August 16, 2012
A tax on all their houses
In an effort to battle Japan's Godzilla-sized national debt (230 percent of GDP and rising), Prime Minister Noda of Japan pushed through a doubling of the consumption tax--from five to ten percent--in the face of defections by party loyalists and a no-confidence vote.
Noda acted against his own and his party's self-interests to accomplish something easily demagogued and highly unpopular but absolutely necessary. And just as importantly, given the options before him, he used his political capital to raise taxes the right way.
Japan's consumption tax is a national sales tax, not a VAT. It's a tax on every citizen who consumes. So is a VAT (so are all corporate income taxes), but the VAT (and corporate incomes taxes) are a lot sneakier about it.
The VAT has got to be the worst tax in the world, if for no other reason than its name: Value Added Tax. The last thing any government wants to do is tax "added value." A sane government wants to create more added value throughout the supply chain, not discourage it.
To quote Wikipedia:
If you've already said, "Huh? What?" that's the biggest problem with the VAT (and most tax regimes): their sheer complexity.
Rent-seekers and politicians prefer laws opaque to the average person. They can then shower freebies on the voters (that the voters ultimately pay for) while squirming through the loopholes without anybody figuring out what they're up to until they've raked in the dough.
This is the problem with OWS types wanting to tax the "fat cats." I doubt any of them could complete a 1040 long form by hand, let alone examine the books of the locally-owned grocer on the corner and be able to tell whether or not it's paying its "fair share."
And they think a thousand more such laws will ensure that Bank of America will? Or will a thousand more laws ensure that the "fat cats" can squeeze out competitors who can't afford to hire entire law firms to assure compliance?
If you're interested in financial "fairness," then start by making the tax code simple enough that you can understand it. I don't mean the cute slogans and oh-so-earnest demonstrations. I mean the real-world implementation of the tax laws. The fine print.
The IRS itself admits that
Politicians who peddle Rube Goldberg schemes in the name of "fairness" will always deliver the former and never the latter.
A sales tax, by contrast, is easy. It's obvious. Look at the receipt. That's what you paid. It's also simple to exempt "good" stuff like food. Yes, exempting stuff will lead to rent-seeking too, but at least it'll be obvious what is and what isn't on the list.
And there's no way a politician can get away with populist drivel about sticking it to someone else.
In terms of idealistic solutions, I'd prefer a flat tax solution (including treating all income streams the same and paying all government obligations out of general revenue). But as long as we're pondering impossibilities, it wouldn't kill me if these guys got their way either.
Noda acted against his own and his party's self-interests to accomplish something easily demagogued and highly unpopular but absolutely necessary. And just as importantly, given the options before him, he used his political capital to raise taxes the right way.
Japan's consumption tax is a national sales tax, not a VAT. It's a tax on every citizen who consumes. So is a VAT (so are all corporate income taxes), but the VAT (and corporate incomes taxes) are a lot sneakier about it.
The VAT has got to be the worst tax in the world, if for no other reason than its name: Value Added Tax. The last thing any government wants to do is tax "added value." A sane government wants to create more added value throughout the supply chain, not discourage it.
To quote Wikipedia:
From the perspective of the buyer, [the VAT] is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.
If you've already said, "Huh? What?" that's the biggest problem with the VAT (and most tax regimes): their sheer complexity.
Rent-seekers and politicians prefer laws opaque to the average person. They can then shower freebies on the voters (that the voters ultimately pay for) while squirming through the loopholes without anybody figuring out what they're up to until they've raked in the dough.
This is the problem with OWS types wanting to tax the "fat cats." I doubt any of them could complete a 1040 long form by hand, let alone examine the books of the locally-owned grocer on the corner and be able to tell whether or not it's paying its "fair share."
And they think a thousand more such laws will ensure that Bank of America will? Or will a thousand more laws ensure that the "fat cats" can squeeze out competitors who can't afford to hire entire law firms to assure compliance?
If you're interested in financial "fairness," then start by making the tax code simple enough that you can understand it. I don't mean the cute slogans and oh-so-earnest demonstrations. I mean the real-world implementation of the tax laws. The fine print.
