global warming a "serious problem.'' Indoctrination is supposed to be a predicate for action commensurate with professions of seriousness.

From George Will's column today "The Media and Global Warming."

Wednesday, April 11, 2007

The Nature and Causes of the Weath of Nations

Johan Norberg, the Swedish author of In Defence of Global Capitalism, produced a 49-minute documentary for Channel Four Television (UK) in 2003 called "Globalisation is Good." It explains why anti-globalisation campaigners are wrong and how globalisation is a force for good, lifting billions out of poverty.

The doccumentary tells a tale of two countries that were equally poor 50 years ago - Taiwan and Kenya. Today Taiwan is 20 times richer than Kenya. Entrepreneurs thrived in Taiwan because it introduced a market economy and integrated into global trade. In contrast, Kenyans are still desperately poor, because Kenya shut its door to globalization. Kenyans suffer from regulations, corruption and the lack of property rights.

The unequal distribution in the world is a result of the unequal distribution of capitalism - those who have capitalism grow rich, those who don't stay poor.

You can watch it here.

Don Imus, Assorted Links, Unconventional Views

1. "A Dangerous Detour: Cycles of Outrage and Apology Distract Blacks from Confronting Many Big, Chronic Problems," by John McWhorter

2. "
Al Sharpton: Nappy Headed Race Ho?" by Mike Adams

3.
The Culture of "Bitches, Hos, and Niggas" by Michelle Malkin

4. "Free Speech Double Standard" by Cal Thomas

Detroit: Highest Mortgage Delinquency Rate in U.S.

From today's WSJ: The Detroit-Livonia-Dearborn, Michign area leads the nation in the mortgage delinquency rate for the first-quarter 2007 at 6.19%, up from 5.10% in the fourth quarter 2005. See chart above, click to enlarge.

Global Warming, Assorted Links

1. Global Cooling in NYC? Temperatures in NYC have averaged 42 degrees Fahrenheit in April, only one degree warmer than the average for April 1874, the coldest on record.

2. Climate change concert star Madonna accused of hypocrisy, her "Confessions" tour produced 440 tons of CO2 in 4 months, just for the flights between the countries, not taking into account the truckloads of equipment needed, the power to stage such a show and the transport of all the thousands of fans getting to the gigs.

3. Camile Paglia, "Climate change is built into Earth's system, and cooling and warming will go on forever. Man is too weak to permanently affect nature, which includes infinitely more than this tiny globe."

4. "The Great Global Warming Swindle" - UK Channel 4 Documentary Film.

5. Al Gore’s extreme proposals on climate change are smart politics—and bad policy.

Cheap Goods From China Are a "Complication"?

From a USA Today article "Surging Chinese Exports Complicate U.S. Position:"

Even as the Bush administration toughens its approach to trade disputes with China, an export surge from Chinese factories is raising the stakes for high-level talks scheduled next month in Washington. The $46.4 billion first-quarter global trade surplus China reported Tuesday was twice the figure for the comparable period last year.

Thanks to productivity gains, Chinese imports today are on average 3% cheaper in dollar terms than they were in December 2003, according to the Bureau of Labor Statistics.

As the Foundation for Economic Education points out, Only in the crazy world of politics are more inexpensive consumer goods a "complication."

What's so complicated? China produces cheap goods and U.S. consumers and businesses voluntary buy them. Volunatry trade. Win-win. Very simple. Not complicated.

Thomas Sowell explains:

“At least half of the popular fallacies about economics come from assuming that economic activity is a zero-sum game, in which what is gained by someone is lost by someone else. But transactions would not continue unless both sides gained, whether in international trade, employment, or renting an apartment.”

Only in a political fantasy world of trade as a zero-sum game would inexpensive goods produced on the other side of an imaginary line called a national border be considered a "complication."

Tuesday, April 10, 2007

Let's Move Tax Day and Voting Day Closer Together

If you pay your income taxes next Monday, April 16, it will have been 160 days since you last voted on November 7, 2006 (see the graph above), and it will be 204 days until you vote again on November 6, 2007.

The day we pay taxes in April is about as far away from the day we vote for politicians as possible. It's been more than 5 months since the last voting day, and more than six months before the next election, and November is probably the time of the year that we are least likely to be thinking about April 15 and taxes.

