Hedgehog Party

Taxes of the Rich and Very Rich

This NY Times piece confirms a central point of the Hedge Tax proposal.  It also explains the political rationale of the widespread support of the current tax code by the very rich.  Recall an earlier posting of Warren Buffets support for the inheritance tax (he largely avoids paying it).

http://economix.blogs.nytimes.com/2009/12/09/the-rich-pay-more-taxes-than-the-very-rich/?emc=eta1

Fragmented Taxation

The Cap and Trade legislation and the Healthcare proposals before Congress represent more fragmentation of our tax regime.  These bills represent a continuation of the massive complexitiy of the tax regimes that we have allowed to be imposed.

Untended consequences are birthed by these initiatives.  Consider these examples related to the Copenhegan meetings.  I think they represent a permanent disability for manufacturing in the West.  Incidentally, the Russians will reap billions from carbon credits, because they are measured from 1990.  The Russian economic collapse generated massive reductions in carbon emissions.

From EUREFERENDUM

It Pays to be Green

... in Eurabia

The EU's emission trading scheme (ETS) may have been the deciding factor in the closure of the Corus Redcar steel-making plant – reported last week , giving the company a windfall bonus of up to £1.2 billion from the plant closure – on top of other savings.

Earlier this year, Corus – part of the Tata Group Europe - disclosed that its UK steel inventory was "close to exhaustion" and analysts are expecting improved earnings from second-half trading as production is increased to meet a rebound in demand.

Mothballing the efficient Redcar plant (with no expectations of its re-opening) thus fails to make obvious commercial sense, especially as Tata bought the plant only in 2007 as part of its strategy to give it better access to European (including UK markets).

However, revealed by The Times today (although the information has been available since June is an illustration of how valuable an alternative product - "carbon allowances" is to the group.

The paper's story focuses on the rival ArcelorMittal group, pointing out that it has accumulated 20.8 million surplus allowances (EUAs) given to it free by the EU. With the carbon price at over £13, they are worth about £270 million. But, with additional surplus allowances up to 2012 and an increased carbon price – expected to rise to £30 - the company could have gained assets worth around £1 billion.

[...]

This, even for a company the size of Tara steel, is a considerable windfall, over and above the money it will aready make from the EU scheme. But, with a little manipulation, the company can double its money. By "offshoring" production to India and bringing emissions down – from over twice the EU level - to the level currently produced by the Redcar plant, it stands to make another £200 million per annum from the UN's Clean Development Mechanism.

... keep reading.

A Majority of Non-payers

Our tax regime is moving inevitably to a majority of non-payers of income tax.  This is destructiive because in this post http://taxprof.typepad.com/taxprof_blog/2009/12/almost-13-of-tax-.html by the Tax Prof points out, vast numbers of Americans are indifferent to spending and taxation.  With a solid indifferent voter base, it is pretty easy to co-opt enough tax payers to pass any spending program.

That is not the whole story.  Those people that work pay lots of federal taxes in the form of labor taxes (Social Security and Medical taxes).  So not paying taxes is just an illusion.  This is a perfect storm for the political rats, because the true nature of taxation and spending is obscured from the voters.

The Tax Prof goes to the heart of the rationale for the Hedge Tax.  Citizens will make different and more rational choices if they have a simple choice between tax and spend.