The IRS itself admits that
The costs of complying with the individual and corporate income tax requirements in 2006 amounted to $193 billion. If tax compliance were an industry, it would be one of the largest in the United States. The current tax code is 3.7 million words long, having tripled in length since 1975.
Politicians who peddle Rube Goldberg schemes in the name of "fairness" will always deliver the former and never the latter.
A sales tax, by contrast, is easy. It's obvious. Look at the receipt. That's what you paid. It's also simple to exempt "good" stuff like food. Yes, exempting stuff will lead to rent-seeking too, but at least it'll be obvious what is and what isn't on the list.
And there's no way a politician can get away with populist drivel about sticking it to someone else.
In terms of idealistic solutions, I'd prefer a flat tax solution (including treating all income streams the same and paying all government obligations out of general revenue). But as long as we're pondering impossibilities, it wouldn't kill me if these guys got their way either.
August 06, 2012
Kitchen Car
Each week, the host (Taiyo Sugiura) teams up with a guest chef and they trundle off to some quaint part of Japan in a kitchen-on-wheels. There they visit the local farms and fisheries, sample the flora and fauna, and collect the ingredient to cook up a banquet for the townspeople.
It's a cute and creative show, though one that inadvertently shines a light on a far darker reality.
You can't help but be struck by how awfully convenient it is to have so many tiny truck farms scattered across the countryside. I'm sure that's in large part due to work of the advance team. But what you see on screen isn't too far from the reality.
Unfortunately, all this "localvore" goodness is killing Japan's economy.
The revolutionary land reform measures enacted in 1947 during the American Occupation successfully turned hundreds of thousands of tenant farmers into land owners and small businessmen (and anti-communist conservatives).
Half a century later, the political power bought with decades of increasingly generous government subsidies (far exceeding those in the U.S.) have kept politicians of all stripes from touching that third rail and changing laws that encourage monstrous inefficiencies across the board.
Aurelia George Mulgan (professor of politics at the University of New South Wales) sums up the downward spiral that has resulted.
Keeping small-scale farms in production blocks the scale expansion of farming by discouraging the transfer of agricultural land to full-time professional farmers. It thus traps the sector in a cycle of low productivity, low profitability, and subsidy dependence.
The Japanese consumer not only pays the taxes that go to these absurdly rich subsidies, but also forks out more than twice the world market prices for staples such as rice. All to support many "farmers" who would barely qualify as backyard gardeners in the U.S.
Mulgan concludes, "The direst prediction is that if the current situation continues, there will probably be no farmers left in Japan after ten years and [home-grown] food production will stop."
This pretty much sums up my bad news/good news view on the world economic meltdown. The same way municipalities in California can't adopt reasonable budgets until they plumb run out of money, Japan won't adopt reasonable farming policies until it plumb runs out of farmers.
The good news is that the way things are going, it's going to happen sooner than later. They won't have to wait long.
Labels: cooking shows, food, japanese tv, japanese tv reviews, politics, taxes, television reviews
July 02, 2012
Libertarian leech
That's what I am, a libertarian leech. A fiscally conservative federalist (I'm with Hamilton about a strong central government, but Jefferson was right about imperial overreaching) who's fine with gay marriage (better than a patchwork of fifty "marriage-lite" compromises), and legalizing all recreational drugs less harmful than alcohol and tobacco.
I loath the abuses of the Commerce Clause in the name of unrestrained Washington do-gooding. The Commerce Clause was intended to prevent the states from behaving like separate countries at their economic borders, which makes the reasoning of Chief Justice Roberts rejecting Commerce Clause reasoning as significant as the rest of the ruling:
As James Madison himself explained:
Roberts allowed the individual mandate as a tax, but nobody likes taxes, especially President Obama, who in a 2009 insisted that the mandate was "absolutely not a tax increase."
Regardless of what anybody calls it, the ACA makes the penalty for not buying insurance so slight ($695 or 2.5 percent of income, automatically qualifying for Medicaid at 133 percent of the federal poverty level) that a starving artist would be a fool to not pay the penalty until necessary. Ditto companies with fewer than 50 employees.
