tax policy

Tax Breaks For Gold Medals

Samuel HooperLeave a comment

Though neither of them have any intention of doing anything about it, in the run-up to the November elections both main political parties in America are at least making noises about the need to reform and simplify the massively complicated tax code in the United States. This is urgently needed – a thick, impenetrable layer of deductions and tax credits doled out by previous Congresses to the favoured special interests or wavering voting blocs of the day have led to an almost incomprehensible system, one which means higher marginal rates overall for everyone and one which benefits almost no one apart from the well-connected and their tax accountants.

So when “rising star” Republican Senator from Florida, Marco Rubio, proposed a tax break for US Olympic medal winners on the cash bonuses that they receive from the US Olympic Committee, you would think that the “first do no harm” rule might apply, and President Obama and others would shoot down the idea. Right?

No. President Obama actually supports this opportunistic piece of pandering, according to Matthew Yglesias, writing at Slate:

If they gave out awards for dumb new policy ideas, President Obama and Republican rising star Sen. Marco Rubio would both be medaling this week. Their achievements? Rubio’s completely pointless bill offering a tax break to recipients of Olympic medals and—even worse—the president’s decision to hop on the bandwagon rather than show the country he has a firmer grasp on the issues than his adversaries do. In the scheme of things, of course, winning Olympic prizes is not an important sector of economic activity, and the medals’ tax status doesn’t really matter. But the overall shape of the tax code does matter a great deal, and the speed with which a bipartisan consensus emerged around making it worse bodes quite poorly for efforts to make it better.

Yglesias goes on to provide some essential background that some early supporters of this harebrained scheme appear to have missed:

In this particular case, the issue is that the U.S. Olympic Committee—the nonprofit group that organizes Team USA for the games—rewards athletes with cash bounties for medals won. Gold medalists receive $25,000, silver medalists get $15,000, and bronze medalists receive $10,000. That’s income, so come spring of 2013 when medalists are filling out their tax forms, it’ll be reported and taxed like any other income. Their after-tax income will be higher if they do win a medal than if they don’t. There’s no “extra tax bill” waiting for anyone. There’s simply extra income, and the income would be taxed. (Some people have confused this with the idea that the medals themselves come with a hefty tax bill, but the real tax issue is about the cash prizes.)

Precisely. This is not about suddenly being landed with an unexpected tax bill just because you worked hard and won an Olympic medal. This is about the IRS treating the prize money that the winning athletes receive as an incentive from the US Olympic Committee as income, which it is, and taxing it at the appropriate marginal rate.

Of course, the number of London 2012 Olympic medal winners as a percentage of the US population is miniscule, so the policy, if enacted, would do no real harm to tax returns or anything else. But the blatant favouritism of rewarding Olympic athletes alone with this tax break, while making other “worthy” types pay normal rates of tax, would set yet another ridiculous and rather alarming precedent:

In terms of fairness, it seems like a strange slight to winners of other kinds of prizes. Are Olympic medalists worthier than winners of the Nobel or Pulitzer prizes? And of course exempting all prize income from income tax could merely encourage all kinds of people to restructure their income as prizes. The J.P. Morgan Memorial Prize for Achievement in Investment Banking, anyone?

And then the money quote:

The underlying issue is that taxes aren’t supposed to be a cosmic judgment on the underlying worthiness of people’s activities. The earnings of a great artist and a reality TV show producer are taxed the same. That can seem a bit perverse at times, but having Congress try to assess which professions are important and which are bad would be much worse.

Republicans always talk about how the government should stop trying to “pick winners”, accusing President Obama of doing this with his subsidies for various forms of green energy (and apparently turning a blind eye toward their own efforts to help their own favoured industries). Well, I would submit to Senator Rubio and President Obama that the successful US Olympic athletes have already picked themselves as winners through their achievements in London. They are to be congratulated and afforded all the respect due to a champion, but their accomplishments do not entitle them to a tax break, particularly at a time when the tax code is crying out for simplification.

