Category: Current Events

U. S. Tax Reform – Wrong Policies, Wrong Reasons, Wrong Time

The tax reform bills which have recently been passed by the U.S. Senate and House of Representatives potentially introduced significant changes to U.S. tax law.  This has been strongly pushed by Donald Trump. Here is a summary of the changes:

  • Reduce corporate tax rate from 35% to 20%
  • The highest personal tax rate has been reduced
  • Inheritance taxes threshold has been raised from $11.2 million $22.4 million
  • Some tax reductions which affect the middle class, but which expire in 2026

There is no doubt that the U.S. tax system needs reform. Although the corporate tax rate is 35%, in practice, the average tax rate actually paid by U.S. corporations is only 18.7% (by one estimate). The difference is due to all the deductions, exemptions and loopholes embedded in the tax code. Many of these are industry specific and are the result of years of successful lobbying by particular industries. As a result, the tax code introduces distortions in the economy which are not in the best interests of the country.

The tax reform has been sold as a needed stimulus for the economy, which will increase investment, hence increase productivity and lead to increased job creation

The reality is quite different:

  • No need for a stimulus at this time
  • Tax cuts for corporations will not flow into productive investment
  • Changes will raise the deficit by $1.3 trillion over 10 years
  • Tax cuts for individuals will not spur consumption or investment in the U.S.
  • Inheritance tax threshold will have a negligible effect

I shall now expand on these in greater detail. Continue reading “U. S. Tax Reform – Wrong Policies, Wrong Reasons, Wrong Time”

Towards a Rational Approach to Climate Change

To decide how to deal with climate change we have to first look at the affects it will have.  The effects which have been discussed fall into three groups.

These are:

  • Effect on wildlife and the environment
  • More frequent extreme weather events
  • Rising sea levels

My conclusion is that the only aspect that poses a real threat to humanity is a rising sea level.

In this blog I shall look at all three aspects and explain the reasoning behind the conclusion. Continue reading “Towards a Rational Approach to Climate Change”

Can Raising the Minimum Wage Boost the Economy?

There has been much discussion about raising the minimum wage, with proponents claiming it will improve the lives of the working poor and reduce “inequality” and opponents claiming it will reduce employment, making the poor worse off.

Classical economic theory claims that raising the minimum wage (or instituting it where there is none) will lower employment.

Closer examination suggests that a higher minimum wage will lead to increased inflation, some job losses, increased economic growth and reduced inequality. Continue reading “Can Raising the Minimum Wage Boost the Economy?”

America Does Not Need Smaller Government!

A familiar rallying cry of the Right is a call for smaller government. This is seen as self-evident and a “good thing” in and of itself.

However, if we look at the most successful advanced economies in the world, we see that most have more government spending as a fraction of GDP than the US (data from “Pocket World in Figures, 2015 Edition, The Economist). Continue reading “America Does Not Need Smaller Government!”

Can Increasing Taxes on the 1-Percent Cover the Deficit?

In an article in the Globe and Mail, provocatively titled “Justin Trudeau lives in a fact-free world on taxes” (Dec 16, 2016) Mark Milke, says that Trudeau “claims taxing one cohort less and another more is a recipe for economic growth. Skip how all the tax talk ignores the spending side of the budget where Mr. Trudeau and prudence are mortal enemies.” A little reflection on the article shows that, in fact, it is Milke whose analysis is wrong. Continue reading “Can Increasing Taxes on the 1-Percent Cover the Deficit?”

Fair or Effective Taxes?

In a recent article in the Financial Post, Ted Rechtshaffen, (“‘Tax the rich’ may be a rallying cry, but it’s hardly a fair system”, May 15) looked at three different tax schemes:

  • Progressive Tax Rates
  • Flat Percentage Tax
  • Flat Dollar Amount per Adult

I will take these in reverse order.

Continue reading “Fair or Effective Taxes?”

Trump v Clinton 2: Trump the Frump

Plenty has been written about the second US presidential debate. I want to touch on a couple of points that have not been raised:

  • The candidates appearance/body language
  • 33000 deleted emails – is this a scandal?
  • “locker room banter” – explanation for the ladies and what are acceptable limits

Continue reading “Trump v Clinton 2: Trump the Frump”

Where Will Putin Strike Next?

Under Vladimir Putin, Russia has become more assertive, trying to regain its status as a superpower.

Every time Russia has made a strike, it seems that the West was caught completely by surprise. Clearly, the Western intelligence services (CIA, CSIS, MI6, Surete) have failed spectacularly.

In view of the failure of the Western intelligence services, I shall try to help them by identifying a couple of probable targets for Putin’s next strike.

Continue reading “Where Will Putin Strike Next?”

Taxing the Multinationals

 

Recently, the EU has ruled that Apple owes Ireland €13 billion in back taxes. The CEO of Apple reacted with the sort of indignation only an American can achieve when dealing with non-Americans. Columnists tended to side with Apple on the basis of their ideological biases.

Yet the central issue of taxing corporations is that globalisation and the rise of mega-corporations has not been mirrored by a rise in inter-governmental co-operation. Only such co-operation can deal with the problems.

Continue reading “Taxing the Multinationals”