Thanks to the Supreme Court, states can pull the same stunt. Chief Justice Roberts says nobody should feel guilty about that at all. From his majority opinion:
Except when all those starving artists have to fork over those fines (oops, "taxes"), there's going to be a whole lot of hollering going on. "Dude! What happened to my tax refund!" Whereupon compassionate liberals will hurry to expand Medicaid all the more, bankrupting the system all the faster.
Chuck Saletta of The Motley Fool points out:
Thanks, everybody! There is, perhaps, no better example of legislative sausage making in history. It should have been done in a piecemeal manner, where each morsel was tasted first and and chewed on a bit, instead of being wolfed down whole, giving the country a bad case of continental-wide indigestion.
Either way, I'm not a rebel, nor am I one for causes. I vote every two years. That's it. So in a few years I'll shrug and start lapping up Social Security (yes, it's a Ponzi scheme; if Madoff could tax his clients when funds ran short, he'd still be in business too) and Medicare. The Affordable Care Act now gives me a ten-year head start.
Mickey Kaus does make a compelling capitalistic argument for universal healthcare. The problem is that the ACA just happens to be the very worst way to go about achieving it.
Better the reforms had started with HSAs and high-deductible plans available across state lines (like every other form of insurance). Divorce insurance from employment so the tax benefits accrue equally to small and big businesses and the self-employed. Require health care providers to normalize and publish pricing information.
For the time being, my gutless stand is that I have little to lose and a lot to gain. We've put the pedal to the metal on the road to a Greece-style fiscal meltdown, but I'm counting on Big Brother grandfathering in leeches like me. We late baby boomers aren't going gently into that good night. We're bringing down the whole system with us.
I loath the abuses of the Commerce Clause in the name of unrestrained Washington do-gooding. The Commerce Clause was intended to prevent the states from behaving like separate countries at their economic borders, which makes the reasoning of Chief Justice Roberts rejecting Commerce Clause reasoning as significant as the rest of the ruling:
Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority.
As James Madison himself explained:
[The Commerce Clause was] intended as a negative and preventive provision against injustice among the States themselves, rather than as a power to be used for the positive purposes of the General Government.
Roberts allowed the individual mandate as a tax, but nobody likes taxes, especially President Obama, who in a 2009 insisted that the mandate was "absolutely not a tax increase."
Regardless of what anybody calls it, the ACA makes the penalty for not buying insurance so slight ($695 or 2.5 percent of income, automatically qualifying for Medicaid at 133 percent of the federal poverty level) that a starving artist would be a fool to not pay the penalty until necessary. Ditto companies with fewer than 50 employees.
Thanks to the Supreme Court, states can pull the same stunt. Chief Justice Roberts says nobody should feel guilty about that at all. From his majority opinion:
Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance. That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance.
Except when all those starving artists have to fork over those fines (oops, "taxes"), there's going to be a whole lot of hollering going on. "Dude! What happened to my tax refund!" Whereupon compassionate liberals will hurry to expand Medicaid all the more, bankrupting the system all the faster.
Chuck Saletta of The Motley Fool points out:
As long as your income falls below the level of 400 percent of federal poverty guidelines, your out-of-pocket premiums for "silver" level coverage are capped on a sliding scale that gets to be no higher than 9.5 percent of your income. The rest of the costs of insuring you are covered by taxpayers.
Thanks, everybody! There is, perhaps, no better example of legislative sausage making in history. It should have been done in a piecemeal manner, where each morsel was tasted first and and chewed on a bit, instead of being wolfed down whole, giving the country a bad case of continental-wide indigestion.
Either way, I'm not a rebel, nor am I one for causes. I vote every two years. That's it. So in a few years I'll shrug and start lapping up Social Security (yes, it's a Ponzi scheme; if Madoff could tax his clients when funds ran short, he'd still be in business too) and Medicare. The Affordable Care Act now gives me a ten-year head start.
