To avoid Detroit’s Fate Chicago looks at Revenue Generation from Speed Cameras

Posted by PITHOCRATES - August 11th, 2013

Week in Review

The City of Detroit bankruptcy shows how the massive costs of a city’s public sector are strangling these cities.  Promises of generous pensions for a long retirement and free health insurance up until you die are just promises these cities can’t pay for.  So some (like Detroit) raised their tax rates so high that people left the city in droves.  Further reducing the tax base.  While other cities turn to other revenue generating schemes (see Speeders were plentiful in camera test run by David Kidwell and Bill Ruthhart posted 8/12/2013 on the Chicago Tribune).

As Mayor Rahm Emanuel rolls out his long-delayed speed camera plan, new numbers his office released suggest that drivers who speed in Chicago could rack up way more in fines than a cash-starved City Hall initially projected.

The mayor had hoped to bring in $30 million this year. But results from a monthlong test of the automated camera system indicate the city could reap well into the hundreds of millions of dollars in the program’s first year.

City transportation officials argue that estimate is overblown, but the test period statistics the mayor’s office released Friday reinvigorated critics who argue that the program is more of a cash grab than the child safety measure Emanuel sold it as…

City transportation officials put estimated first-year revenues at $40 million to $60 million, arguing that several factors will cut down on the number of tickets actually issued.

For starters, they argue that it’s incorrect to estimate revenues based on the test program. They suggest the money will never reach into the hundreds of millions of dollars because of a number of factors. The most important: the fast learning curve of Chicago drivers…

Ald. Leslie Hairston, 5th, who voted against the speed camera program, said the number of speeders captured on the test cameras supports her insistence that the main motivation is to generate more city revenue.

“I guess this is just going to be a city for wealthy people, that’s where we’re headed,” she said…

The speed camera rollout was scheduled for closer to the start of the year, but it was delayed after City Hall came under scrutiny following Tribune reports of an alleged bribery scandal involving its 10-year-old red light camera program.

Making the streets safer for children is a noble goal.  But like their red light camera program it’s all about the Benjamins.  The money.  And they love cameras because they can rake in the money without having to put more costly public sector workers (i.e., cops) onto the streets.  That is, they’re outsourcing these costly union jobs to machines.  To minimize their labor costs.  Just like corporations try to minimize their labor costs.  Because union workers are very, very expensive.

But like every government revenue policy they’ve overstated the expected revenue from these cameras.  Just like a higher cigarette tax rate reduces cigarette tax revenue.  Taxes, and these revenue cameras, change human behavior.  Actually achieving the stated purpose for them (better health if people don’t smoke and safer streets if speeders are punished).  Which means though they have a burst of revenue in the beginning it will eventually taper away.  Requiring a new revenue generating scheme.  And then another one to replace that one.  And so on.  On and on.  Forever and forever.  Instead of doing the simpler thing.  And the thing that would work best.  Forever and forever.  Just stop spending so much.

If the public sector union enjoyed pensions and health care benefits like they do in the private sector there would be no Detroits going bankrupt.  Because there would be no generational theft.  These workers would provide their own pensions—401(k)s—and pay a much larger portion of their health care expense.  And they would work into their Sixties (or more) like the rest of America.  Instead of retiring in their 40s or 50s.  To enjoy a retirement that in some cases lasts longer than their working career.  This would solve the budget problems of the big cities.  Instead of passing it on to future taxpayers who were not included in those generous contract negotiations that they find themselves stuck paying for.

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The Rising Costs of the British Welfare State has the Taxing Authority shaming People using Legal tax Avoidance Schemes

Posted by PITHOCRATES - August 11th, 2013

Week in Review

Britain’s aging population and her vast welfare state is making government very expensive per taxpayer.  As the tax base shrinks and people live longer into retirement state pensions and the National Health Service are consuming an ever larger percentage of the available pot of money.  Forcing the taxing authorities to get more money from each individual taxpayer.   Especially the wealthy.  Who are paying confiscatory tax rates to make up for that shrinking tax base.  So these people use every law in the tax code to minimize their tax liability.  Which the taxing authority strongly objects to.  As they want rich people to submit and pay.  No matter the amount they must pay (see Britain plans to name, shame ‘cowboy’ tax advisers by William James posted 8/12/2013 on Reuters).

