Europe continues to flounder

As another week goes by, Europe continues to flounder – even German car sales were off by 17% YOY, a decline which was presumably not all to be laid at the door of the unusually severe winter. Among the shrinking band of triple-A nations on whose creditworthiness the whole of the Zone rests like the globe on Atlas’ weary shoulders, Finland’s industrial output has come close to registering another one of those pitiful ‘lost decades’ as the aggregate inches painfully down from 2010’s incomplete recovery peak to levels typical of 2004.

Then again, why pick on the Finns when France – despite the latest minor uptick – sits at 1990 levels, a sixth below 2008’s best and now only 4% off the 2009 Crash lows. Or Italy – off 25% from the top, barely 2% off the trough, and at a level first attained in 1980. Or Spain – off 30%, making new 19-year lows and back at 1987’s mark.

Output may have held up better in the Netherlands, but the 20% drop in property prices is threatening to test a banking sector with the highest exposure to real estate in the entire EU. At around 340% of domestic banks’ capital and reserves, the margin for error is slender indeed and it may just be that the market is beginning to cotton on to the vulnerabilities as the country’s CDS have moved from parity with Germany to 25bps over and from 60 less than France to only 35bps less. Could this be the little acorn of doubt from which a mighty oak of positioning could grow?

More generally in Europe, the authorities seem to have taken heart from their assault on Cypriot depositors to continue to talk up the idea of clipping their ilk in all in failing banks now that those egregious corporate welfare queens, the major money centre banks, have had time and Target enough to reduce their exposures to the weaklings and so flee the front-line of the capital structure.

Forming the other pincer of what seems like a looming double envelopment of confiscation, our masters have lately become intensely fixated on sniffing out all expropriable sources of wealth (taxed or untaxed, legitimate or dubious) wherever they may be found.

Amid the suspiciously convenient release of the BVI account records by the self-proclaimed ‘muckrakers’ at the ICIJ, there has been a flurry of announcements regarding cross-border data sharing and the abrogation of banking confidentiality (sorry, ‘secrecy’) in several key jurisdictions, all of which will further shrink the already dwindling domain of the private sphere and increase our thrall to Big Brother.

The hypocrisy is breathtaking, whether it be President Hollande calling for the ‘eradication’ of tax havens (so that he can see whether he’s as rich as his cabinet colleagues, one presumes), the Russian crony state demanding that all state employees close their foreign bank accounts by quarter-end (something which may well be adding to the bid in securities markets everywhere) or would-be Chancellor Steinbrück demanding the automatic release of his fellow citizens’ financial details of a kind he himself was all too reluctant to divulge when the gargantuan scale of his own venality became a matter for controversy last year.

In all of this there appears an almost unchallenged assumption that rather than the state being the instrument of the people – as laid out by more than three centuries of Enlightenment thinking – the people are the property of Leviathan itself and should count themselves lucky that the Beast does not make any more repressive demands upon them than it already does. But as well as being supremely counter-productive, this runs contrary to any concept of natural justice. Gemeinnutz geht nicht vor Eigennutz, we might once more reaffirm or, in the lapidary phrase of the late, great Margaret Thatcher, “There is no such thing as society: there are individual men and women and there are families…” 

And, yes, since we have started on this tack, it is your author’s personal opinion that the whole business of offshore accounts, legal prestidigitation, and complicated tax structures are indeed grossly unfair, but only because the wholly defensible shelter to legitimate income and the worthy contribution to the preservation of carefully accumulated capital which they entail are denied to the populace at large, so that the ordinary man and the local entrepreneur are each rendered helpless and disadvantaged with regard to their better-off brethren (many of whom are, alas, rent-seekers who have themselves acquired their pile, or sheltered its source from honest competition, through the same sort of crass political manipulation which has now come to threatening their existing degree of privilege).

Thus, the market is hampered and opportunities for both personal advancement and the positive externalities of progress are squandered, not because we are not vigorous enough in soaking the established rich, but because we are soaking poor, that is to say the would-be rich, by denying them the exercise of their own natural right to render as little as possible of their hard-earned gains unto an arbitrary and insatiable Caesar.

But rather than abolishing such havens, while indulging in the invidious public vilification of anyone sufficiently well-heeled and astute to use them, they should simply be made redundant by making the same facilities available to everyone. It would do much for the common good, serving the material and moral improvement of us all, if every land became a tax haven.