Mickey Kaus does make a compelling capitalistic argument for universal healthcare. The problem is that the ACA just happens to be the very worst way to go about achieving it.
Better the reforms had started with HSAs and high-deductible plans available across state lines (like every other form of insurance). Divorce insurance from employment so the tax benefits accrue equally to small and big businesses and the self-employed. Require health care providers to normalize and publish pricing information.
For the time being, my gutless stand is that I have little to lose and a lot to gain. We've put the pedal to the metal on the road to a Greece-style fiscal meltdown, but I'm counting on Big Brother grandfathering in leeches like me. We late baby boomers aren't going gently into that good night. We're bringing down the whole system with us.
May 09, 2011
The taxwoman
The detective series and the police (and now CSI) procedural are pretty ubiquitous around the world. Once you've adjusted for culture quirks and legal differences, a British series and an American series and a Japanese series mostly share the same storytelling space.
But there is one particular genre of the police procedural on Japanese television that you're not going to see anytime soon in the U.S.: the IRS agent. Seriously. For the past several years, a new series about heroic tax inspectors has debuted almost every season.
Actually, there is an American precedent: The Untouchables. Al Capone was ultimately sent to jail by Treasury Department inspectors led by Eliot Ness. The television series and movie, though, are more shoot-'em-up actioners than adventures in forensic accounting.
That's exactly what these Japanese shows are about. They owe a lot to A Taxing Woman and its sequel, Juzo Itami's critically acclaimed 1987 and 1988 films about a tenacious government tax investigator.
Of course, the conflicts are spiced up for entertainment purposes. We watch them going after the big fish, not the sympathetic small fry. The protagonist is the expected combination of tenacious genius and rugged nonconformist (and if a woman, she's probably really hot).
In the current offering (the tagline: "This woman chases money"), Ryoko Yonekura has a ball playing against type as a frumpy, eccentric, Columbo-style investigator (albeit with a supermodel bod).
The puzzle is why Japan has such an abundance of tax cheats that tax inspectors are celebrated. In places like Greece, many of their financial woes boil down to the fact that everybody cheats on their taxes. In Japan, the conviction is that only the undeserving rich are doing so.
The reasons can in part be traced back to practices that date to the 19th century, such as the wide use of promissory notes and accepting signature stamps (hanko) as valid forms of identity. The sure sign of a tax cheat is a stash of bank books and hanko stamps.
But at the root of the problem is that even in the 21st century, Japan remains a largely cash-based society.
For practical purposes, personal checking accounts don't exist. Credit cards have become widely accepted only in the last decade or so. Most financial transactions are done in cash or by wire transfer. When ATMs appeared in the 1970s, so did the ability to wire money via the ATM.
The ATM wire transfer process has become so rife with fraud that police regularly stake out ATMs, not in order to apprehend the fraudsters, but to question the little old ladies targeted by the scams, to make sure they know who they're sending their savings to.
Banks rake in extortionary fees on these wire transfers and so have little incentive to change the system. Avoiding those fees means it's not uncommon for bonuses and even wages at respectable companies to be paid with envelopes full of cash.
The match that lights all this kindling was a post-war anti-corruption law that required the government to publish the tax liabilities of top-earning individuals and corporations. Every year, the tabloids took great pleasure estimating the incomes of the rich and famous.
The law was repeated in 2004, but this curiosity in the financial lives of others surely continues. Add to that historically lax reporting requirements and the temptation to imagine squirreling away tax-free money for a rainy day gains a whole new appeal.
Labels: japan, japanese tv, personal favs, politics, pop culture, taxes, television
April 21, 2011
We're already all wet
Now that I'm thinking about taxes, an additional rant. As I pointed out last time, I didn't have to pay any income taxes this year, and in times past have even qualified for the Earned Income Tax credit. So I definitely qualify as "non-rich." But I'm against "soaking" them.
The problem with soaking the rich is two-fold: 1) If a bunch of rich people hit a rough patch and start making half as much, or decide to take their income in capital gains, they'll still be rich, but the government will be broke; 2) "No taxation without representation" isn't just a snappy slogan, it's a law of human nature. It starts in childhood. Weasel a couple of bucks out of your parents and they're going to want to what you're going to do with it. We all expect a quid pro quo.