How Not To Do Tax Policy

Samuel HooperLeave a comment

Priti Patel, writing in The Spectator’s Coffee House blog, warns that:

… we should all fear Ed Miliband’s praise for a new socialist French President who plans to raise the top rate of tax to 75 per cent. It is a chilling reminder of Miliband’s own commitment to a permanent 50 per cent income tax rate in this country.

But as he visited the Elysée Palace this week, one of France’s leading newspapers warned that the 75 per cent tax rate threat is already leading to French businesses evacuating senior executives to London. Since François Hollande’s victory on 6 May, this exodus of enterprise has caused the waiting list of the prestigious Charles de Gaulle school in our capital to rocket by over 700 places. We haven’t even rolled out the red carpet yet.

Very true. Let this be a warning to all those who think either that there is a binary choice between “austerity” and “growth”, or that Britain’s (or France’s) finances can be rectified, and the current excessive levels of government spending maintained, simply by turning the screws on the rich a little more.

Unfortunately, Patel’s article also misses out the most crucial actions required to get the British economy moving again – introducing much needed supply side reforms. Note:

Yesterday’s economic news reminds us of the need for the Government to continue to focus relentlessly on getting our economy moving – dealing with the debt crisis, boosting bank lending to the real economy, and ensuring sustainable long-term prosperity through radical economic reform.

Nothing about reducing regulation, either independently or through the European Union. Nothing about tackling the restive trades union that are always a day or so away from striking for spurious reasons.

By all means warn about Labour’s policies on tax, but given the fact that Osborne messed up the Budget and left us with a 45% top rate of tax for the foreseeable future, let’s focus on where the coalition government has the political strength to do the most good to restore economic growth.

SEMI-PARTISAN SUMMARY

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CULTURE

Amanda Marcotte, writing at Slate magazine, makes a compelling case for movie scriptwriters and directors to show more condom use in their movies. She makes a fair point: “In the world of movies and TV, people seem to be having sex all the time, but they almost never talk about or are shown using contraception. Since so much of movie sex serves the plot, you get encounters that are much more spontaneous than they would be in real life, without any pause in the action to wrap it up. Young viewers could easily get the sense that the norm is to hop right in bed with someone without ever worrying about unintended pregnancy.” And it’s true – if realism is your aim (and admittedly this is not always the case), pretending that people hop into bed with each other without going through that awkward “fumbling in the bedside cabinet drawer” moment is a misrepresentation, and one that can be easily (and, if done well, humorously) corrected.

Jim Henson Studios, creator of The Muppets, is boycotting Chick-fil-A over that company’s president’s condemnation of gay marriage. In a stern rebuke, their statement reads: “The Jim Henson Company has celebrated and embraced diversity and inclusiveness for over fifty years and we have notified Chick-Fil-A that we do not wish to partner with them on any future endeavors”.

Proco Moreno, Alderman of Chicago’s 1st Ward, joined in the anti Chick-fil-A backlash, stating that he would block the restaurant chain’s attempts to open their second Chicago outlet in his district because of the aforementioned statement issued by their CEO. His statement is somewhat over-the top – “If you are discriminating against a segment of the community, I don’t want you in the 1st Ward” – it is hard to see how any discrimination is taking place, as the restaurant does not check the sexual orientation of its customers upon entry, or have any policies in place that discriminate against one or another. But the fact remains that needlessly coming out in favour of a regressive social policy position that has no direct impact on your business or bottom line, can cost you money.

Getting in on the act, The Onion reports on Chick-fil-A’s new homophobic sandwich. Reports The Onion: “In a press conference to reporters, company representatives said the homophobic new sandwich will include the national fast food chain’s trademark fried chicken filet wrapped in a piece of specially-smoked No Homo ham that would be topped with a slice of Swiss cheese and lathered in a creamy new Thousand Island-based Fag Punching sauce”.

