Carbon Trading - bureaucratic nightmare and fraudster's paradise

Whoever thought up the crazy idea of carbon trading is a card-carrying member of the bureaucratic, undemocratic and technocratic 'elite' that rules over us. Some 'academics' are always happy to support new schemes (think Tobin Tax) and cosy up to their political paymasters. A naive press also toes the official line in most instances.
But we have a long-established 'Carbon Tax' - it is levied in nearly all countries on the use of petrol and could easily extended to any oil and coal use. And it is not obvious why air transport, shipping and agriculture should be treated leniently. Or the heavy industry which gets also treated with kid's gloves in many countries.
Carbon tax an unwanted gift?

Tax burden on the wealthy has trebled since the 1970s

Meaningless statistic, the wealthy also increased their share of wealth, income, so only logical their share 'burden' goes up, how about Philip Green's Monaco shifting of wealth?
Tax burden on the wealthy has trebled since the 1970s, Telegraph analysis shows

Don't blame Capitalism for Underinvestment

Massive increase in state spending over the past 40+ years - as measured in relation to GDP - has resulted in less disposable income, less saving and as a consequence less investment in most 'Western' economies. The greater part of state spending is earmarked for miscellaneous free goodies, so-called 'social' services that are nothing else than consumption.

IPO excess contributes to Inequality

Talk of 'Shareholder Capitalism' is muted these days. The great unwashed public - thanks to the services for their fiduciaries in the asset management and private banking industry - is only allowed in at extortionate levels of company valuations when the insiders are ready to cash in their chips. No wonder Inequality is rising inexorably - helped by the mantra that those selling a business should be treated with kid's gloves by the tax authorities. Not content with paying a lower tax on share sales than the average employee pays on the earnings he derives from actually providing hard work there is often a tax shelter in the form of (sham) 'trusts' or offshore companies that reduce the tax burden even further - if there is any tax paid at all. Given the secrecy that shrouds individual tax returns we will never know the true picture.
The recent IPO of CMC Markets here in London illustrates the sorry state of affairs. The Public is allowed in at a generous multiple of the capital that is actually invested in the business. So the return that the savers can expect to get from their (risky) investment is burdened by a big disadvantage right at the start. But the greater Fool theory is alive and kicking, every fund manager thinks he can outwit his competitors and offload shares before they take a turn for the worse. Due to the lack of a minimum holding period before capital gains tax is due (zero for institutional fiduciaries in any case) the shares can be flipped the second they start trading in the aftermarket. Talk of sustainable capitalism.
So it is no surprise that the main beneficiary of these non-sensical arrangements goes out and buys himself a modest mansion for all of £ 42 million that he has cashed in from the public. So watch out for the next purchase, a yacht or country pad maybe?

Self-driving Cars - unintended consequences

The Industry, led by oligopolistic firms, it trying to push the idea of self-driving 'autonomous' cars (Robot-Car sounds off putting I guess) on an unsuspecting public that - as usual - has no say in this. But despite all the (paid for with backhanders?) enthusiasm in a gullible press three questions need to be answered: (1) Is it not the case that a lot of people LOVE to drive their cars? (2) Apart from the question of battery life, how long the re-loading takes and whether or not there are enough loading stations - where is all the electricity coming from? England already is threatened with an Electricity crisis and the additional demand (if ALL cars and trucks switch to e-cars) would be enormous. (3) Governments in many countries would loose a major source of revenue, how is it going to be replaced?
So dear Google etal, what are your answers?

Childcare Subsidy no panacea for Job Creation

We may not have the intellectual firepower of Christopher Pissarides (being neither a 'enobled', a Nobel Laureate or professor on the LSE) but that may be an advantage. He argues that paying subsidies for childcare would create jobs - one for the mother (usually) who can now enter the job market and one for the childcare worker. What this simplistic argument forgets is that another solution to the employment problem (if you accept there is one) is that the childcare worker could just take another job while the mother stays at home. Net result is the same, unless you assume that more than one child would be looked after by the childcare 'industry'. It is up to you to decide which child is better looked after. That - and the question who pays the subsidies, and at what level - is another question.

