Friday, January 25, 2008

Are taxes a threat to prosperity?

Arthur Laffer has a very intersting piece in today's Wall Street Journal, The Tax Threat to Prosperity.
Mr. Laffer uses hard data and statistical research to prove that:
  • lower marginal tax rates (taxes for the highest-earners) result in bigger tax revenues
  • lower rates for the smaller tax brackets have the opposite result - smaller tax revenues

Tuesday, January 22, 2008

Are Government regulations the cause of all troubles?

Walter Williams has an interesting editorial today on the subprime crisis, and the item that drew my attention is its mention of the Community Reinvestment Act of 1977. It appears as this is another example of Government interference with the free markets, and it mandates lenders to offer home ownership opportunities to underserved populations, and each bank must meet the credit needs of the entire community. In other words, this act that was opposed by virtually all economists forces banks to lend to subprime borrowers. It's like affirmative action and equal opportunity for the banking industry. Do you see any link between this and the subprime problems??

I don't think we need to argue anymore that government regulations are only causing more problems. The Freakonomics guys had an article yesterday in the New York Times in which they show, in their own style, how the Americans with Disabilities Act only helps increase unemplyment for americans with disabilities, while the Endangered Species Act does more to endanger the species on the list than to protect them.

When will politicians, especially liberals, udnerstand that the Government cannot fix externalities, and it should just leave the free markets take care of the problems??

Thursday, January 17, 2008

Economics 102: Mortgages and economic stimulus

Today I read two very informative articles about some hot topics in the economy:

Wednesday, January 16, 2008

New York Times advocating Free Trade??

OK, I lived to witness this... NY Times publishing an op-ed in support of Free Trade: "What to Expect When You’re Free Trading" (by Prof Steven Landsburg).
It's probably in response to the wacko idea of compensating people for job losses due to free trade and outsourcing. What's worse is that even candidates looking for the conservative vote advanced this crazy, populist theory.

From Prof Landsburg's article: Suppose, after years of buying shampoo at your local pharmacy, you discover you can order the same shampoo for less money on the Web. Do you have an obligation to compensate your pharmacist? If you move to a cheaper apartment, should you compensate your landlord? When you eat at McDonald’s, should you compensate the owners of the diner next door?

Monday, January 7, 2008

It's the employees who bear the burden of the Corporate Tax

A just released Treasury research paper shows who bears the burden of the corporate tax. Just when presidential candidates talk about increasing corporate taxes, just to squeeze those greedy, economy boosting, paycheck providing businessman, the Treasury research reaches the conclusion:

The incidence of the corporate income tax is an important issue for designing tax policy. Who bears the corporate income tax can affect overall conclusions about the progressivity of the tax system. Policy analysts have often made assumptions about how to allocate the corporate income tax in measuring the distribution of tax burdens.

A common assumption, based on theoretical models of tax incidence, is that capital (i.e. shareholders) bears the burden of the corporate income tax. Recent empirical work using cross-country data on corporate taxes and wages suggests reconsidering this assumption; labor may actually bear a substantial burden from the corporate income tax.

It shows how a 1% increase in the Corporate Tax will result, in the long run, in an almost 1% decrease in wages.