Well, not entirely, but the deductibility of interest and the nondeductibility of dividends certainly encouraged corporations to borrow more than they otherwise would have. Combined with tax incentives, interest payments were effectively subsidized more than 100%, as explained here.
Author: Administrator
Why are drug costs so high?
Apparently the cost of research and development isn’t the cause.
Large drug companies simply can’t afford to keep spending as much as they are now, when about 10% to 20% of revenue goes to R&D
That’s 10-20% of drug company revenue, not including the markup your pharmacy and “health insurance” company add. I wonder how much of the remaining 80-90% is spent, directly or indirectly, on lobbying and enhancing their privileges.
Stumbling onto another land value tax endorsement
Just happened to find it while searching for something else in a Florida library
The killer argument in favour of a national tax on land values for any modern government relates to the effect of globalisation on the tax base. The ability of companies to shift their operations from one tax jurisdiction to another in a world of increasingly mobile capital means that the corporate tax base is likely to erode. This is taking longer to happen than intuition might suggest, but the logic of capital mobility and of transfer pricing by large corporations makes it inevitable. Rich private individuals are similarly prone to shift residence and domicile to minimise their tax liabilities. But it is much harder to shift factories, offices, shops and houses, and impossible to move the ground on which they are built.
The article also includes a prescient observation regarding the housing bubble
Better still, the effect on the housing market would be inherently countercyclical. When house prices and land values are rising, the tax would admittedly with a delay act as a dampener on the boom.
source: One tax to untangle this unholy mess.(real property taxes).
Estates Gazette (Feb 28, 2004): p.50.
POSTED: Assessor candidates debate
An mp3 audio file of the debate is now (February 2, 11 PM CST) available for download here. At least two of the candidates (Robert Grota and Sharon Strobeck-Eckersall, of the Green and Republican parties respectively) will be on the November ballot. The two Democrats, Ray Figueroa and Robert Shaw, may (according to incomplete returns) have been defeated by a third candidate, who did not participate.
Inconveniently, the debate was held less than five days before the election, and it took our co-sponsor more than four days to produce the audio file. Perhaps next election we will achieve better scheduling. It is also possible that most voters would not choose to listen to a 101-minute discussion on this subject, but at least we had hoped to provide the opportunity.
I will have some comments on the content of the debate subsequently.
Going to the candidates’ debate
Cook County Assessor candidates, that is. Five folks will be on the ballot, 3 Dems (one of whom will emerge from next Tuesday’s primary), one Green and one Repub. Can you say “pandering to real estate homeowners?” Of course people hate to pay taxes, but whose burden is hardest to bear, those who own real estate or those who must rent their abodes? What it comes down to, of course, is that homeowners vote, and real estate tax bills have big black numbers. Whereas renters are much less likely to vote, and are nickled and dimed (make that $5 and $10) by sales tax and income tax that are harder to see.
Anyhow, the debate is this Thursday, at the Union League Club (65 W Jackson), 4:30 PM. It is open to the public without charge, but you must register in advance (by calling 312 435-5946) and you must dress in nothing less than business casual attire. A bit more detail here.
Housing cost trends around the world
A great little interactive tool compares house price trends to income trends and general price levels for twenty countries. Be warned that it is flash-based. Most series seem to go back to 1990. Relative to incomes, Holland and Belgium show the greatest increases, while the big decliner was Japan. Thanks to Steve Keen for finding it and providing the link, originally from The Economist. And of course we know that house prices mainly represent the cost of land (including the cost of permission to build).
Gaffney Interview
Mason Gaffney, author of After the Crash, interviewed by Kevin Press (part 1 and part 2). Also available as a pdf. Book was reviewed earlier here.
Car price trends
I don’t have a car, don’t want one, can’t afford one, always figured they are just way too expensive for intelligent folks to waste money on. But someone close to me has “always” had a car, and when her twelve-year-old one became less reliable and more expensive to maintain, decided to get a new one. Same make, essentially the same model, a Toyota Sienna van. Of course, over twelve years there were some changes, mostly improvements and extra features (power doors, stability control). To me, the amazing part was:
- Cost of new car in 1998: $27,370
- Cost of new car in 2010: $27,133
The above are current dollars, include all taxes and invented fees, and were the result of negotiation by an informed customer. . Now, in 1998 this was a new model, they were hard to get. By 2010, production was more in line with demand, inventories at local dealers were limited but there was some choice of color. The 2010 price was net of a $1,000 rebate, which of course is just Toyota’s way of cutting prices temporarily..