British authorities would get the right to name and shame tax advisers who deliberately steer their clients into tax avoidance schemes that are likely to break the law, under a government proposal announced on Monday…

Tax avoidance schemes seek legal ways to reduce tax bills for companies or wealthy individuals. But some which take advantage of complex ownership structures, often involving overseas tax havens, are illegal.

The new policy would empower Her Majesty’s Revenue and Customs (HMRC) to name the so-called high risk tax advisers it considers to be promoting schemes which are deliberately opaque and likely to be hiding illegal activity.

Despite tax avoidance schemes being legal and the fact that only some people may be breaking the law the taxing authority will shame tax advisors who help their clients to not willingly submit and pay.  No matter how high those tax rates get.  Of course it’s nothing new in Britain.  For they have a record of excessively taxing some of their people.

The British Americans, for example.  But in the 1700s it was the cost of world war that they were trying to pay off.  Today it’s the cost of their massive welfare state they’re trying to fund.  Of course, that war debt may have lost the American colonies.  But it built an empire that lasted for a century.  So that war debt could be looked at as an investment into the future of all British people.  Unlike the cost of the welfare state.  Where it is just generational theft.  For those taxes today pay for obligations from the past.  Which doesn’t invest into the future of all British people.  But discounts their future.

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U.S. Expatriates giving up their Citizenship to escape the Long Reach of the IRS

Posted by PITHOCRATES - August 11th, 2013

Week in Review

Once an American always an American.  As far as the IRS is concerned, that is (see Americans Giving Up Passports Jump Sixfold as Tougher Rules Loom by Dylan Griffiths, Bloomberg, posted 8/9/2013 on Yahoo! Finance).

Americans renouncing U.S. citizenship surged sixfold in the second quarter from a year earlier as the government prepares to introduce tougher asset-disclosure rules.

Expatriates giving up their nationality at U.S. embassies climbed to 1,131 in the three months through June from 189 in the year-earlier period, according to Federal Register figures published today. That brought the first-half total to 1,810 compared with 235 for the whole of 2008.

The U.S., the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit. Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport.

Just to clarify what this means, these are people who no longer live in the United States.  They earn their money outside of the United States.  And they pay taxes to the countries they live in on the income they earn while living there.  But they still hold onto their U.S. citizenship.  In case they want to return to the United States one day.  Where they may resume earning income there.  And paying taxes there.

Taxes are supposed to pay for the cost of government that is providing for you.  The military that protects the United States.  Social Security.  Etc.  Things these expatriates may in all likelihood never use.  True, they may benefit from the U.S. military keeping the peace in the world.  But no more than the people living in these other countries.  So this is not about financing the cost of benefits they are consuming.  It’s all about funding out of control government spending that they do not benefit from in the least.  Green energy subsidies.  The Obama stimulus.  Obamacare.  Food stamps.  And other federal assistance programs.  Benefits that are in most cases an ocean away from these people.  Yet the U.S. government wants to track these people down.  And make them pay taxes for stuff they’ll never use.  Unlike every other nation in the Organization for Economic Cooperation and Development.

The additional compliance costs for companies to ensure that Americans they hire are filing the correct U.S. tax returns and asset-declaration forms are at least $5,000 per person, said Ledvina.

For individuals, the costs are also rising. Getting a mortgage or acquiring life insurance is becoming almost impossible for American citizens living overseas, Ledvina said.

“With increased U.S. tax reporting, U.S. accounting costs alone are around $2,000 per year for a U.S. citizen residing abroad,” the tax lawyer said. “Adding factors, such as difficulty in finding a bank to accept a U.S. citizen as a client, it is difficult to justify keeping the U.S. citizenship for those who reside permanently abroad.”

So these people are not giving up their U.S. citizenship because they are greedy.  They’re doing it because it is too difficult and too costly for them and their employer if they hold onto their U.S. citizenship.  Of course, once they give up their citizenship the government loses all access to their money.  So what’s next?  Preventing people from ever leaving the United States?  Turning the U.S. into a police state?  Or would it be simpler just for the government to stop spending so much?

I think most people would prefer a government that spends less than living in a police state.

