Bruce Schneier skewers an imaginative fear-mongerer.
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Moving to Canada for Lower Taxes
In a recent op-ed, I noted that Canada’s industrial heartland of Ontario is cutting its federal-provincial corporate tax rate to 25%, or 15 percentage points lower than the average U.S. federal-state rate of 40%.
Marginal tax rates affect economic behavior. Thus I was not surprised when I read in a Mark Steyn column that retailer Tim Hortons (essentially Canada’s Starbucks) is packing up its U.S. headquarters and moving to Ontario. The company operates 3,457 retail outlets on both sides of the border.
Here is the company’s June 29 press release:
“Management and the Board believe that the proposed reorganization would be in the best interests of the Company and our stockholders by creating operational and administrative efficiencies over the long-term, enhancing the Company’s ability to expand in Canada and internationally, and improving the Company’s position to take advantage of lower Canadian tax rates.”
Note that the middle reason–“ability to expand…internationally”–probably implies tax factors as well. If the company wants to open locations in, say, Europe, it would be better that the parent company is located in Canada because of its more favorable tax treatment of corporate foreign investment than the United States.
With respect to jobs, Horton’s reorganization probably won’t affect where relatively low-wage jobs in retail branches will be located. But it might affect where higher-wage corporate headquarters jobs are located in the long run.
As a U.S.-incorporated company in recent years, Hortons has had a high effective tax rate, averaging 32 percent. The company will shave that rate by moving to Canada by a few percentage points at first, and then by increasing amounts as lower Canadian rates are phased-in.
For more on such corporate “expatriations” get your copy of Global Tax Revolution.
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Senator Webb: Time to reinvent criminal justice system
Interesting article in today’s Washington Post on Senator Webb’s efforts to revamp the American criminal justice system. Here’s an excerpt:
“I am, at bottom, a writer,” he says, invoking his default response. “I start with a theme, rather than a plot.” Webb wants to shape a plotline that, with each turn of the page, draws America closer to reinventing its criminal justice system. Questioning why the United States locks up so many of its youths, why its prisons swell with disease and atrocities while fundamental social problems persist in its streets, has earned Webb lavish praise as a politician unafraid to be smeared as soft on crime. And when a law-and-order type as rock-ribbed as Webb expresses willingness to consider legalizing or decriminalizing drugs, excitement follows.
Read the whole thing. Tomorrow Cato will be hosting a Hill Briefing about federal drug policy. For additional Cato work, go here and here.
Uwe Reinhardt on Health Care Rationing
Health care analyst Uwe Reinhardt takes on critics of the Obama administration effort to “reform” health care, pointing out that the free market is a form of rationing. He adds:
As I read it, the main thrust of the health care reforms espoused by President Obama and his allies in Congress is first of all to reduce rationing on the basis of price and ability to pay in our health system.
An important allied goal is to seek greater value for the dollar in health care, through comparative effectiveness analysis and payment reform. As I reported in an earlier post on this blog, even the Business Roundtable, once a staunch defender of the American health system, now laments that relative to citizens in other developed countries, Americans receive an estimated 23 percent less value than they should, given our high health care spending.
To suggest that the main goal of the health reform efforts is to cram rationing down the throat of hapless, nonelite Americans reflects either woeful ignorance or of utter cynicism. Take your pick.
Fair ’nuff. In a world of infinite wants but finite resources, some form of “rationing” is inevitable.
But Reinhardt leaves liberty out of the equation. The health care system is a mess, largely because of perverse government incentives through its big health care programs, Medicare and Medicaid, and its tax break for employer-provided insurance. As a result, we now have a third party payment-dominated system which simultaneously encourages excessive spending and pushes insurers and providers to decide how to “ration” (i.e., limit) care.
What people need is a medical system that allows them to make the basic rationing decisions: what kind of insurance to buy, what kind of coverage to choose, what kind of trade-offs to make between spending on medicine and spending on other goods and services.
Such decisions are complex and people with little means will need assistance. But the specific “rationing” decisions–i.e., the inevitable trade-offs–vary dramatically by individual and family preference and circumstance. Even today’s system allows many people some choice between plans and providers. The rise in consumer-directed care is a positive development which is expanding the choices available to Americans.
The worst strategy would be to increase the government’s authority. Washington already has to “ration” care through its own programs. Politicizing everyone’s care by increasing federal control would override the differences in preferences and circumstances which are so important for all of us. It doesn’t matter how bright or thoughtful or well-intentioned the legislators and regulators would be. They would end up getting it wrong for most Americans.
Is rationing inevitable? Yes. Is government rationing inevitable or desirable? Neither. The bottom line is: who should control people’s and families’ medical futures? Not Uncle Sam.
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A Defense for Iranian Reformers
Although the regime in Tehran finally succeeded in suppressing demonstrations protesting the fraudulant elections, other voices are being raised in Iran in defense of democracy. Reports the Wall Street Journal:
Some members of Iran’s powerful clerical class are stepping up their antigovernment protests over Iran’s election in defiance of the country’s supreme leader, bringing potential aid to opposition figures as the regime is increasingly labeling them foreign-sponsored traitors.