 

BRITISH POLITICS

The UK economy shrank by another 0.7% according to the latest figures released today. Iain Martin, writing in The Telegraph, thinks that George Osborne has six months to turn things around. I would guess that this estimate sounds about right, but I am not optimistic that Osborne will do anything differently, given his obstinate refusal to implement the needed supply-side reforms, and his obsession with trying to score cheap political points from Ed Balls, a diversion which should be beneath him.

The Guardian’s foremost education journalist twists herself in knots trying to explain why she is against private schools, and yet is sending her daughter to a private school. She takes a whole article, and many unnecessary words to explain what I can say in just three – she’s a hypocrite. She says: “I remember reading about Diane Abbott’s decision to send her son to the £10,000-a-year City of London school. She said she was a mother first and a politician second, a point that resonated strongly with me.” Precisely. She’s happy to inflict her left-wing social engineering on other people to make them conform to her ideal worldview (uniform standards, uniform people, uniform outcomes), but as soon as her own interests come in to play, she takes the conservative position.

 

AMERICAN POLITICS

Oh noes. The house of cards built by Grover Norquist has started to come crashing down as more and more elected officials repudiate his “tax pledge”. Whether you think the current tax burden in America is sustainable or not, I think most reasonable people can agree that Norquist’s pledge is overly restrictive on lawmakers, preventing them from closing unwarranted and discriminatory tax loopholes on the grounds that doing so would constitute a “tax increase”. Norquist, and his advocacy group Americans for Tax Reform, are one of several significant hurdles standing in the way of a fundamental simplification of the existing byzantine tax code. We should all cheer its demise, and hope that similar obstacles from the American left fall by the wayside too, in the name of meaningful, lasting reform.

It is hard to disagree with this piece from Marbury, discussing the old-fashioned political art of persuasion, and the relative aptitudes of Obama and Clinton at using it. Through the lense of the Northern Irish “Good Friday” peace accord, Marbury looks at the way that President Clinton was able to flatter, cajole and reassure the key parties so that they reached a point where a deal could be signed, and how this skill is currently lacking in the Obama administration. Money quote: “Obama likes the big set-piece speech. But every policy he has backed, from the stimulus to healthcare, has declined in popularity the more speeches he made about it. His speeches explain things very well, very precisely. But they don’t change minds. This, it turns out, was the big hole in Obama’s campaign rhetoric of unification, of bringing red and blue together. He spoke about it eloquently, but he was never going to be the president who put it into action. Obama is a preacher, not a persuader. He’s terrific if you already agree with him, but doesn’t have much impact on those who don’t.”

Jacob Weisberg, writing in Slate magazine, effectively deconstructs the Romney campaign’s attempts to smear President Obama with the “Chicago machine politician” label. Says Weisberg: “Of course, Romney isn’t interested in this kind of nuance. ‘Chicago-style politics’ is mainly just a way for him to call Obama corrupt without coming out and saying so”.

SEMI-PARTISAN SUMMARY

Samuel HooperLeave a comment

CULTURE

In an interesting piece from Slate Magazine, Hanna Rosin delves into the deeper meaning behind the fact that the men strived to protect the women as the horror of the Aurora Colorado shooting unfolded. In an interesting and poignant article, noting the various ways that traditional “manhood” is being eroded by economic and social forces, she concludes: “Throwing your body in front of your girlfriend when people all around you are getting shot is an instinct that’s basic, and deeper. It’s the same reason these Batman and Spider-Man franchises endure: Because whatever else is fading away, women still seem to want their superhero, and men still seem to want to be him.”

Through the prism of astronaut Buzz Aldrin’s memoirs and a recent Soyuz rocket launch, Atlantic magazine takes an interesting look at the intertwining of human spaceflight endeavours (perhaps the pinnacle of our scientific accomplishment) with religion and the sacred world. As well as the obvious example of Aldrin taking communion while on the surface of the moon, the author also considers other examples: “here is a priest, outfitted in the finery of a centuries-old church, shaking holy water over the engines, invoking God’s protection for a journey to near-earth orbit. That these two spheres of human creation co-exist is remarkable. That they interact, space agencies courting the sanction of Russian Orthodox Christianity, is strange”. A long article, but well worth a read.