No fancy lawyers and intricate chains of nameplate companies, no nested trusts and interlinked nominees would be needed, but only the introduction of a structure of taxation which was clear, simple, conducive to capital formation, and above all minimal. In that way, each man would rightly keep the maximum possible fraction of his income under his own control, while greatly limiting the ambition of the elective dictators such as Herr Steinbrück who presume to lord it over him. It would also fully emasculate the insidious, Tocquevillean tyranny of the clamouring ragtag of green millennialists, bien pensants, and Utopians, les Clercs from whose Trahison we have all so suffered since they were first sprung out of the Bastille 224 years ago.

And so it goes on in that continental-scale Potemkin village we know as Europe. Rather than attempt anything radical in diminishing the burden imposed on the outlay side of the ledger (which any businessman will tell you is usually the most efficacious way to restore lost profitability), the Commissars would much prefer that we few remaining Kulaks hand over even more of our already much-reduced harvest in order to feed their collectivist conceits. Ironically, the scale of this presumption is best revealed in the fact that for all her ill-humoured posturing about her partners’ budgetary indiscipline, Frau Merkel has, for the past 5 ½ years presided over a regime where the government ‘contribution’ to GDP has actually grown faster than has that of France.


Who needs jobs anyway?

Nick Cohen is one of my favourite writers but he really has come a cropper with his latest piece on Starbucks and its taxes for the Spectator.

He writes

In the past, right-wingers argued for lower taxes and a smaller state and left-wingers argued for higher taxes and a bigger state. Both agreed, however, that you had to pay what taxes the state set.

But that is what almost everyone still thinks. A company which doesn’t “pay what taxes the state set(s)” is engaging in tax evasion, a criminal activity, and I’m not aware of many people supporting that. Starbucks, to be clear, paid every penny of tax it was legally obliged to and if Cohen has information to the contrary he ought to contact HMRC.

If you think Starbucks should pay more tax then increase its legal obligations. This is a point of view Cohen dismisses, saying “We are not talking about a couple moving assets to keep their tax bill down, but vast corporate structures hiding money in piratical tax havens”

First, notice the loaded language. Cohen could have written “We are not talking about a couple moving assets to keep their tax bill down, but vast corporate structures moving assets to keep their tax bill down” Less emotive sure, but also more accurate and more helpful analytically.

Second, consider the thinking behind it. It’s ok when one set of people do it but when another set of people does it it’s not, that we should apply one law to one set of people but another set to others. This is a major blind spot for a man who considers himself the beleaguered tribune of a dying, liberal England.

The whole piece is an example of the moralistic guff which fogs the debate about tax in this country. One of the silliest phrases in current public policy discourse is ‘aggressive tax avoidance’, which is a little like complaining that someone is ‘aggressively’ quitting smoking when they stop as a result of the tax on cigarettes going up.

Cohen, for example, writes “A good rule of thumb in all circumstances is to ask whether you can defend your actions in public”. Actually Nick, in business that’s a pretty terrible rule of thumb. If you are wondering whether to invest or not you need information upon which to base the calculation of whether that investment will be worth it. Considering that tax is going to effect the return on investment it therefore helps to have a firm idea of what taxes are likely to be. This is why taxes are levied on the basis of laws everyone knows in advance. If we dispensed with taxes raised in this way and, instead, investors had to base their tax calculations based on “What Nick Cohen might think is fair”, well, it’s a far less quantifiable variable.

And there’s the moral question. Can a man who wrote ‘Reports from the Sickbed of Liberal England’ really be advocating the rule of man (himself) or the mob (UK Uncut) over the rule of law? Apparently so.

We have a large and persistent problem in Britain with youth unemployment. Many unemployed youths simply lack the skills to command high wages and so, until either that changes or until capital can be applied to make their labour more productive a job somewhere like Starbucks is probably the best gateway to employment. And if we want to tackle youth unemployment we ought not to be chasing these companies out of the country.

Nick Cohen gleefully instructs David Cameron to “point [Kris Engskov, Starbuck’s UK managing director] westwards, and tell him to keep going until he reaches Heathrow” and writes that “From the point of view of the Exchequer, it is a matter of supreme indifference whether Starbucks stays or goes” But it might be a matter of rather less indifference to Starbucks’ staff. Or maybe Cohen can get those unemployed baristas jobs writing for his tax efficient employers at The Guardian?


The End of Politics and the Birth of iDemocracy

The West is in crisis.  Our Big Government way of doing things does not work.  It is no longer going to be possible to run a burgeoning welfare state on the back of a shrinking wealth-creating base.