Suggestions:

1. Let's abolish withholding taxes, and require all taxpayers to write a check once a year for their entire tax liability, like taxpayers did from 1913 to WWII (or make monthly or quarterly tax payments). For someone with $100,000 of adjusted gross income that would mean writing a check to the IRS of about $17,400, and probably another $3,000 or so to the state treasury, depending on the state you live in. This would not only relieve companies and organizations of the costly burden of tax collection for the government, but would significantly increase our "tax awareness."

Here is an exercise about your tax awareness: What is your monthly car or cell phone payment? What is your monthly mortgage or rent payment? Most people know these amounts immediately, because most of us write a check for those expenses. Now, what is your monthly tax liability for federal income taxes, and what is the amount of state income taxes you pay monthly? Most of us have no idea what our tax liabilities are, because we don't write monthly checks for federal and state taxes, employers withhold those taxes and make payments on our behalf.

2. Next we should move Voting Day and Tax Day much closer together, like the same week or same month. We could move Voting Day to mid-April right after we pay taxes, or we could move Tax Day to early November right before we vote.

Having greater tax awareness and voting closer to the day we pay taxes might influence our voting behavior?

Monday, April 09, 2007

Wal-Mart More Selective Than Harvard

From the NY Times, "A Great Year for Ivy League Schools, but Not So Good for Applicants to Them," the acceptance rates this year are as follows:

Columbia University 8.9%

Harvard University 9%
Stanford University 10.3%
Cal Tech 16.2%
Amherst 17.5%

Acceptance rate for job applicants at new Wal-Marts: 1-3% (e.g. 11,000 applications for 330 jobs at the first Wal-Mart inside the D.C. beltway, a 3% acceptance rate, read more here)

Conclusion: Wal-Mart is more selective than an Ivy League university, and turns away more job applicants than Harvard or Columbia turn aways students.

Famed Violinist Goes Incognito on the DC Subway

What would happen if one of the world's great violinists performed incognito before a traveling rush-hour audience of 1,000-odd people in a subway station?

No one knew it, but on January 12 the violinist standing against a bare wall outside a Washington, D.C. Metro station in an indoor arcade at the top of the escalators was one of the finest classical musicians in the world, playing some of the most elegant music ever written on one of the most valuable violins ever made. His performance was arranged by The Washington Post as an experiment in context, perception and priorities -- as well as an unblinking assessment of public taste: In a banal setting at an inconvenient time, would beauty transcend?

Read what happened here.

Maybe to complete the experiment the Washington Post should next arrange for a mediocore street musician to get dressed up in a tuxedo and perform classical music in a concert hall with perfect acoustics, and see if "in an elegant setting at a convenient time, would mediocrity be obvious?"

Grammar Mistake's That Make You Look Stupid

If you want to craft an error-free message that reflects your professionalism, be on the lookout for these common grammatical slip-ups:

#1: Loose for lose
#2: It's for its (or god forbid, its')
#3: They're for their
#4: Effect for affect
#5: You're for your

Read more about the "10 flagrant grammar mistakes that make you look stupid."

Your welcome.

History of Corporate Income Tax, People Pay Taxes

Even before the personal income tax started in 1913, corporate income was taxed starting in 1909, at an initial rate of only 1% on income over $5,000, equivalent in today's dollars to about $113,000 of tax-exempt business income.

Until 1931, some amount of corporate income was tax-exempt - $2,000 or $3,000 in most years, equivalent in today's dollars to $45,000-$68,000 of non-taxable income. By 1932, tax-exempt corporate income was eliminated forever, and all business income gets taxed, starting with the first dollar of income. Also, by 1932 the corporate tax rate was up to 13.75%, having been increased gradually over the years from its original 1% level in 1909.

Myth: Corporations pay taxes.

Reality: Corporations really don't pay any taxes at all; people pay all taxes, in our roles as customers, workers and shareholders. In other words, higher taxes on corporations mean either higher prices for a corporation's customers, lower wages for its workers, or lower dividends for its shareholders, or all three.

Tax Law Complexity Continues to Grow

From the National Taxpayers Union’s 8th Annual Study of Tax Law Complexity Trends, released last year on April 17, 2006 (release of a new study is pending):

  • The total number of paperwork hours imposed by the Department of the Treasury exceeds 6.4 billion hours (most of which are IRS-related).

