Friday, December 26, 2014

Condolences to Piketty, Saez, and the 250 French Economists Who Endorsed Francois Hollande for President and his 75% Tax Rate on the Super Rich

In 2012, 250 French economists endorsed Francois Hollande for President, especially his proposal to impose a 75% marginal tax rate on the earnings of French residents that exceeded one million euros, an increase of 30 percentage points over the top rate of 45%.  Once in office, Hollande promptly imposed the tax.

Two years later, Hollande is letting the 75% top rate expire on December 31, 2014, which takes it back 45%.

Piketty, Saez, and their colleagues must have had a "Blue Christmas."

The imposition of a 75% marginal tax rate on the super rich had no impact on reducing inequality.  It collected only 420 million euros over two years, amounting to 0.005% of France's October 2014 deficit of 87 billion euros.  Indeed, it is likely that lost investment reduced the incomes of low- and middle-income French households more than 420 million euros.  France's appeal as a home for high-income earners was damaged along with its competitiveness for international senior managers.

It will be a very long time before another leftist French government, or a government of any stripe in Europe, puts Piketty into practice.

Professors Piketty and Saez should have been aware of the famous quote:  "Be careful what you wish for. You just might get it."

Sunday, November 30, 2014

Saturday, November 8, 2014

If Republicans Only Care About The Top 1%

How did they win majorities in both houses of Congress, along with a majority of governorships and state legislatures?

Thursday, October 2, 2014

Monday, September 15, 2014

How to Live in High-Tax Sweden Almost Tax-Free

This post is directed largely at American men aged 50-65 who were enthralled with NBC’s summer 2014 hit mini-series “Welcome to Sweden.”

In 2005, Sweden abolished inheritance and gift taxes.  This opens the door to the possibility of almost tax-free living in Sweden.  But it’s not quite so simple as it sounds.

Swedish Inheritance Law is complex.  For an American man to fully realize its benefits, he should be (1) single (divorced, widowed, or never-married), (2) preferably childless, (3) willing to live a good part of the year in a cold, dark climate, (4) prepared to learn Swedish, (5) become a Swedish citizen, and (6) adjust himself to some peculiar Swedish norms and behaviors.  It would help to have excellent social media skills.

He should plan to arrive in Sweden by early June, when the weather warms and the foliage bursts into green, and be prepared to stay for the summer.  He should seek out Swedish women aged late 40s to mid-60s.  To minimize the pitfalls of Swedish Inheritance Law, he should look for Swedish women who are: (1) single (divorced, widowed, or never-married), (2) childless, (3) an only child, (4) the child of married parents who have no other children from other relationships, and (5) have wealthy parents.

Local and expat social media can provide information on where he is most likely to meet such a woman.  If he hits it off with her, he should state that wants a lifelong marriage, not cohabitation or a summer of “love.”  He should get to know her parents, who will be happy to see her married before they pass away.

Getting married to a Swede in Sweden is not too difficult.  Thereafter getting Swedish citizenship is straightforward.  While these processes are underway, her mom and dad can provide tax-free gifts to support the starry-eyed couple.

When mom and dad pass away, his new wife will inherit tax-free the assets of her late parents.  These are likely to include a fully-furnished house or apartment in Stockholm, country and/or island houses, several cars, plus financial assets on which they can draw for living expenses.   Since he will retain his U.S. citizenship, it is important that income from the estate flows largely to her to avoid his being subject to US personal income tax.

All that’s left is to minimize taxes on consumption.  Swedes face a staggering 25% value-added tax on most purchases (VAT is equivalent to a sales tax).  Since the happy couple will already own all the big-ticket items, they will be spared the 25% sales tax on cars, consumer durables and other household items.  They will benefit from reduced 12% rates on food and restaurant dining (excluding alcohol), and a 6% rates on cultural events.

It’s really important for him to love his wife since the money is hers, and to love living in Sweden.  If she loves him, given the fact that she has been single for a long time, their remaining years will be truly golden.