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Keynesian Economics Destroyed Good Lending Practices at our Banks and gave us the Subprime Mortgage Crisis

Posted by PITHOCRATES - August 11th, 2013

Week in Review

In the days of classical economics, before Keynesian economics, people put their money into a bank to earn interest.  The banks gathered all of these deposits together and created a pool of investment capital.  People and businesses then went to the banks to borrow this capital to invest into something.  A house to start a new family in.  Or a factory.  And the more people saved the more money there was to loan to investors.  Which kept the cost of borrowing that money reasonable.  And created booming economic activity.

It was a beautiful system.  And one that worked so well it made the United States the number one economic power in the world.  Then John Maynard Keynes came along and ruined that proven system.  By telling governments that they should intervene into their economies.  That they should manipulate the interest rates.  By printing money.  Which changed the banking system forever (see The Housing Market Is Still Missing a Backbone by GRETCHEN MORGENSON posted 8/10/2013 on The New York Times).

Yet with the government backing or financing nine out of 10 residential mortgages today, it is crucial to lure back private capital, with no government guarantees, to the home loan market. Mr. Obama contended that “private lending should be the backbone” of the market, but he provided no specifics on how to make that happen.

This is a huge, complex problem. In fact, there are many reasons for the reluctance of banks and private investors to fund residential mortgages without government backing.

For starters, banks have grown accustomed to earning fees for making mortgages that they sell to Fannie and Freddie. Generating fee income while placing the long-term credit or interest rate risk on the government’s balance sheet is a win-win for the banks.

A coming shift by the Federal Reserve in its quantitative easing program may also be curbing banks’ appetite for mortgage loans they keep on their own books. These institutions are hesitant to make 30-year, fixed-rate loans before the Fed shifts its stance and rates climb. For a bank, the value of such loans falls when rates rise. This process has already begun — rates on 30-year fixed-rate mortgages were 4.4 percent last week, up from 3.35 percent in early May. This is painful for banks that actually hold older, lower-rate mortgages.

In other words, the federal government’s intervention into the private sector economy caused the subprime mortgage crisis.  And the Great Recession.  By removing all risk from the banking industry by transferring it to the taxpayer.  This created an environment that encouraged lenders to adopt poor lending standards.  Because they made their money on loan initiation fees.  No matter how risky those loans were.  And not by managing a portfolio of performing mortgages.  Which kept the bank honest when writing a loan.  As they would feel the pain if the borrower did not make his or her loan payments.  But if they sold those loans and broomed them off of their balance sheets what would they care if these people ever serviced their loans?

This is what you get with government intervention into the free market.  Distortions of the free market.  Keynesian economics was supposed to get rid of recessions.  By cutting away half of the business cycle.  And just keeping the inflationary side of it.  Trading permanent inflation for no recessions ever.  But since the Keynesians began intervening we’ve had a Great Depression.  A subprime mortgage crisis.  And a Great Recession.  All because they tried to improve the free market.  Which also, coincidentally, enabled Big Government.  The ultimate goal of Keynesian economics.  To get smart government planners in control of our lives.  Just like they were in the former Soviet Union.  But revolutions are messy.  So the government planners bided their time.  And slow-walked their way to power.  First they took control of the banks.  And now they have health care.  Which they will destroy.  Just as they destroyed good lending practices.  Which have given us the worst economic recovery since that following the Great Depression.

Anytime you move away from capitalism things get worse.  When this nation embraced free market capitalism we became the number one economic power in the world.  And the destination for oppressed people everywhere in the world.  For the better life that was available in America.  While the nations that chose the state planning of socialism and communism became those places oppressed people wanted to flee.  And life in those nations only got better with a move towards capitalism.  China may soon become the world’s number one economic power.  But they’re not doing this by adhering strictly to their state-planning ways of Mao’s China.  No.  They are doing this by moving away from the state-planning of Mao’s China.  To something called state-capitalism.  Pseudo-capitalism.  Just hints and traces of capitalism simmering in state-planning stew.  Where communist planners still control the people’s lives.  A direction America is slow-walking itself to.  Slowly.  But surely.

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Spain wants to tear up the Treaty of Utrecht and take back Gibraltar from Britain

Posted by PITHOCRATES - August 11th, 2013

Week in Review

8/14/2013 CORRECTION:  There were factual errors/omissions in this piece.  We apologize for them.  And we apologize to the good people of Spain if we have offended them.  But it should be noted that some of the corrections are from quotes pulled from the sourced Mirror article.  A British newspaper.