An influential group of religious scholars seen as politically neutral during the presidential election called the country’s highest election arbiter, the Guardian Council, biased, and said the June 12 election was “invalid.” Earlier, it had endorsed the official result that President Mahmoud Ahmadinejad defeated Mir Houssein Mousavi and other challengers by a wide margin.
The group, with no government role, has little practical ability to change the election outcome. But its new posture may carry moral weight with Iranians after security forces have quashed street protests and jailed hundreds of opposition supporters.
It highlights a growing unease among Iran’s scholarly ruling class about the direction of the country, and questions the theological underpinning of the Islamic Republic: that the supreme leader and the institutions under him are infallible.
“I’m not sure of the Persian equivalent of ‘crossing the Rubicon,’ but we are seeing it now. The future of the Islamic Republic, which has in recent years become a fig leaf for keeping a small clique of people in power, is now in question,” said Michael Axworthy, director of Exeter University’s Center for Persian and Iranian Studies in the U.K.
The U.S. isn’t going to be able to bring liberty to the Iranian people. Only they will be able to throw the repressive political establishment overboard. But this break within the Islamic establishment, with respected religious leaders denouncing repression, is a critical step forward.
The Iranian people deserve better. For nearly six decades they have suffered, first under the Shah, and second under the Islamic theocracy. They deserve to be free.
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Yet Another Imperial Outpost in Pakistan
Visit an American embassy almost anywhere in the world and it is likely to be a large, hulking, ugly fortress. Both size and security are dictated by the U.S. government’s seeming attempt to be dictatress of the world. Following the biblical principle that God is aware whenever a sparrow falls to earth, Washington wants to be consulted whenever a country adjusts a local education ordinance.
Very often the U.S. government keeps busy propping up unpopular regimes and intervening in internal political disputes. As a result, Americans are targeted by demonstrators and terrorists alike. Our embassies need to be large to accommodate all of the officials who are busy micro-managing the local society and fortified to protect those same officials.
The result isn’t particularly good for America’s image. And it is expensive.
Consider the taxpayer tab for new and expanded facilities in Pakistan. Reports the Christian Science Monitor:
The US is embarking on a $1 billion crash program to expand its diplomatic presence in Pakistan and neighboring Afghanistan, another sign that the Obama administration is making a costly, long-term commitment to war-torn South Asia, US officials said Wednesday.
The White House has asked Congress for – and seems likely to receive – $736 million to build a new US embassy in Islamabad, along with permanent housing for US government civilians and new office space in the Pakistani capital.The scale of the projects rivals the giant US Embassy in Baghdad, which was completed last year after construction delays at a cost of $740 million.
Senior State Department officials said the expanded diplomatic presence is needed to replace overcrowded, dilapidated and unsafe facilities and to support a “surge” of civilian officials into Afghanistan and Pakistan ordered by President Barack Obama and Secretary of State Hillary Rodham Clinton.
Other major projects are planned for Kabul, Afghanistan; and for the Pakistani cities of Lahore and Peshawar. In Peshawar, the US government is negotiating the purchase of a five-star hotel that would house a new US consulate.
U.S. policy towards Pakistan has been roughly 60 years of incompetence, mistakes, bad judgment, ignorance, inadequate moral conscience, wasted aid, counterproductive actions, and utter failure. But Washington continues to try to fix Pakistan. It seems like time for U.S. officials to learn from their experience.
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Biden’s Situational Sovereignty
Vice President Biden was on “This Week” with George Stephanopoulos yesterday talking about Israel bombing Iran:
STEPHANOPOULOS: But just to be clear here, if the Israelis decide Iran is an existential threat, they have to take out the nuclear program, militarily the United States will not stand in the way?
BIDEN: Look, we cannot dictate to another sovereign nation what they can and cannot do when they make a determination, if they make a determination that they’re existentially threatened and their survival is threatened by another country.
The vice president made this point three times.
I suppose it would have been tangential to point out that Biden’s view of sovereignty has not always been so robust. Or that he is effectively renouncing the international laws of war, which dictate what self-defense allows. But Stephanopoulos might have at least acknowledged the irony of this particular exchange. Iran, the country being bombed in his question, is also a sovereign nation. Biden’s needlessly universal principle – U.S. deference in the face of a sovereign nation’s determination that it is in danger – would protect its right to build nuclear weapons.
Biden is being overly broad to obscure the fact that he’s granting Israel special rights, of course. But it’s still worth pointing out that it’s a bad principle, if “not dictating” means never saying “bad idea.” When considering war, the opinions of other nations are generally worth knowing. Some of our European friends argued in 2002 that invading Iraq would not enhance our security, after all. Useful advice! Offering our opinions is perfectly consistent with a policy of military restraint.
The problem here goes beyond the principle though. We give Israel all sorts of aid. The F‑16s and F‑15s carrying out the bulk of the attack would be U.S.-made. They might pass through Iraqi airspace that the U.S. effectively controls. Historical U.S. support for Israel means that people around the world reasonably hold Americans responsible for what Israel does to Iran. Sooner or later, probably sooner, an Israeli attack on Iran would be likely to produce blowback, diplomatic or otherwise, that would damage us. Given that, our position should be that attacks on Iran are unacceptable, and would cost Israel our support.
For analysis on Israel’s ability to disable Iran’s nuclear programs, read Whitney Raas and Austin’s Long’s work.