Times Rich List, Piketty and Inequality

At a time when there is heightened awareness about inequality it is astounding that serious (?) media commentators suggest that the (Times) Rich List 'should be taught as a set text to inspire the next generation of risk takers'.
Quite how this inspiration should work in detail the author leaves to our imagination. It certainly is not possible to become the next Duke of Westminster, one of the rare true British members of the top ten entrants in this year's list.
And how one should emulate the various oligarchs and tax exiles - some of feature only because they chose the right parents - could also be of great interest to those lucky or unlucky enough to be given the benefit of these lectures.
It would also be interesting during which class these lectures would be held. Religion, Philosophy, Politics or Economics?
The really sad thing with this sort of fawning at the superrich 0.01% is the fact that there is very little reporting about the reasons such extreme wealth can be accumulated and what should be done to prevent it. Not a word about fairer tax laws, more effective inheritance taxes, better regulation, less generous copyright protection or a wider spread of ownership of productive assets.

Higher taxes no solution for Income Inequality

Robert Shiller is too much focused on the simple expedient of higher taxes for the rich (however defined) as a tool to stop rising inequality. It may well paper over the underlying malaise but does little to change the reasons behind the increase in differences between income (and even more importantly, wealth) disparities in the USA and many other countries. Only a thorough review of policies concerning the way the capitalist system works (ownership of productive assets, capital gains and inheritance taxes, intellectual property rights, educational policies to name just a few) will lead to a substantial reduction in inequality.

Superrich pay paltry tax in Zurich

News that 97 'Super rich' individuals have left the Swiss canton after a favourable tax treatment for rich foreigners was revoked demonstrates that unfair tax competition is alive and well. The 97 are among 201 rich foreigners that only paid an agreed amount to to canton that was far from representative of their overall global wealth. How little these individuals pay is revealed by the fact, that the departure of the 97 only led to a Swiss Franc 12.2 million diminution of the tax take. This means that each of them paid just around Sfr 100,000 a year. We do not know the aggregate wealth of these persons but we would guess that even Warren Buffett would be even more embarrassed if he could get away with the tax rate these tax fugitives paid. While the canton of Zurich is the loser, there are plenty of other Swiss cantons who still operate a tax haven on a highly selective (and discriminatory) basis. One only has to wonder what purpose the WTO or the OECD serve if they cannot stop this blatant case unfair tax competition. No wonder the Super rich 0.01 per cent are laughing all the way to the bank.

Carried Interest Debate - Hairsplitting by Mankiw

Professor Mankiw admits that he is an adviser to Mitt Romney so one should not be surprised that he expends a considerable amount of energy confusing the straightforward case against a low tax on carried interest for private equity promoters with a variety of situations faced by hypothetical property investors. But the performance fee and basic management fee charged by private equity firms that predominately buy and sell existing assets can simply not be called a capital gain as there is no capital at risk. The exception is the portion of capital that has actually be invested by the managers of the pe firm. The rest simply is reward for putting in the effort to manage the fund. One problem we have to face is that the amount of this investment can easily be manipulated. Already, the insiders of the pe firms (promoters and senior management of the companies that the firms invest in) receive founder's shares (or options) at exceptionally favourable terms (something that would need closer attention by the 'limited partners', i.e. the investors who bear most if not all the costs and risks of the funds). Subsequently it can be claimed that the proceeds arising from the eventual sale of these shares (allocated at pennies) are a 'capital gain'. Maybe it would be a good idea for Professor Mankiw to let us know how he would prevent this abuse?

500 British Business Luminaries moan about 50pct tax rate

The arguments of these 500 pillars of the British Economy are laughable but also symptomatic of the feeble state of entrepreneurship that has been a factor for the relative (and absolute?) decline of British Business over the past 40-50 years. Would these businessmen really work less just to spite the government? Their income would decline even more if they would do so. Would they really cut employment or refrain from expanding the business if a good opportunity presents itself? As Warren Buffett argues over and over again, the economy in the US, for example, grew pretty fast in the 1950s and 1960s when top marginal tax rates were much higher.