(Caveat: The reader is advised to study Swedish norms and behaviors before embarking on his possible new life.  He can learn a lot reading English-language blogs about life in Sweden and talking with American men who live with Swedish women in Sweden.)

Sunday, September 14, 2014

Swedes Vote for Higher Taxes, More Government Spending

On September 14, 2014, Swedes voted to replace their center-right government led by Prime Minister Fredrik Reinfeldt with a center-left government led by union leader Stefan Loefven. The era of Fredrik Reinfelt (2006-14) is over!

Bloomberg News on January 21, 2014, summarized Reinfeldt's achievements:

“Prime Minister Fredrik Reinfeldt, whose main policy thrust over the past eight years has been to let voters take home more of their pay....Reinfeldt has prioritized tax cuts as a path to job creation....To help pay for five rounds of income tax cuts since 2006, Reinfeldt has reduced unemployment and sickness benefits. His government has also lowered corporate taxes by 6 percentage points to 22 percent, below the EU average of 22.85 percent....Sweden’s tax revenue has dropped to 44.3 percent of GDP, from a peak of 51.5 percent in 1999, when the Social Democrats were in office.”  Reinfeldt also abolished a tax on wealth.

Reinfeldt has been widely credited with steering Sweden through the global financial crisis at the end of the last decade, consolidating its position as perhaps the healthiest economy in Europe.  After 8 years of lower taxes and more economic freedom, Swedes could not resist the siren song of more government spending for political handouts.  The center-left Social Democrats based their campaign on increasing government spending by 40 billion crowns ($5.6 billion) on job schemes, education and healthcare to be financed by raising personal income taxes from a maximum rate of 57% to 60% as well as company taxes.

Welcome to Sweden!

Saturday, August 23, 2014

Racial Classification: Politics of the Future?

Written in 1980 with the late L.H. Gann, a prophetic warning that ethnic politics would transform the U.S. from a nation of individual rights into group rights, with all its destructive consequences.

Wednesday, May 28, 2014

China Grows, America Stagnates, Europe Declines

For the past few years, most Western “China experts” have predicted China’s Imminent Collapse (CIC).  They cite heavy investment, high savings, dependence on exports, rapid credit creation, property bubbles, declining trade surplus, capital controls, corruption, and so on.

While down from 9-10% growth rates in previous decades, China still grows at 7.5-8%.

How can this be?

The recipe consists of  hard work, rigorous study, personal and national ambition, trial-and-error policies, with an overriding emphasis on growth and jobs.  Sound policies coupled with competent leaders have unleashed the productive potential of the Chinese people, which had been suppressed by the ultra-leftist policies of Mao Zedong.

As China grows, America stagnates and Europe declines.  American businesses and individuals are heavily taxed and regulated, and successful individuals and enterprises are denounced for being productive and seeking profit.  Meanwhile, the number of individuals on government disability has passed 10 million and 5% of the adult population has dropped out of the labor force. A third of university graduates live with their parents.  K-12 education shows no improvement.

European prospects are downright depressing.  It’s ironic that Frenchman Thomas Piketty’s book on  “Inequality” has become a global best-seller, surpassing 300,000 sales.  Amazon can barely keep the book in stock.  Piketty calls for 80% marginal tax rates on high-income earners and redistribution of wealth to reduce inequality.  If adopted, these measures will worsen Europe’s failing “social market economy.”  In the European Parliament elections of late May 2014, voters rejected Piketty’s ideas in France, Britain, Denmark, and other European Union countries.  European leaders are mouthing tax cuts and less regulation as solutions to decline.

Europe is a continent of monuments, museums, churches, and castles served by high-priced hotels and restaurants, hardly a foundation for growth and jobs.  Good thing that Chinese tourists are visiting Europe in ever-rising numbers.  (The proprietor of Thoughtful Ideas, who travels frequently to Europe and speaks passable Chinese, has been watching this trend for years.)

At 7% growth, China’s economy will quadruple in 20 years, far surpassing the combined output of America and Europe.  Who would have thought this possible 30 years ago?