Mike Huckabee thinks that Chick-fil-A’s decision to come out in opposition to gay marriage equality is just super, and is proposing that Americans make this Wednesday “Chick-fil-A Appreciation Day” in recognition of their “principled” (some might say irrelevant, because a corporation is harmed by gay marriage even less than a heterosexual human being) stance.

NPR reports in depth on the Vatican’s decision to send a crack team of Bishops to oversee the Leadership Conference of Women Religious – an organisation representing the majority of nuns in the United States – due to concerns that they are promoting “radical feminist themes incompatible with the Catholic faith”. Sister Pat Farrell, whose interview forms the basis of this article, sees things rather differently, and while she says that the LCWR will do its utmost to engage with the Vatican in good faith, there may be some elements of the mandate with which they cannot comply. Money quote from Sister Pat: “The question is, ‘Can you be Catholic and have a questioning mind?’ That’s what we’re asking … I think one of our deepest hopes is that in the way we manage the balancing beam in the position we’re in, if we can make any headways in helping to create a safe and respectful environment where church leaders along with rank-and-file members can raise questions openly and search for truth freely, with very complex and swiftly changing issues in our day, that would be our hope. But the climate is not there. And this mandate coming from the Congregation of the Doctrine of the Faith putting us in a position of being under the control of certain bishops, that is not a dialogue. If anything, it appears to be shutting down dialogue.”

A British couple holidaying in British Columbia caught a big fish. A really, really big fish. A really, really, really really big fish. The creature weighs nearly half a metric tonne, is 4 metres long and is estimated to be at least 100 years old. Makes for some good bragging rights back at the local pub when they go home…

 

BRITISH POLITICS

Minister of the Bleeding Obvious states the bleeding obvious in this story from The Telegraph. Treasury minister David Gauke informs us that it is “morally wrong” to pay tradesmen (plumbers, builders, electricians etc.) with cash in hand, as this makes it easier for them to evade VAT or income tax. Aside from the fact that every cabinet member from Cameron on downwards needs to quit the moral preaching (why can’t you just say “illegal” or “wrong”?), his basic point is right. Until he goes on to say: “Getting a discount with your plumber by paying cash in hand is something that is a big cost to the Revenue and means others have to pay more in tax”. Seriously, Mr. Gauke? You expect us to believe that the black economy makes our taxes higher? You would tax us just as much as you already do even if you could get your hands on this missing slice of revenue, you would just find new ways to fritter it away on pointless, undeserving goals. So let’s not pretend that the cash-in-hand job that your local plumber does on the sly is the one thing standing between us and an actual competitive tax code. You must think we’re all really dumb.

The Commons Culture Committee has reported that they believe the UK’s current gambling laws are outdated and have not kept pace sufficiently with technological innovations such as online gaming. Overall, this appears to be a liberalisation of the market, which is good news. However, the proposed bill has been somewhat watered down in an attempt to assuage the concerns of detractors who worry about potential negative externalities.

It’s starting to get real. The BBC reports that the Crown Prosecution Service has decided to charge eight individuals with a total of 19 charges relating to the “phone hacking scandal”. Included in those facing charges are Rebekah Brooks and Andy Coulson. So now the Long-Winded Leveson will not be the only thing keeping this dull story in the news. Hooray.

 

AMERICAN POLITICS

Inspired by the movie “Legally Blonde”, 22-year-old US State Senate candidate Mindy Meyer has blinged up her website with a lot of bright pink, bad MIDI sound files and other bells and whistles. If you ever wanted to know what you would get if you crossed a political website with MySpace at the peak of its popularity, here is your answer. She would clearly make a great state senator, because according to her homepage, she is against corruption. Says Meyer: “This is how politics has to change. There is always corruption, but I have the intention to follow my values and ensure that none of what happens in my district is corrupt.” Well, that’s sorted, then.