The more the government takes from corporations and the wealthy, the more they are going to want to know what's happening to their money, the more they're going to care about where it goes and how much, and the bigger the payoff for corrupting the process. The fiduciary responsibility of a corporation is to its shareholders, and it'd be irresponsible of them to not spend a few million on lobbyists and tax lawyers to make sure tens of millions more flow to their investors.
The answer is simplicity and transparency. Eliminate all forms of corporate welfare, farm subsidies, green energy subsidies, the whole lot. In turn, eliminate the corporate income tax and treat capital gains as ordinary income. Reduce all deductions to a single, individual deduction that is the same for everybody. I see no reason why home buyers should be privileged over renters, especially after they ruined the world economy. Oh, and get rid of Fannie and Freddie too.
The problem with soaking the rich is two-fold: 1) If a bunch of rich people hit a rough patch and start making half as much, or decide to take their income in capital gains, they'll still be rich, but the government will be broke; 2) "No taxation without representation" isn't just a snappy slogan, it's a law of human nature. It starts in childhood. Weasel a couple of bucks out of your parents and they're going to want to what you're going to do with it. We all expect a quid pro quo.
The more the government takes from corporations and the wealthy, the more they are going to want to know what's happening to their money, the more they're going to care about where it goes and how much, and the bigger the payoff for corrupting the process. The fiduciary responsibility of a corporation is to its shareholders, and it'd be irresponsible of them to not spend a few million on lobbyists and tax lawyers to make sure tens of millions more flow to their investors.
The answer is simplicity and transparency. Eliminate all forms of corporate welfare, farm subsidies, green energy subsidies, the whole lot. In turn, eliminate the corporate income tax and treat capital gains as ordinary income. Reduce all deductions to a single, individual deduction that is the same for everybody. I see no reason why home buyers should be privileged over renters, especially after they ruined the world economy. Oh, and get rid of Fannie and Freddie too.
April 18, 2011
Washington witchcraft
Once again, as a full-time starving artist I only had to fork over to Uncle Sam a pound of flesh in the form of "self-employment taxes." On the bright side, if the Social Security system survives in its current form until I hit seventy, I'll collect about what I'm making now!
Doing my taxes reminds me what a corrupt system this is. I didn't starve that much this year, so I was a little surprised when I ended up owning no income taxes. The "Making work pay" tax credit, it turns out. I had no idea it was there until I scanned the final PDF of my 1040.
The complexity of the tax code and the resulting lack of transparency means that however politicians may swear they're helping the poor and downtrodden, the poor and downtrodden are more likely than not being screwed over by those same "tax breaks" they don't know exist.
There was even a story on the local nightly news about the "Making work pay" tax credit, reminding people to take advantage of it. The only rational recourse is to use decent tax preparation software (I use TaxAct). But that, frankly, is an utterly undemocratic solution.
The income tax has become a magical black box that turns numbers into money for reasons known only to the alchemists, which politicians then pretend came out of their own generous pockets. We may be One Nation under God, but we're being ruled by witchcraft.
Doing my taxes reminds me what a corrupt system this is. I didn't starve that much this year, so I was a little surprised when I ended up owning no income taxes. The "Making work pay" tax credit, it turns out. I had no idea it was there until I scanned the final PDF of my 1040.
The complexity of the tax code and the resulting lack of transparency means that however politicians may swear they're helping the poor and downtrodden, the poor and downtrodden are more likely than not being screwed over by those same "tax breaks" they don't know exist.
There was even a story on the local nightly news about the "Making work pay" tax credit, reminding people to take advantage of it. The only rational recourse is to use decent tax preparation software (I use TaxAct). But that, frankly, is an utterly undemocratic solution.
The income tax has become a magical black box that turns numbers into money for reasons known only to the alchemists, which politicians then pretend came out of their own generous pockets. We may be One Nation under God, but we're being ruled by witchcraft.