The point of the piece is a recurring theme in history.  There are rarely any innocents when it comes to international disputes.  That was the point of the French and the Spanish helping the Americans during the Revolutionary War.  They did this not for American interests but for their own interests.

We also will note that the world’s power center shifted from the Mediterranean to the great sea powers of Europe.  Because these great European powers advanced seafaring to the point that they were first to conquer the oceans.  Also, the man that discovered America (Christopher Columbus) was sailing for Spain.  During the time of the Age of Discovery.  Where Spain dominated that discovery.  And Spain was home to the School of Salamanca.  Where the seeds of the Renaissance and the Enlightenment were sown.  And they would bear their greatest fruit in the late 18th century.  Thanks to America’s Founding Fathers being students of the Enlightenment.  So Spain has a formidable place in world history.  One that we admire and greatly respect.

A reader from Madrid sent in a well-written and very respectful criticism.  We include it here in its entirety.

Dear Pithocrates, I have read your paper on Gibraltar which is rather accurate but there are some missing points which are very relevant to understand the roots of the issue. These points are as follows:

a) It is true that the Spanish captured Gibraltar from the moors in 1462, but you shouldn´t omit that the moors captured it previously from the visigotic kingdom of Spain in 711.

b) You state that “Gibraltar was captured in turn by the Royal Navy in 1704”, but you omit that it was in the context of a Spanish dynastic sucesion war and this capture was in the name of one of aspirants to the Spanish crown, supported by British and Dutchs.

c) The Treaty of Utrecht didn´t handed over the surrounding waters and the istmus where the airstrip lies. The istmus was a neutral zone wich was taken by the British in XIX century by asking quarantine land due an epidemy in Gibraltar. It doesn´t seem fair play. This is the key point for Spain since Gibraltar has no waters to drop blocks in and the airport is out of Gibraltar territory.

I fully agree that we can´t go back to the first wrong but your statement that Spain wants to tear up the treaty is far from reality.  In essence Spain wants the British to meet the treaty in full since is not an acceptable behave to throw concrete blocks in non British waters nor contaminate them with chopy bunkering practice,. If you study the history of Spain, you will learn that some part of it was outstanding, glorious and brilliant and some not, but ALWAYS we have been people of honour and we honoured the treaties we signed off.

Finally I believe that in XXI the gunboat policy is out of place, but in any case it is clear that Spain was not the first to put the navy in this conflict.

I would be very grateful if you share these lines with your readers in order to clarify the situation. Spaniards and British have had a long common history. We have been rivals for centuries and in the past we fought very often each other and sometimes were allies. We have in Gibraltar a common “heritage” and we should be intelligent enough not to make it a wedge but a hinge between us.

Best, regards,
[name withheld by Pithocrates to protect writer’s privacy]
Madrid (Spain)

PD: In addition there is a little geographical mistake in your text: none of the sides of Gibraltar is on the Atlantic ocean, both are in the Med (Mediterranean sea is considered eastward Tarifa).

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Do you know what you will find at the southern tip of Spain?  Britain.  That’s right.  Gibraltar belongs to Britain.  Something Spain isn’t all that happy about.  Kind of how Argentina isn’t all that happy about Britain being in the Falkland Islands.  And both Argentina and Spain try to make life difficult for the British living in these British possessions (see Gibraltar: Britain to send Navy warships to Mediterranean in show of force to Spain by James Lyons posted 8/9/2013 on the Mirror).

Britain is sending warships to Gibraltar after David Cameron failed in his attempt to end the diplomatic row with Spain…

The 10-vessel Med visit follows weeks of rising diplomatic tension as the Madrid government holds up traffic at the border in retaliation for Gibraltar’s efforts to stop Spanish trawlers plundering fish stocks…

The PM, in a phone call to his Spanish counterpart Mariano Rajoy, issued a coded warning of legal action over the border checks and the threat to impose a £43 crossing fee.

But the checks still happened today and the Spanish hit back by criticising the Gibraltar government for making an artificial reef to protect fish stocks.