Commentary magazine takes a hatchet to President Obama’s reputation for being a brilliant orator. Alana Goodman calls Obama out for his recent speech in Roanoke, Virginia, not because of his “you didn’t make that” line but for dull, flat words and delivery when he goes off the autocue. She takes the line where Obama says “There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires” as a particularly egregious example of pedestrian speech-giving. She concludes: “For the past four years, liberals have tried to sell us on the idea that Obama is one of the greatest speakers of all time. Now they’re complaining that conservatives are taking his words literally and not cutting him enough slack. Which one is it?”.

In an excellent, frank op-ed in the New York Times, David Blankenhorn charts his evolution from opposing to supporting the idea of gay marriage. Though disappointed that society no longer thinks of marriage primarily in terms of providing the optimal environment in which to raise children, but instead as an official sanctioning of private relationships, he concedes that given this is how marriage is now viewed by most, the best thing to do is to try to strengthen the institution under its new definition, by welcoming committed gay and lesbian couples into the fold. He eventually comes to the conclusion: “So my intention is to try something new. Instead of fighting gay marriage, I’d like to help build new coalitions bringing together gays who want to strengthen marriage with straight people who want to do the same”.

A good long-form article from The Daily Beast explaining some of the underlying factors and influences behind the GOP’s sinister anti-Muslim hysteria. I thought I had heard pretty much everything when it comes to crazy quotes uttered by Republican lawmakers and “intellectuals” on this topic, but this article introduced me to a few more sad examples.

Let’s Fly

Samuel Hooper2 Comments

Apparently the Conservative-led government can no longer be relied upon to do anything that doesn’t make me want to bang my head repeatedly against a brick wall in open-mouthed astonishment at their zesty blend of rank incompetence and lack of principle, so it was particularly refreshing today to read this piece in The Telegraph, reporting that the Taxpayers’ Alliance is renewing their call for an abolishment of air passenger duty (the ludicrously huge tax on passenger air travel in the UK).

The Telegraph reports:

The pressure group – which was formed in 2004 and supports lower taxes for UK residents – has given its backing to the Fair Tax on Flying campaign, which is urging the Government to reduce or abolish APD.

“Britain’s punitive taxes on flights, now the highest in the world, are an incredible burden on families taking a well-earned break,” said Emma Boon, campaign director at the Taxpayers’ Alliance. “Jobs are also at stake as tourists and business travellers choose a destination to visit or invest where they won’t get ripped off. APD should really be abolished, but the very least politicians can do is cut this tax to a fairer level.”

Absolutely. Air Passenger Duty is just another typically, depressingly British example of the government picking an arbitrary thing to fixate upon, and gradually cranking up the tax in each successive Budget to help fund whatever addle-headed, moronic scheme happens to be flavour of the month at that particular time. It penalises business travellers, leisure travellers, people trying to visit far-flung family, people in long distance relationships and  anyone else whose only crime is their need to transit through one of Britain’s dilapidated airports.

The article goes on to explain:

APD is paid by all travellers departing from a UK airport. Following the most recent rise in the tax, an eight per cent hike made in April, a family of four travelling to Europe must pay £52 in APD, while those flying farther afield are hit even harder. The cost of APD for a family of four flying to the United States or Egypt, for example, is £260; for those travelling to the Caribbean or South Africa, it is £324; and a family visiting Argentina or Australia must pay £368.

Those figures are doubled for those flying in premium-economy, business- or first-class cabins.

That level of taxation is simply not funny, in fact it is intolerably ridiculous, and ought not to be allowed to remain under a Conservative government. Staggeringly, in 2005 this tax was only £5 per person for a European flight and £20 for a longer distance flight. A 360% rise in any tax over just seven years is quite ridiculous, and this one is proving to be a real dampener on the economy at a time when we need to be keeping business and family costs down the most. It’s typical of this rudderless, unprincipled government that yet further rises are also planned this year.

I strongly encourage everyone to sign the petition to scrap Air Passenger Duty at this website.