It turns out that this does reflects the general state of the auto industry: Our friends at the Bureau of Labor Statistics say that car prices in November (the latest available) were 2.8% below the 1999 annual average (Earlier figures apparently aren’t available on weekends.)
Of course, auto manufacturers have a big investment sunk into their plants, and prefer to lose a bit of money to keep them active, rather than taking a bigger hit by closing them down.
It would be interesting to compare these figures to the cost of transit rolling stock.
Rentiers are welcome in the U S
Some Americans may not be aware that U S Citizenship– or at least, lawful permanent residency– has long been for sale, legally and aboveboard. It’s called the EB5 program, and essentially provides that any foreigner “investing” $500,000 to $1 million in a U. S. business can become a legal permanent resident. And, of course, entrepreneurs have found the niche market, setting up businesses in which foreigners may invest, without taking an active role in management of the enterprise.
A Chinese and American joint venture is “converting the dormant Northridge mall in Milwaukee into a regional shopping center featuring merchandise from Chinese retailers” according to Milwaukee Business Journal. Presumably, each of the 200 Chinese retailers expected could support one or more EB5 visas. 300-500 local residents are expected to be hired, tho I think it’s a bit imaginative to suggest that these jobs would be “created” by the project. Rather, like most economic development incentives, they are simply shifted from elsewhere.
A China Daily report on the project indicates that the Chinese investors might not be familiar with primitive North American travel conditions. Milwaukee “is only an hour away from Chicago,” says the developer. Maybe someday.
Of course, the poor would-be immigrant has no similar opportunity. She cannot say “I will work to build a business that will employ Americans,” nor even “I will borrow a half-million dollars to invest,” as the program doesn’t permit this.
So, as existing Americans, are we better off inviting a bunch of rentiers, or a bunch of hardworking laborers? Too many people believe that the latter will drive down American wages– which may appear to be true, only because we fail to consider what the immigrants can produce.
If we insist on inviting rentiers, we have chosen an inefficient way to do it. Instead of requiring $500,000 invested in a business, when plenty of American entrepreneurs are already able to supply capital, we could simply require $500,000 paid toward reduction of the Federal debt.
Why campaign contribution limits can’t work
This is from House Banking Committee Chair Barney Frank, specifically on the subject of whether car dealers should be subject to regulation in regards to auto loans, but the significance is much more general:
“I have not had a problem because of campaign contributions. The problem is democracy: it’s people responding to people in their districts: community bankers, realtors, auto dealers, as I said, end users, insurance agents.”
“The local auto dealers are very popular in their districts,” Frank says. The more an interest group can make an issue district-specific and the more it can relate on an everyday level, Frank argues, the better it will do. “That’s why the realtors always beat the bankers. The bankers sit and they go [Frank makes a dour face, leans back in his chair and tightly folds his arms, miming an aloof posture]. The realtors are out there joining the Kiwanis and sponsoring little league.” The same is true with John Deere, dairy farmers and other back-slapping boys from back home.
How can we overcome this? Of course Realtors are going to support their own interests, ditto farmers [or, more likely, farmland owners], and other groups. One solution would be for us to treat government as a service administering common assets for the common benefit, rather than a means of transferring wealth to ourselves or our favorite groups. Not easy, but at least it’s right.
Also relevant to this article, HGS students may remember this passage from Social Problems (1883).
The map of the United States is colored to show States and Territories. A map of real political powers would ignore State lines. Here would be a big patch representing the domains of Vanderbilt; there Jay Gould’s dominions would be brightly marked. In another place would be set off the empire of Stanford and Huntington; in another the newer empire of Henry Villard. The States and parts of States that own the sway of the Pennsylvania Central would be distinguished from those ruled by the Baltimore and Ohio; and so on. In our National Senate, sovereign members of the Union are supposed to be represented; but what are more truly represented are railroad kings and great moneyed interests, though occasionally a mine jobber from Nevada or Colorado, not inimical to the ruling powers, is suffered to buy himself a seat for glory.
Compare to this, from the Huffpo article, Frank talking about his 71-member(!) committee:
“What’s happening now is the pro-regulation forces are being out-grassroots-ed by the antis,” Frank says. One member, he says, represented tons of title insurance companies. Another came from the headquarters of credit unions. A third’s district is home to LexisNexis; another to Equifax. Each of those entities received special treatment because their representative sits on the committee — and the more members on the committee, the more special treatment is needed.
HT, Felix Salmon