Wintery Knight

…integrating Christian faith and knowledge in the public square

American corporations are expanding outside the United States to avoid high taxes

From Investors Business Daily.

Excerpt:

Walgreen, America’s venerable drug-store chain, is thinking the unthinkable: relocating to Europe. Not because it sees growth and opportunity there, but because of onerous taxes here in the U.S. It’s an ominous trend.

The Financial Times of London calls it “one of the largest tax inversions ever.” That is, a company seeking to avoid punitive taxes in one market by moving to another.

No doubt the FT is right. And after its recent $16 billion takeover of Swiss-based Alliance Boots, it would be easy for Walgreen to remake itself as a Swiss company.

If it did, the Democratic Party’s liberals would no doubt call Walgreen unpatriotic for wanting to lessen its tax burden. In fact, they are responsible for an economic environment so hostile to capital and investment that companies now find it intolerable.

[…]According to an analysis by UBS, Walgreen’s U.S. tax rate is 37.5% — compared with Alliance Boots’ rate in Europe of about 20%. That’s a huge gap, worth billions of dollars a year.

But it’s even worse than that. A recent OECD study says the “integrated tax rate” — taxes on capital and income — for U.S. companies is a nightmarish 67.8% vs. 43.7% for the OECD.

Many companies facing steep tax rates and insane regulations in the U.S. have had enough. They’re keeping their profits overseas. Last week, Senate Finance Committee chief Ron Wyden, an Oregon Democrat, reported U.S. corporations now hold $2.1 trillion in earnings in overseas accounts — a massive amount, roughly equal to 12% of U.S. gross domestic product.

A total of 547 companies — including Apple, GE, Microsoft and Pfizer — have dramatically expanded their so-called foreign indefinitely reinvested earnings overseas, which let them avoid the punishing rates here at home.

[…]Not only are taxes too high, but also new laws such as Dodd-Frank and ObamaCare, a vast expansion of regulation, debt and the size of government, the federal takeover of entire industries, the bullying of Wall Street and demonization of CEOs, and forced CO2 cuts that will hammer manufacturers have made this the least pro-free market U.S. government in generations.

If you make it harder for businesses here to do business (higher taxes and burdensome regulations), then they will expand abroad instead, and in some cases, they will just move completely. How does that help create jobs here? It doesn’t.

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Quebec citizens dissatisfied with expensive government-run daycare

IMFC researcher Andrea Mrozek writes about a new survey in the Montreal Gazette.

Excerpt:

For 16 years, the Quebec government has been providing highly subsidized daycare. Canada-wide and indeed internationally, this $7-a-day system is praised as a leading example and the path to follow.

The question is whether Quebecers actually feel that way.

Our recent poll about Canadians’ daycare desires shows some interesting results in Quebec (imfcanada.org/daycaredesires/Quebec). When asked what Quebecers ideally prefer for children under age 6, a competent caregiver or a parent, 70 per cent of Quebecers say a parent.

In short, a clear majority of Quebecers believe that the best place for children under 6 is with a parent — in spite of having a provincially funded system that gives preference to daycare centres.

A second surprising result also emerged. When given options about how governments should help parents with child care, almost half of Quebecers polled (45 per cent) said money should go directly to parents. This option was placed next to other options like subsidies to childcare centres, child-tax deductions or providing funding exclusively for families in need, among others.

Surprisingly, more Quebecers believed that money should go directly to parents; by way of contrast, 25 per cent of Canadians outside Quebec said governments should provide cash payments directly to parents.

These poll results leave us with a lot to think about with regard to how governments enact childcare policy. Seven in 10 Quebecers believe the best place for a child under six is with a parent. Yet the government’s public policy on that point does not remotely reflect this desire.

In fact, when the government introduced its policy of subsidized daycare, other family funding and programs were cut. Scholars have shown how other family benefits were cancelled as Quebec ramped up spending on institutional daycare.

Some may think the Quebec program is very popular simply because so many parents use it. That may not be the case. Anytime a government provides a service at lower-than-market costs, it provides an incentive to use that service. The reality is that child care is actually very expensive, regardless of who provides it. When the government provides it, we are all paying for it through increased taxes.

In our poll, we asked simple and somewhat idealistic questions as to where children under 6 are better off. “What is best for children” is not necessarily the same as asking about what is possible for families. The two ought not be confused, of course. There might be many parents who think their presence would be better for their kids, but they simply cannot afford to stay home. Personal circumstances are just that, personal, and they vary from family to family.

Still, there should still be a place for idealism — for a blue-sky view of how we would like things to go. And public policy should assess opportunity costs and unintended consequences. Where public policy is divorced from citizens’ desires, it does taxpayers a disservice. In effect, it means taxpayers are paying for something they would rather not use.

