Proposal re India

Memo to Finance Minister Manmohan Singh & his team from an adviser to the late Rajiv Gandhi

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Good tax reform ideas

originated by Asymptosis(

Tax All Corporate Profits Like S-Corps, and Eradicate Taxes on Corporations, Dividends, and Capital Gains. Credit for the idea goes to Milton Friedman (Capitalism and Freedom, page 174 in my edition). Shareholders pay taxes on the year’s corporate profits (at normal earned-income rates or higher), whether or not they’re distributed. No more double taxation, but no more preferencing over earned and interest income, or indefinite/eternal deferral.

Eradicate Tax Deductions for Interest Payments — Personal and Corporate. Mortgage- and corporate-interest deductions are terribly distortionary; they encourage borrowing — debt financing — over equity- and self-financing. And they’re regressive.

Eradicate Business Deductions for Employee Health Care/Insurance. Destroy the distortionary historical artifact of employer-based health care coverage. Stop discouraging self-employment and personal choice of health-insurance options. (Having been self-employed for decades, I take this very personally. It’s cost me many tens of thousands of dollars.)

Scrap the Cap on Social Security Taxes. Include all earned income. This only makes a terribly regressive tax somewhat less regressive, and it expands the tax slice from that still-regressive tax — a tax that discourages working for a living because it only taxes earned income. But it makes Social Security cash-flow solvent beyond the foreseeable horizon (revenues support outlays). Other propositions here should be scaled to compensate for its regressiveness and work disincentive.

Change All Local Property Taxes to Land-Value-Only Taxes. Land value taxes are the least distortionary taxes around. This would remove the disincentive to improve land. Since it’s non-distortionary, it would also be good to increase its total share of the tax take.

Greatly Expand and Simplify the Earned Income Tax Credit, and Deliver it on Weekly Paychecks. Beyond its manifest benefits to tens of millions, and turbocharger effect on the economy, it could allow for some reduction or eradication of other (economically inefficient) means-tested payments.

Of course, implementing any single one of these reforms would be a challenge, given vested interests in the current system.

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Densification in Portland

A good analysis by the local paper from this summer:

“2010 Census shows that Oregon’s densest tract shifted from the area around Northwest 21st Avenue to downtown, specifically the area centered on Portland State University.  What do all these numbers mean? Portland’s 1972 Downtown Plan created in response to suburban flight continues to exert influence decades later.

“As the city has grown, so has the share of people who want to be close to downtown,” said Charles Rynerson, a demographer at PSU’s Population Research Center. “So there’s a lot less resistance to high density. You can’t build a 20-story tower everywhere in Portland. But where you can build one, and where people want to build one, it can be done.”

There’s still quite a bit of resistance to densification throughout Portland, which is strange because popular support for urban growth boundaries is contradicted by the resistance to densification.  The president of Metro, the area’s regional government stated that there is still a great deal of resistance to infill development in the city of Portland.



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On China

China has protective tariffs, manipulates its currency, pirates software and other proprietary technologies, keeps costs low by polluting their own air and water, selling sub-standard, poisonous products, and has a labor system somewhere in the general neighborhood of feudalism, and disregards international law routinely.

For example:  Stupidity is always punished

Historians will have a hard time explaining western attitudes to China during the early 21st century.

Industrial espionage is rampant. infringements of intellectual property rights are so widespread that they barely merit a comment. When sometime actually tries to seek redress in a Chinese court, they are guaranteed to fail, as Sir James Dyson recently discovered.

From today’s Telegraph…..

Sir James Dyson says he has spent £3.5m fighting Chinese companies who stole his designs last year and even hired private detectives to spy on illegal Asian workshops where his bladeless fans are taken apart and copied.

The British inventor accused Chinese authorities of turning a blind eye to native companies which violate intellectual property rights by imitating successful designs. Sir James said he had spent £3.5m pursuing often futile legal cases in Chinese court.

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Post-secession Congress extremely influential

according to James McPherson’s Battle Cry of Freedom, and led to the following actions:

… Republicans easily overcame feeble Democratic and border-state opposition to pass a homestead act. …

a bill to grant public lands to the states for the promotion of higher education in “agriculture and the mechanic arts.” … The success of the land-grant institutions was attested by the later development of first-class institutions in many states and world-famous universities at Ithaca, Urbana, Madison, Minneapolis, and Berkeley.

-… transcontinental railroadFreed of the southern incubus, Yankee legislators highballed forward 

this Congress drafted “the blueprint for modern America.”

All actions apparently resisted by the plantation aristocratic South.

The author of Retirement Blues suggests(

In some of my more cynical moments, I think that, when the south seceded from the Union, President Lincoln should have just said, “The hell with them.  Let ’em go.  Who needs them, anyway?

This would have been (and I am deadly serious) very good for the rest of us, but really, really bad for the south.  (If you think I need to elaborate, you need to give this some serious thought.  Hints: beneficiaries of federal programs (like TVA and rural electrification), net gains from federal taxation, locations of military bases, whatever social progress Selma, Alabama has reluctantly been dragged into.)

There is merit to the point of view that the South has benefited enormously from being returned to the Union at gunpoint.

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US losses in Afghanistan

Between the start of action in Afghanistan and the end of 2008, 295 US soldiers were killed in action.  In the three years of Obama’s presidency, 1,554 US soldiers have been killed in action in Afghanistan(84% of the total).

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House prices still dropping

The source for this chart is LPS:

Foreclosures slowed down since 2009 due to the well-known problems with documentation that have surfaced.

Calculated Risk commented today:

It was pretty obvious that investor buying was pushing up prices in 2004 and 2005. I wrote a post in April 2005 (over six years ago!) on that subject: Housing: Speculation is the Key (Note: in that 2005 post I treated speculation as storage and showed how speculation pushes up prices during the bubble – and pushes down prices after the bubble bursts).

One thing is clear: investor buying did contribute to the bubble, but it wasn’t the cause. But – as I noted in 2005:

“Speculation tends to chase appreciating assets, and then speculation begets more speculation, until finally, for some reason that will become obvious to all in hindsight, the “bubble” bursts.”

It was no surprise that investors piled in after prices really took off. But the real causes of the bubble were rapid changes in the mortgage lending industry combined with a lack of regulatory oversight. The speculators just added to the fire.

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