Under the seas surrounding the Falkland Islands are oil and gas deposits.  In the waters around Gibraltar it’s fish stocks.  So there are economic reasons.  But what really irks Spain is that unlike the cold and windy Falkland Islands Gibraltar is a sunny vacation paradise.  And you don’t need a boat or a plane to get there from Spain.  All you have to do is drive there.  And cross an active runway.  Yes, the road through Gibraltar actually crosses an active runway.  Why, you may ask, doesn’t the road go around the runway?  Well, the thing is, Gibraltar is so narrow that one end of the runway ends at the waters of the Atlantic Ocean.  While the other ends at the water of the Mediterranean Sea.

Gibraltar is an outpost of Britishness at the mouth of the Mediterranean, and has been for 300 years.

The 2.3 square miles land mass, dominated by the 1,300-foot limestone Rock of Gibraltar, is one of the last remaining parts of the empire…

The 30,000 inhabitants of the British Overseas Territory cling to their UK roots.

Sterling currency, red post boxes, familiar British shops and banks and the use of the English language are all legacies of the Rock’s long association with Britain…

The results of several referendums in Gibraltar over the years, the most recent in 2002, have been overwhelmingly in favour of remaining linked to Britain.

So it’s only a small sliver of land.  And the people who live there are British.  And want to remain British.  As it is in the Falklands.  Referendum after referendum is always the same.  These British people want to remain British.  It makes one wonder what would happen to them if Spain and Argentina got their way.  Would they deport them?  Segregate them?  Or simply make them stop being British?

So how did it come to this?  How did a tip of Spain become British?

Captured from the Moors by the Spanish in 1462, Gibraltar was captured in turn by the Royal Navy in 1704.

Nine years later it was officially handed over to Britain in the Treaty of Utrecht, and it has remained in British hands ever since.

It is this treaty which is at the heart of Spain’s claim to the land.

The Rock was ceded to Britain “to be held and enjoyed absolutely, with all manner of right for ever, without any exception or impediment whatsoever”.

But successive Spanish governments have argued that this is an anachronism and that Spain’s territorial integrity justifies the return of Gibraltar to Spanish control.

Critics of Spain’s attitude towards Gibraltar have pointed out that it has its own city enclaves, Ceuta and Melilla, on the north African coast, bordering Morocco.

Despite repeated demands by Morocco that the cities should be returned to its territory, Spain refuses to do so.

Interestingly, the Spanish took the land from someone else.  The Moors.  So the British didn’t do anything the Spanish didn’t do.  They got the land by military conquest.  Then made it permanent by treaty.  A treaty they say now is silly to maintain.  Because Gibraltar is attached to the Spanish mainland and logically belongs to them.  While they themselves are holding on to lands that by their logic belong to Morocco.

The Spanish Empire once stretched throughout the world.  But it was overtaken by the British Empire.  Whose representative government and capitalism vaulted the British into the number one world power.  While the Spanish Empire declined the British Empire only grew stronger.  France, too, lost bits of her empire to the British.  Which is why the French aided the Americans in the American Revolutionary War.  And why the Spanish joined that conflict by allying themselves with the French against the British.  Neither of them cared about helping the Americans.  They went to war against the British when they were preoccupied with the Americans to reclaim their lost pieces of empire.  And hoped to limit the Americans’ expansion into North America by the treaty that would end the war.  A treaty that would undo the Treaty of Utrecht.  And allow further expansion of France and Spain into North America.

How far back do you go to right past wrongs?  Should Spain return their land to the Moors?  Should they take back Mexico and return it to the Aztecs?  Do you go back to the first wrong?  Which would be difficult without a historical record going back to the first wrong.  So do you go back just far enough?  And if so who determines how far that is?

No.  You can’t do this.  All you can do is honor the treaties you have now.  Treaties that were signed willingly by all parties concerned.  Yes, some parties were negotiating from a position of weakness.  But that’s war.  In hindsight Napoleon would much rather have signed a treaty before losing at Waterloo.  Just as Hitler would have, in hindsight, preferred to sign peace treaties with all combatants before his invasion of the Soviet Union.  But when you wage war and lose you have little choice but to negotiate from a position of weakness.  And because the British bested the Spanish in battle Gibraltar belongs to Britain.  Just as the Spanish would be holding on to Cornwall in England if the roles were reversed.

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