For several generations, officialdom has been able to divert ever greater resources toward officialdom by concealing the costs of extra government.

How? Partly through unequal taxation, and partly by manipulating the money.

Taxation is, in the words of Louis XIV’s finance minister, Jean-Baptiste Colbert, the art of “plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing”.  Too much hissing, and the king might lose more than the extra revenue.

The introduction of so-called progressive taxation a century ago enabled the governing elite to extract more feathers from a minority of geese at any one time, confining the hissing to a few.  Government has grown every decade since.

Since 1971 Western governments have lived beyond the tax base by manipulating the money, transfering wealth from the governed to the governing without many voters even noticing.

Indeed, Western finance ministers meet regularly in order to discuss the rate at which they internally devalue their currencies such that they might ensure the external consequences are manageable.

The trouble is that these pillars on which the Big Government model rests – unequal taxation and money manipulation – are starting the crumble.

The digital revolution will redefine money.  Instead of having to live under monopoly money regimes, we will have currency competition.  Governments simply won’t be able to keep on debasing the currency at our expense.

In the digital economy of the future, taxes will, I argue, need to be much flatter.  A consequence of flatter taxes is that even quite modest attempts at plucking us for more taxes will be met with a great deal more hissing.

The digital revolution will  reinvigorate the West, lifting us out of our Big Government induced stupor.

Douglas Carswell is Conservative MP for Clacton. His book The End of Politics and the Birth of iDemocracy is published by Biteback


Brain Sematary

The debate over taxing the rich has reached new depth in the United States with a true man of letters entering the fray. Depth, that is, as in low point. What the essay by acclaimed and popular novelist Stephen King lacked in profundity it made up for in profanity: Tax me, for f@%&’s sake, was Mr. King’s eloquent plea to the government he so admires.

One of the freedoms that Americans of any income bracket still enjoy is the freedom to give more to the government than the government already takes from them by force. If you think that the government can spend your money better than you can, you are free to write them an extra check each year and hand it over with your tax return. King grudgingly acknowledges that he, like everybody else, has that right but that is not enough for him. He wants to see the state take more from ‘rich’ people, himself included, by force, and thus put it to better uses than the rich people themselves ever could.

The essay is a bizarre document of economic illiteracy, political naivete, plain arrogance and bad language. Of course, Mr. King and his ‘liberal’ Hollywood friends, like Steven Spielberg, know how to put their wealth to good effect. They fund fire departments and run loss-making radio stations. But not all rich people are that enlightened. There are some who also “give their money away”, such as the hated Koch brothers who fund libertarian think tanks (Cato) or fund independent, coeducational schools, such as Deerfield Academy. For these deranged people we thankfully have a government that has the power to tax, take the wealth from these retards and puts it to all the good uses that only government (and the Stephens, King and Spielberg) can really appreciate. But even worse, there are those rich people who do not even “give their money away” but who – can you believe this? – invest it. They expect to make a return on it. For themselves! Sometimes even by investing abroad. (How unpatriotic!) With proper taxation we could get a better society with fewer and smaller investment portfolios and more government spending. Who can’t see the beauty in that?

But here is a real highlight:

At a rally in Florida (..), I pointed out that I was paying taxes of roughly 28 percent on my income. My question was, ‘How come I’m not paying 50?’

To which the proper answer, in Stephen-King-lingo, would be: Why the f@%& just 50%, Stephen? Why not 75%? — Well, come to think of it, why not 80% or 90%?

Let’s look at one of those enlightened places where the rich have for some time been paying – what’s the phrase, again? – their “fair share” of 50 percent or thereabout: France. According to King’s logic this must be a workers’ paradise by now, complete with great state schools, social mobility for children of all backgrounds, all-round social harmony and a balanced budget. Maybe, Mr. King, you should leave Planet Hollywood for a minute, buy yourself a first-class ticket to France and look for yourself.

Meanwhile, the debate in France is all about how to tax the ‘rich’ more. In progressive France, Mr. King’s ideas are way behind the curve. They seem positively, well, reactionary.

“50% taxes for the rich? Stephen, mon ami, what are you? A Republicain?”

Soon-to-be President Francois Hollande suggested that upward of a million euro in income, the tax should be 75%, while his left-wing challenger, Jean-Luc Melenchon suggested that from a certain level the tax should be 100%, meaning that a maximum income is established, upwards of which everything will be taxed away and go to the state.

