U.S. Taxes Drive International Deals

By on 4.28.14 | 3:11PM

Until fairly recently, most corporate takeovers (i.e. one company buying another) were done primarily for business development reasons, for economies of scale, for access to increased distribution, and/or because the target company seemed inexpensive to the acquirer (though sometimes an outsider would wonder just what value management of the buying firm thought they saw in the target).

More recently, while those factors remain important, another impetus for international M&A (mergers and acquisitions), specifically U.S. companies buying foreign companies, is for the U.S. company to be able to become a foreign-domiciled company to avoid the U.S.'s destructive corporate tax code which, unlike almost any other country's tax code, taxes income earned overseas.

Thus, part of American drug giant Pfizer's interest in British drug firm Astra Zeneca is because if a merger were to happen, Pfizer would legally turn itself into a British company (while maintaining headquarters in New York and listing on the New York Stock Exchange).

Austerity Saves Great Britain

By on 4.24.14 | 3:37PM

All right, not quite. But knowing how much heartburn Paul Krugman will suffer if he reads that headline makes it worthwhile.

I’ve noted before how Britain’s supposed fiscal austerity is nothing of the sort, consisting of tax increases and mere cuts to the rate of spending. In 2013, British Chancellor of the Exchequer George Osborne decided to try real spending cuts for a change, sending Europe’s financial establishment into a tizzy. Now the results are in, and Francis Menton surveys them in a delicious blog post:

Shocker: Rise Of Single-Parent Families Means Greater “Income Inequality”

By on 4.21.14 | 5:46PM

Income inequality is one of the favorite bogeymen of the left these days. Instead of asking the important question as to whether life is improving--after all, a 2011 Heritage Foundation study shows that most of America's "poor" live much better lives than what most people think of as poverty--their focus is on the widening income gap between the proverbial C.E.O. and janitor. Of course, the cynic in me thinks that this is because such a focus gives cover for the redistributive policies that our friends on the left favor these days. "Who cares that the rich bear by far the greatest share of the tax burden," liberals ask us. "They don't pay their 'fair share.'" Here is a fun parlor game: the next time this topic comes up, inquire as to just how much more the much-maligned wealthy should pay in taxes in order to be "fair." Better still, ask why narrowing the income gap is more important than improving the earnings of all. You will get some interesting answers and/or blank stares.

Tax Gap Terrorism

By on 3.6.14 | 4:00AM

Tax season is here, and the government has a license to hunt. Nearly two-thirds of Americans are caught like wide-eyed deer in the light of their computer screens. The percentage of people who filed their taxes online using services such as H&R Block and Turbotax has increased 27 percent since 2008.  

The burgeoning population of middlemen between your pocket and the government’s coffers is growing. As the tax-filing industry has increased, the length of the 101-year-old tax code itself has swelled to 73,954 pages. That’s 60 copies of The Lord of the Rings trilogy or 62 copies of Atlas Shrugged, if that’s your credo. The IRS instructions explaining the tax code drone on for 90 pages.

Economists: Turns Out We Got Everything Wrong

By on 2.18.14 | 1:33PM

At least phone psychics have colorful personalities. The OECD has a new report out that blasts its own economists for having foggy crystal balls with regards to their recent forecasts. The Wall Street Journal reports:

The Organization for Economic Cooperation and Development Tuesday said it underestimated the degree to which economic and banking setbacks in one country would have negative impacts on others, leading it to consistently forecast stronger growth than actually materialized in the wake of the 2008 financial crisis.

But in the latest analysis of forecasting failures by an international financial institution, the OECD said it didn't share the International Monetary Fund's view that misjudging the impact of budget cuts on growth was a crucial error. (Emphasis mine)

The Minimum Wage President

By on 2.5.14 | 11:12AM

President Obama loves himself some minimum wage banter. The man who never ran so much as a lemonade stand knows more than you about how micro- and macro-economics work, especially as it pertains to small businesses around the country. After all, he went to Harvard. He's a lawyer. Magazines told me he was the smartest fella ever to become commander-in-chief. He's a pragmatist. A great orator. And very good at basketball. 

So that's him. But what about the rest of us? 

As my pal Andrew Johnson reported at NRO, the president is never one to let direct questions about the real-world impact of Obamacare get in the way of a prime chance to extol the virtues of raising the minimum wage:

Yellen Sworn in as Bernanke Ends Term With Fed Taper

By on 2.4.14 | 11:08AM

Janet Yellen was sworn in yesterday as the fifteenth chair and first woman to head the Federal Reserve. She replaced Ben Bernanke, who presided over his final session during last week’s meeting of the Federal Open Market Committee (FOMC). The Fed announced after that meeting that it would once again taper its monthly asset purchases. Yellen’s installation and the continuation of tapering indicate that Bernanke’s retirement is not the end of an era or an unprecedented turn, but rather business as usual at the central bank.

At the Fed’s January 28-29 meeting, the FOMC announced that it will reduce the scale of quantitative easing. The reduction in asset purchases is $10 billion, bringing the monthly total down from $75 billion to $65 billion. The last reduction was announced during the Fed’s December meeting in 2013, and markets reacted positively. This announcement, however, came on the heels of a bad week for equity markets.

The Public Policy

Fannie, Freddie, and the Big One

By 1.17.14

Twenty years ago today, the 6.7-magnitude Northridge Earthquake struck the San Fernando Valley 20 miles northwest of downtown Los Angeles, killing 60, injuring 7,000, and damaging more than 82,000 buildings. The price tag for the quake was a record $20 billion in property damage, only about half of which was insured.

The two decades since Northridge have seen significant efforts to mitigate earthquake risk through retrofitting, as well as the creation of a state agency in California dedicated to providing earthquake insurance to all who seek it. Alas, despite those steps, there is significant evidence that not only are we less prepared for a major quake today than we were in 1994, but that the financial brunt of any such disaster would mostly fall squarely on the shoulders of U.S. taxpayers.

On Obamacare Death Spirals and Medicaid Time Bombs

By on 1.15.14 | 1:41PM

The left’s clairvoyant wonks are pleased with themselves this week. The Obama administration recently announced that 24 percent of enrollees on the Obamacare exchanges have been between the ages of 18 and 34. That was enough for Ezra Klein to herald “The death of Obamacare’s death spiral” in today’s Wonkblog. The death spiral was the prediction made by many that not enough young people would dive into the Obamacare risk pools, leaving them filled with high-cost elderly patients and driving up premiums.

So are we moving in a positive direction? Megan McArdle is skeptical:

Of course, the ratio is mostly what we’re worried about, not the number; getting an extra 100,000 young people to sign up while you get an extra 500,000 old people doesn’t improve the stability of the insurance markets -- it makes them more unstable.

The ‘Trickle-Down’ Lie

By on 1.7.14 | 4:00AM

New York's new mayor, Bill de Blasio, in his inaugural speech, denounced people "on the far right" who "continue to preach the virtue of trickle-down economics." According to Mayor de Blasio, "They believe that the way to move forward is to give more to the most fortunate, and that somehow the benefits will work their way down to everyone else."

If there is ever a contest for the biggest lie in politics, this one should be a top contender.

While there have been all too many lies told in politics, most have some little tiny fraction of truth in them, to make them seem plausible. But the "trickle-down" lie is 100 percent lie.

It should win the contest both because of its purity -- no contaminating speck of truth -- and because of how many people have repeated it over the years, without any evidence being asked for or given.