  • Taxpayers had to wade through 142 pages of instructions for the standard 1040 form and schedules, up from 128 pages in the previous year, and more than double the number in 1985. As mentioned in the post direclty below, the instructions in 1913 came on one page.

  • 9 out of 10 filers used a paid preparer and/or a computer for assistance in filing their tax returns.

  • Self-employed taxpayers filing the 1040 with small business schedules face an 80-hour completion task – the equivalent of two weeks’ paid vacation.

  • The 1040 tax form with common Schedules A, D, and others will take the average taxpayer 38 hours to prepare this year – with the assistance of a computer! Even the so- called “short” form will take more than half a day (12.6 hours) to complete.

Tax Deadline Approaches: Bring Us Back to 1913


University of Dayton history professor Larry Schweikart traces the history of the U.S. income tax in today's NY Sun (Take Us Back to '13) and concludes that:

As it now stands, the income tax is oppressive in its rates and ridiculously complex. While a good argument could be made for alternatives, the best solution to fixing the tax code is to return to the lowrate simple form of 1913. (appears above)

See the entire 1913 IRS 1040 form here (only 4 pages including all forms and instructions).

We now have a 67,204 page tax code, which significantly contributes to the reality that 60% of taxpayers today have to hire a tax professional - I don't think anybody in 1913 needed help to fill out the one-page tax form above!

From the USA Today article from last week "67,204-page Code Confounds Taxpayers:"

This year, individuals and companies will spend about $300 billion on tax preparation costs. To put that in perspective, that is a 20% levy on top of the $1.5 trillion they will actually pay in taxes.

Shortage of High-Quality Workers in India

From the Boston Globe (via Cafe Hayek), an article "India High-tech Industry Out of Workers:"

Nearly two decades into India's phenomenal growth as an international center for high technology, the industry has a problem: It's running out of workers.

The problem is not a shortage of people," said Mohandas Pai, human resources chief for Infosys Technologies, the software giant that built and runs the Mysore campus for its new employees. "It's a shortage of trained people."

In 2000, there were maybe 50,000 IT jobs and 500,000 applicants. Now there are perhaps 180,000 annual openings, but only between 100,000 and 200,000 qualified candidates.

Much of the problem is rooted in a deeply flawed school system. As India's economy blossomed over 15 years, spawning a middle class desperate to push their children further up the economic ladder, the higher education system grew dramatically. The number of engineering colleges, for instance, has nearly tripled.

But the problems have simply grown worse. India has technical institutes that seldom have electricity, and colleges with no computers. There are universities where professors seldom show up. Textbooks can be decades old.

Instruction is by rote learning, and only test scores count. "Everything else is forgotten: the capacity to think, to write, to be logical, to get along with people," Pai said. The result is smart, well-educated people who can have trouble with such professional basics as working on a team or good phone manners.


Not to worry, it looks like the U.S. government will help out by continuing to restrict the competition for India's workers. From today's IBD:

This year, as in the past, 65,000 of these H-1B visas are available. Last Monday, the first day on which applications were accepted for 2007, U.S. Citizenship and Immigration Services received more than 150,000 petitions from companies needing them to hire scientists, engineers, architects, computer programmers and other highly trained employees. It's clear that a lot of skilled workers wishing to live and work here are out of luck.

The U.S. is again showing how well it can seal the border against skilled, law-abiding workers who are crucial to its economic future.

Sunday, April 08, 2007

Quote of the Day: Economics vs. Politics

Good economists are seldom popular with the political class. This is not a shortcoming unique to democratic systems. Dictators like good economists even less. Why is this?

As a rule, politics doesn’t educate. It obfuscates, pontificates and prevaricates. It often seeks to advance the interests of the few at the expense of the many. It is a playground for the short-sighted and the demagogic. Economics, on the other hand, tells us a great deal about how material life can be improved through the operation of entrepreneurship and markets. It informs us that there are laws beyond those that legislatures pass, and consequences for ignoring them.

The good economist is the one who takes the discussion of economic matters to the lofty level it deserves. When others spout clever sound bites, unsubstantiated charges and snake-oil remedies, it’s the good economist who raises his hand and calmly declares, "Wait a minute! Let’s look at the facts. Let’s separate the wheat (truth, logic and evidence) from the chaff (nonsense, false assumptions and panaceas)."

~Lawrence W. Reed, President of the Mackinac Center for Public Policy in Midland, MI