You see, Stephen, that is the problem with a ‘fair share’. Fairness is in the eye of the beholder.

What Stephen King and his rich ‘liberal’ friends don’t get is this: the government never has enough money. The state cannot handle money, period. It needs more and more. That is the nature of the state, in particular the nature of a modern social-democratic state that depends on the votes of the masses.

Every prosperous and peaceful society depends on social cooperation. Social cooperation has to be voluntary and contractual and therefore has to be based on the institution of private property. Our problem – in the U.S. and in France and elsewhere – is that we have too much government, which, by definition, is the negation of liberty, and which always replaces voluntary and free interaction with forced reallocation of resources and forced redirection of human action. The problem is not that the state has too little funds but that it has too much power.

But I doubt that Mr. King nor any of his friends have any understanding of what makes a prosperous and free society. As an example of the social mobility that was supposedly once possible in America thanks to government, Mr. King cites Barack Obama. I guess that is his idea of what America needs: lawyers, community organizers and politicians. And that is supposed to be the American dream?

Such opinions are indicative of the intellectual decline that drives our social and economic decline: according to our opinion moulders, politicians are better than businessmen, charity is better than business, taxation is better than investing.

“Whom the gods would destroy, they first make mad.”

In the meantime, the debasement of paper money continues.

This article was previously published at Paper Money Collapse.


Revolutionary insights for the eurozone

Everyone seems to be searching for a roadmap for the Euro-crisis. A precedent to guide policymaking and financial decisions would give some assurance that feasible outcomes are available. I have argued elsewhere (here, here and here) that there are examples for individual countries to follow. But what of the eurozone as a whole?

With luck, precedent for the precarious situation the 17 members of the euro-club face is available. Across the pond, the United States of America once faced a similar challenge.

After the revolutionary War, the US was faced with a band of individual member states (emphasis placed on the “States” aspect of the USA). The Articles of Confederation allowed each state the exclusive right to tax its population. The Continental Congress was given the right to issue paper money – “Continentals”, as they were known.

Individual states refused to give the Continental Congress the ability to tax, nor did they consent to sharing their tax revenue with it. With no ability to raise funds through taxation, the Continental Congress turned to the only fund-raising means available – issuing new Continentals. The phrase “Not worth a Continental” predictably resulted, as hyperinflation set in.

This course of events prompted Alexander Hamilton and his Federalists to argue for a stronger central government, with the ability to both tax and issue debt. The ratification of the U.S. Constitution in 1789 was the culmination of this drive.

This is the situation roughly analogous to what the eurozone faces today.

Each of the 17 member states has the ability to tax but not to issue currency. The European Central Bank has the ability to issue currency, but not to tax. Some countries can no longer remain solvent through increasing taxes alone. Two solutions result:

  1. Allow individual states the right to issue money.
  2. Allow for a centralized fiscal agency to collect taxes for redistribution within the eurozone.

Option 1 amounts to a breakup of the currency union. Option 2 is currently the more popular option. By having a fiscal union with one tax-collecting agency, transfer payments can solve country specific insolvencies. (Of course, longer-term  issues remain, but that is for another article.)

Is such a solution as efficient, or equitable, as we are led to believe?

The longevity of the United States suggests that fiscal union is not such a bad idea for a currency union. But important differences exist between the eurozone’s future and the US.

First, with no central fiscal agent for the eurozone there is no central spending required, unlike with the Continental Congress. Each eurozone member state funds its own activities. For example, there is no joint military that requires funding, as is the case with the United States. Hence, there is no threat that the ECB would hyperinflate the euro to fund its fiscal activities (as it has none). This was decidedly not the case with the Continental Congress.

Second, has the centralization of fiscal power been beneficial to the US? The longevity argument is not as strong as one might think. America has, after all, defaulted explicitly on its debt four times in its history. It has evaded insolvency numerous times by inflating its liabilities away. But such an action is default by another means. It has taken from the citizens in the form of an inflation tax to pay for its excesses.

Third, with a central fiscal agency, the US Congress has continually seen a strengthening of its role and scope. New agencies to displace the rights of the individual states have become the norm. The bill to fund the increase in federal activities has risen commensurately. The cost of a centralized fiscal agency in the US has been paid with increasing taxes – whether explicitly through the income tax, or implicitly through the inflation tax.