Quebec is the most liberal province in Canada, and it only survives because it receives massive transfers of wealth from the other business-friendly provinces. But that doesn’t stop them from sneering at their enablers, or from passive expensive socialist programs. But they do serve as a lesson to us – government doesn’t do child care better than moms and dads. And we shouldn’t be paying them massive amounts of money them to do things that they don’t do well. The ideology of feminism isn’t more important than the needs of children.

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New study finds that many young people won’t purchase Obamacare plans

Dr. David Hogberg of the National Center for Public Policy Research explains how Obamacare affects young people.

Here’s the executive summary:

If the ObamaCare health insurance exchanges are to function properly, it is crucial that a substantial number of people ages 18-34 join them. This age group that is young and relatively healthy must purchase health insurance on the exchanges in order to “cross-subsidize” people who are older and sicker. Without the young and healthy, the exchanges will enter a “death spiral” where only the older and sicker participate and price of insurance premiums will increase precipitously.

This study finds that in 2014 many single people aged 18-34 who do not have children will have a substantial financial incentive to forego insurance on the exchanges and instead pay the individual mandate penalty of $95 or one percent of income. About 3.7 million of those ages 18-34 will be at least $500 better off if they forgo insurance and pay the penalty. More than 3 million will be $1,000 better off if they go the same route. This raises the likelihood that an insufficient number of young and healthy people will participate in the exchanges, thereby leading to a death spiral. 

The design of the plan is to tax younger, healthier people – especially men – in order to obtain the money to pay for heavy users of health care.

To compel the young and healthy to purchase insurance, the architects of ObamaCare included an individual mandate that requires individuals to either buy insurance or pay a penalty. The penalty, which increases over time, is whichever is greater: $95 or one percent of income in 2014, $325 or two percent of income in 2015, and $695 or 2.5 percent of income in 2016 and thereafter.

[…]The gender breakdown of these individuals presents another problem. Women have higher rates of health utilization than men, including more visits to primary-care physicians and greater use of diagnostic tests and emergency care. However, as Table 3 shows, roughly two-thirds of the individuals for whom insurance will cost at least $1,000 more than the fine are men.

Hard to see why any young man would have voted Democrat, and yet many did. Did they know that they were voting for a tax on themselves at a time when many of them are poorly educated by government-run schools, and can’t even find jobs? How can you pay a fine for not having health care when you don’t have a proper education or a proper job?

The net effect of the “community rating” and “guaranteed issue” provisions of Obamacare will be to raise health insurance premiums and force private companies to stop offering plans:

If the exchanges do not attract a sufficient number of people in the 18-34 age demographic, they will eventually enter an insurance “death spiral.” This occurs when the young and healthy drop out of the “insurance pool.” This leads to “adverse selection” in which insurance is only attractive to those who are generally older and sicker. If the insurance pool is comprised largely of people who are older and sicker, then insurance prices will rise to cover their costs. That rate increase causes even more young and healthy people drop their insurance, leaving the pools even older and sicker than before, and so on. Eventually, all but a few insurers will be forced to discontinue their business on the exchanges because they can no longer make a profit. Fewer insurers means less competition, resulting in even higher insurance premiums.

Community rating and guaranteed issue are catalysts for a death spiral. In its strictest form, community rating means that insurers must charge everyone the same premium, regardless of factors such as health status and age. Guaranteed issue means that an insurer must sell a policy to a consumer anytime.

Under ObamaCare, the exchanges use a modified version of both of these regulations. Its form of community rating doesn’t allow insurers to vary rates based on health status. It does allow, however, for modification of premiums if one smokes and to compensate for age (although in a more restricted manner than the market currently does). Regarding guaranteed issue, insurers must sell policies to all comers but (with a few exceptions) only during the annual open enrollment period from October to December.

Both of these rules give young and healthy people big incentives to forgo insurance coverage altogether. Community rating means young people have a reduced incentive to buy insurance since they will pay a premium that is above the market rate. Many who are currently purchasing insurance in the individual market, for example, will see a substantial premium increase if they switch to the exchange.

In a market without guaranteed issue, consumers run the risk of insurers not selling them policies when they get seriously ill. But that risk is largely gone under the exchanges. For instance, a young person who gets a serious illness in June only has to wait until October to sign up for insurance and then wait until January 1 of the next year to receive coverage. Combined, community rating and guaranteed issue give the young and healthy big incentives to forgo insurance until they are sick.

“Community rating” and “guaranteed issue” have actually already been tried at the state level. What happened then?

This:

The late Conrad Meier, then a senior fellow in health care policy for the Heartland Institute, examined what happened when these two regulations were instituted on the state level in his 2005 monograph “Destroying Insurance Markets.” In the early 1990s eight states — Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont and Washington — imposed community rating and guaranteed issue on their individual insurance markets. The result, according to Meier, was the above-described death spiral.