November 11, 2010
Old wine, new bottles
The real problem with CFLs--besides exposing the hypocrisy of environmentalists who have suddenly discovered the wisdom of regulating toxic materials at threshold, rather than detectable, amounts (though that might be a benefit)--is that their wide adoption encourages political busybodies to imagine that mandating a technology can make it an economic reality.
Rather, you can "mandate" something after it's been proved economically feasible. Fluorescent lighting technology has been economically feasible for fifty years.
A good example of a mandated failure is Japan's analog HDTV system, lauded as forward-thinking in the 1980s when everything Japan did was proof that whatever the U.S. was doing sucked (though that was true about the automobile industry). It ended up an expensive and wasteful white elephant. The U.S. implemented digital HDTV a year ahead of Japan.
There's a lot to be said for not rushing to embrace cutting-edge technologies. The CFL is based on quite old technology that now thrives through improvements in materials science and manufacturing (and, yes, regulatory capture). When I lived in Japan thirty years ago, the not-so-compact CFL was ubiquitous--because it was economical, not because it was "green."
Electricity in Japan is twice as expensive as the U.S. (and even more when factored as a percentage of real income in 1980; if you thought the oil shocks of the early 1970s were shocking in the U.S., they were heart-stopping in Japan). The same goes for automobile fuel efficiency. An old but refined technology like diesel blows away ultra-modern hybrids in raw MPG.
The Japanese make and drive fuel-efficient cars because gas costs twice as much and the registration fees and taxes on large engines ("large" meaning over a paltry 1.6 liters) are ten times as much, not because of government mandates. In fact, higher CAFE standards lower the cost of driving. Making something cheaper does not encourage its conservation.
Over the last quarter century, total vehicle-miles-driven in the U.S. has climbed three times faster than population growth and twice as fast as auto registrations. The only things that temporarily flatten the curve are big honking increases in the price of gasoline and big honking recessions.
Politicians can't raise the price of gas or tax vehicles to levels that would change the behavior of their constituents in meaningful ways (and get reelected), so they tell tall tales that only apply to hypothetical worlds where nobody lives. We go along with the charade because it makes us feel good. It's a substitute for religion--though tithing would be cheaper.
Rather, you can "mandate" something after it's been proved economically feasible. Fluorescent lighting technology has been economically feasible for fifty years.
A good example of a mandated failure is Japan's analog HDTV system, lauded as forward-thinking in the 1980s when everything Japan did was proof that whatever the U.S. was doing sucked (though that was true about the automobile industry). It ended up an expensive and wasteful white elephant. The U.S. implemented digital HDTV a year ahead of Japan.
There's a lot to be said for not rushing to embrace cutting-edge technologies. The CFL is based on quite old technology that now thrives through improvements in materials science and manufacturing (and, yes, regulatory capture). When I lived in Japan thirty years ago, the not-so-compact CFL was ubiquitous--because it was economical, not because it was "green."
Electricity in Japan is twice as expensive as the U.S. (and even more when factored as a percentage of real income in 1980; if you thought the oil shocks of the early 1970s were shocking in the U.S., they were heart-stopping in Japan). The same goes for automobile fuel efficiency. An old but refined technology like diesel blows away ultra-modern hybrids in raw MPG.
The Japanese make and drive fuel-efficient cars because gas costs twice as much and the registration fees and taxes on large engines ("large" meaning over a paltry 1.6 liters) are ten times as much, not because of government mandates. In fact, higher CAFE standards lower the cost of driving. Making something cheaper does not encourage its conservation.
Over the last quarter century, total vehicle-miles-driven in the U.S. has climbed three times faster than population growth and twice as fast as auto registrations. The only things that temporarily flatten the curve are big honking increases in the price of gasoline and big honking recessions.
Politicians can't raise the price of gas or tax vehicles to levels that would change the behavior of their constituents in meaningful ways (and get reelected), so they tell tall tales that only apply to hypothetical worlds where nobody lives. We go along with the charade because it makes us feel good. It's a substitute for religion--though tithing would be cheaper.
Labels: environmentalism, politics, science, taxes, technology