If the eurozone finds itself amidst a crisis set off by too much government spending (an insolvency crisis) does anyone seriously think the solution is a centralized fiscal agency with the incentive to increase its own indebtedness?

As the United States’ own history demonstrates, calls for a centralized fiscal agency to complete a currency union are misplaced at best and damaging at worst. If history is any guide, fiscal consolidation will result in increased indebtedness on a supranational level. This indebtedness is solved in one of two ways: increased taxes on the member states, or increased inflation. Neither of these seems like a welcome option.


Europe’s underground economies

One significant issue arising in the crisis has been the size of some European underground economies. Politicians seek measures to increase public revenues as public budgets come under strain. As large segments of European, and especially southern European, economies are hidden in the underground, large amounts of otherwise taxable incomes are likewise hidden.

Chapter 4 my new edited collection, Institutions in Crisis: European Perspectives on the Recession, grapples with the issue of these underground economies. With over a quarter of Greek economic activity only unofficially undertaken, we see that in some countries the issue is significant. Indeed, the average underground economy for the PIGS (the PIIGS excluding Ireland) is 21.7 percent of GDP, almost three times the size of America’s, and double that of Germany’s.

Two important questions must be answered. First, what explains the size of these underground economies? Second, how can we integrate them into the official economy?

There are two general reasons why economic activity seeks to be underground rather than official. On the one hand high, tax rates prohibit otherwise mutually beneficial economic activities from occurring. Movements into the underground try to evade these taxes and thus allow trades to be made (for those of you who can remember your first-year economics class, this is a way to reduce those triangular deadweight losses of taxation). On the other hand, regulations add a potentially complex and costly web of rules that entrepreneurs must abide by. In some cases it is only possible, or at least easier, for a firm to operate in the underground instead of the official regulation-abiding economy.

When looking at the general range of underground economies in Europe it does not take long to discern which effect is stronger. Europe is well known for its plethora of taxes, as well as its high marginal tax rates, but there is no clear relationship between taxes and the size of the underground economy. High tax Scandinavian countries, for example, seem to enjoy relatively small undergrounds. Some southern European countries, Spain for example, have relatively low tax rates and large undergrounds.

The answer lies in the distinction between different interventions that Murray Rothbard made in this economic treatise, Man, Economy and State. Binary interventions are those where one party becomes subordinate to the intervener in the transaction. Labor taxes, for example, cause a firm to hire labor at a different price than it originally would have, and under the constraints placed on it by the government imposing the tax. Triangular interventions, in distinction, are those that place both parties to a transaction subordinate to the intervener simultaneously. Testing requirements on drugs subordinate both drug producers and consumers to the government imposing the regulation – no transaction can take place regardless of the desires of the relevant parties.

Northern European countries, despite their high tax rates (a form of binary intervention) enjoy relatively low levels of triangular interventions. Low levels of simple regulations make entrepreneurial undertakings relatively pain free. Business owners can comprehend the binary interventions as an additional cost of business, and proceed cognizant of the fact that they face a minimal level of complex and uncertain regulatory burdens. Consequently, there is not much reason to operate in the unofficial section of the economy. (Keep in mind that although one can save on taxes by doing so, there are costs – the lack of a clearly defined and enforceable rule of law being the foremost.)

Southern European countries, in distinction, are well known for the bureaucratic boondoggles they are. Triangular interventions abound. Complex and uncertain labor laws make firing (and subsequently, hiring) employees a costly or impossible ordeal. Unable to navigate the regulatory burdens endemic in these economies, entrepreneurs hide in the underground. By saving on the expense of the difficulties of complying with complex regulations, entrepreneurs are able to outweigh the added costs by working in less official conditions.

As this problem is most acute in the PIGS countries, it has become an issue as politicians search for means to bolster government revenues. By reallocating economic activity to the official sector, taxes will be able to be collected and government coffers replenished. Calls for more frequent auditing and increased fines have come to the fore. Such solutions are misplaced at best, and will exacerbate the problem at worst.

Increased audits and fines for the “guilty” will doubtlessly decrease the size of the underground economies. This added risk and cost of underground business will incentivize some entrepreneurs to withdraw, or at least curtail, such economic activity. It is doubtful that this will translate into increased official economic activity. Entrepreneurs in the underground are there because the conditions in the official economy are not conducive to business. High taxes and complex regulatory structures drove them out in the first place. Without a change to either of these two facets (primarily the latter), we should not expect any increase in official economic activity.