For example, in 1992 the New Jersey legislature adopted community rating and guaranteed issue rules for its individual insurance market with the passage of the “Individual Health Coverage Program.” The monthly premium for family coverage from Aetna rose from $769 in 1994 to $6,005 in 2005, a whopping increase of 683 percent! Other insurers saw similar increases.

Before the reforms began, there were about 28 insurers covering the New Jersey individual market. By 2007 there were only seven. According to the Census Bureau, the number of people in New Jersey’s individual market fell from about 998,000 in 1994 to 630,000 in 2005, a decline of 37 percent.

It’s pretty clear that Obamacare was designed to replicate this same effect that’s been observed in states at a national level, paving the way for single payer health care. What will Americans think when their healthcare is controlled by the kind of people who run USPS, Amtrak, the Bureau of Motor Vehicles and the IRS? 

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Democrat senator Barbara Boxer introduces carbon tax legislation

From CNS News.

Excerpt:

Today, Sen. Barbara Boxer (D-CA) introduced a bill to levy a carbon tax. But, back on Nov. 15 of last year, Pres. Obama’s press secretary promised the administration would “never” do so.

According to Reuters, the new tax law “would set a $20 tax for each ton of carbon dioxide equivalent a polluter would emit beyond a set limit, which would rise 5.6 percent annually over a 10-year period.”

Last November, however, White House Press Secretary Jay Carney told reporters that would never happen:

“We would never propose a carbon tax, and have no intention of proposing one.  The point the President was making is that our focus right now is the same as the American people’s focus, which is on the need to extend economic growth, expand job creation.  And task number one is dealing with these deadlines that pose real challenges to our economy, as he talked about yesterday.”

“A carbon tax will skyrocket [the] price of everything,” a statement from Sen. David Vitter (R-LA), a member of the Senate Environment and Public Works Committee, warned today:

“It’s not just energy prices that would skyrocket from a carbon tax, the cost of nearly everything built in America would go up.”

The cost of everything is already going up because of inflation. This carbon tax is just going to make it worse, especially for the poor.

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Middle class tax rate set to rise to nearly 50% in January 2013

From the Heritage Foundation’s Foundry blog.

Excerpt:

A middle-class taxpayer’s income is subject to a 25 percent federal income tax. Then there is the federal Social Security and Medicare payroll tax of 13.3 percent in 2012—5.65 percent of that is removed from the employee’s paycheck, and the remaining 7.65 percent is paid by the employer. (In reality, the employee pays the entire 13.3 percent, because the employer’s portion of the tax does not affect the cost of labor: The employer would pay the employee 7.65 percent more if there were no employer’s portion of the payroll tax.)

So the 25 percent federal income tax plus 13.3 Social Security and Medicare payroll taxes equals 38.3 percent going to federal taxes in 2012.

And then there are state taxes. According to the Tax Foundation, the average state’s income tax rate for the middle-class taxpayer is 4.82 percent, which brings the total to 43.12 percent in federal and state taxes. And it’s going higher, thanks to the nearly $500 billion in tax increases for 2013 that some have called Taxmageddon. In January of next year, the federal income tax rate for middle-class taxpayers is scheduled to rise from 25 percent to 28 percent, and the payroll tax is scheduled to rise from 13.3 percent to 15.3 percent. This drives the marginal tax rate based on the aforementioned three taxes to 48.12 percent. Add in state and local property, corporate, excise, and other state and local taxes, and the percentage of each additional dollar that is taxed hovers around 50 percent.

When half of each additional dollar earned is taxed away, taxpayers experience a disincentive to start businesses or expand existing ones. This leads to fewer jobs being created.

It is outrageous that any dollar earned by a middle-class taxpayer would go as much to taxes as to supporting the taxpayer’s family. The government didn’t earn the taxpayer’s paycheck and shouldn’t be entitled to it.

People like me really do think about things like this – about getting up and going to work every day to earn half of what I am worth. Of giving up half my salary so that the Georgetown University student can have free contraception paid for by me. I am one of those people who pays about 45% of my income (federal, state and local) in taxes. If I had more of my own money, I could be following my own dreams – maybe to do a Ph.D and teach, or start a business, or become a minister. But those things can’t happen, because people keep voting for more and more benefits for themselves on my back – so that they don’t have to be burdened to make the decisions that it takes to take care of themselves and their families.

That’s what being a Democrat means – it means persisting in perpetual adolescence at the expense of people like me. It means taking away my dreams so that they can have my standard of living without having to work or play by the rules. Being a Democrat means piling up trillions of dollars of debt onto people who haven’t even been born – so that feminists can have free contraceptives. That’s what a Democrat is.

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