In my book I spell out one additional reason why EU politicians should not be overly keen on minimizing the size of their underground economies. As unemployment rates have increased, the various undergrounds have been able to cushion part of the blow. Working conditions in the underground economies are certainly not as desirable as in the official one, but the unemployed have few choices. Lacking growing employment opportunities in the official economy, a lack that I stress is caused by excessive and uncertain regulatory burdens, removing the underground options available will only serve to further impoverish the burgeoning unemployed masses.


Large changes in fiscal policy: taxes versus spending

This paper by Alberto Alesina and Silvia Ardagna provides very good empirical research to confirm that what we expect a priori: that deficit cutting sets up a strong recovery, while deficit spending funded by tax increases does not. The abstract nicely summarises other aspects of the paper, and it is worthwhile for anyone to read who is involved or interested in public policy.

We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions. We confirm these results with simple regression analysis.

H/T to Sean Corrigan.


Thought for the day: should we pay the BoE £9bn pa in interest?

In November, I asked this Parliamentary question:

Steven Baker (Wycombe, Conservative)

To ask the Chancellor of the Exchequer how much debt interest has been paid on Government securities held by the Bank of England and its subsidiaries in the last 12 months.

Mark Hoban (Financial Secretary, HM Treasury; Fareham, Conservative)

In the 12 months to end September 2010, the Bank of England and its subsidiaries have received the following interest on holdings of UK Government debt securities:

£ million
Banking Department 187
Issue Department 282
Bank of England Asset Purchase Facility Fund Ltd 8,527
Total 8,996

That’s right – the Treasury paid the Bank of England about £9 billion in debt interest.

The time for a six-month update on the figures is soon approaching, so I wondered what TCC readers thought…

Is this just the left and right hands of the State passing money to and fro and should bonds held by the Bank of England be written off? Is it vital those bonds are held so that QE can be “reversed” or is that like, as Mises put it, reversing over the man you just ran down in your car?

Mises also refers to the fact that deflation can never repair the damage of a priori inflation. In his seminar, he often likened such a process to an auto driver who had run over a person and then tried to remedy the situation by backing over the victim in reverse. Inflation so scrambles the changes in wealth and income that it becomes impossible to undo the effects. Then too, deflationary manipulations of the quantity of money are just as destructive of market processes, guided by unhampered market prices, wage rates and interest rates, as are such inflationary manipulations of the quantity of money.

£9bn is about 6% of the annual income tax take.

See also Toby’s An easy £10 bn of deficit reduction and £200 bn off the National Debt. Over to you…


The 2020 Tax Commission

Exciting news from Matthew Sinclair on Friday:

This morning we have announced the formation of the new TaxPayers’ Alliance and Institute of Directors (IoD) 2020 Tax Commission.

At the moment policymakers are trying to work out how to deal with the deficit, and at the TPA we’ve done a huge amount of work on how we can cut spending, and a previous joint project with the IoD set out £50 billion of potential savings. But those of us who think that we are better off leaving money in people’s pockets, having low taxes that reward the hard work and investment that is and will be the basis of our prosperity, need to go beyond TINA. Our pitch to the public can’t just be about dire necessity, in the face of the very real threat that Britain could have moved from the status of secure safe haven to the next Greece/Ireland/Portugal. We need a plan and to show why tax reform should be a priority once the economy and the public finances are recovering.

The Tax Commission boasts many familiar names, including Cobden Centre founding fellow Anthony J. Evans. For more information, visit


Emergency Budget – Reconsider the Capital-Gains Tax Hike

Alan McCormick of Legatum wrote an excellent article for yesterday’s Wall Street Journal:

Shortly after taking office in May, Britain’s new chief secretary to the Treasury discovered a note from his predecessor, Liam Byrne: “I’m afraid to tell you there’s no money left.”

Tomorrow, to help address that mounting fiscal crisis, Chancellor George Osborne will release an emergency budget. It is expected to include an array of spending cuts and tax hikes to reduce the £156 billion deficit he inherited from the previous government. In all likelihood, it will call for a dramatic increase in the capital-gains tax.

Such a move would be disastrous for the economy. Raising the capital-gains tax would discourage Britons from creating new businesses, and scare off investors. The government should instead focus on leaving money in the hands of entrepreneurs. It is their hard work that’s going to create the jobs and wealth needed for full economic recovery.

(a subscription is required to view the whole article, but a free trial is available)

For readers seeking further analysis of the Capital Gains Tax proposals, I recommend this post by Steve Baker.