Archive

April 11th, 2016

Why tax avoidance is a lousy business strategy

    Earlier this week, the Obama administration put in place new rules - ones with pretty sharp teeth - to block tax inversions, where companies move their "tax residence" to a low-tax country.

    I know, what does that mean and where do you sign up? It means that a U.S. company merges with a foreign company and declares itself, for tax purposes, a U.S. subsidiary of the new foreign parent. The new rules out of the Treasury Department don't outlaw this process, but by blocking some of the most lucrative tax-avoidance tactics that motivate inverters - "earnings stripping" (the parent loads up the subsidiary with debt, who then deducts interest payments from its tax bill), "hopscotch loans" (tax free access to foreign profits), and more - they seriously dampen major incentives.

    So much so, in fact, that the pharmaceutical firm Pfizer decided not to go ahead with their planned merger with the "Irish" firm Allergan, a firm that, according to Bloomberg, "is run from New Jersey but has a legal domicile in Dublin."

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When the 'kindness of strangers' is no longer enough

    One of the biggest unanswered questions of Britain's looming referendum is how much capital might flee the nation if it decides to go it alone.

    As it stands, foreign investors do better in Britain than British investors abroad, and that investment has been a big driver in the U.K. economy. It also helps explain why there's so much concern about the nation's growing deficit in its current account -- the gap between what Britain pays foreigners and what it receives.

    Britain's economy is one of Europe's strongest in terms of growth. But in 2015 the country's current account deficit hit a record, meaning more money was flowing out of the U.K. than into it. After widening for four consecutive years, the deficit reached 32.7 billion pounds ($46.47 billion) in the fourth quarter -- that's 7 percent of GDP, the highest of any developed nation's economy.

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The Clinton Broadway revival

    It will not be the first time that a Clinton relies on the tough-minded voters of New York to salvage a front-running presidential candidacy.

      On March 24, 1992, an insurgent candidate named Jerry Brown (yes, California's current governor) upended Bill Clinton, the Democrats' nominee-in-waiting, in the Connecticut primary. To re-establish his primacy, Clinton went to work in New York.

     A few days after his Connecticut defeat, Clinton spoke to reporters about "all this crap I've put up with" and how he had to deal with "attacks, attacks, attacks on me."

     Of Brown, Clinton said: "I think he gives them easier answers to problems than I do. And a lot of people who are frustrated and angry want simple solutions."

     Sound familiar?

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Sanders, like Clinton, has 'what it takes'

    Hillary Clinton and Bernie Sanders are trading swipes about each other's qualifications (or lack thereof) to be U.S. president. Both may be misinterpreting the credentials required.

    Clinton fired the opening salvo when she assailed Sanders for fumbling an answer about his plan to break up the big banks:

    "I think he hadn't done his homework and he'd been talking for more than a year about doing things that he obviously hadn't really studied or understood, and that does raise a lot of questions."

    Reacting less to the content of her comments than to a headline in The Washington Post -- "Clinton Questions Whether Sanders Is Qualified to Be President" -- Sanders issued a harsh response. He said that Clinton was the unqualified one because she has accepted campaign contributions from Wall Street, voted for the war in Iraq and supported "disastrous" trade deals.

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Sanders Over the Edge

    From the beginning, many and probably most liberal policy wonks were skeptical about Bernie Sanders. On many major issues — including the signature issues of his campaign, especially financial reform — he seemed to go for easy slogans over hard thinking. And his political theory of change, his waving away of limits, seemed utterly unrealistic.

    Some Sanders supporters responded angrily when these concerns were raised, immediately accusing anyone expressing doubts about their hero of being corrupt if not actually criminal. But intolerance and cultishness from some of a candidate’s supporters are one thing; what about the candidate himself?

    Unfortunately, in the past few days the answer has become all too clear: Sanders is starting to sound like his worst followers. Bernie is becoming a Bernie Bro.

    Let me illustrate the point about issues by talking about bank reform.

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Read the law, judge, to see that marijuana can be a sacrament

    A U.S. appeals court says that the federal law protecting religious liberty doesn't shield a Hawaiian church that uses cannabis in its rituals. That's pretty outrageous.

    The decision's perverse logic relies on a cartoonishly rigid idea of religious obligation. And it suggests that the religious-freedom law only protects mainstream religious groups like the Catholic Church, not smaller denominations.

    The case involves the Oklevueha Native American Church of Hawaii, founded by Michael Rex "Raging Bear" Mooney, who is also described as the "Medicine Custodian" of the church. The church draws on an eclectic range of Native American traditions. Its sacraments include sweat lodge ceremonies that take place at the full moon and the new moon. Church members use drugs including cannabis in what they describe as a "communion," seeking to achieve mystical union with the divine.

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Panama is the new Switzerland

    Another century, another tax haven. In the 20th century, the very rich used to park their money in secret Swiss bank accounts. How quaint. And how old-fashioned.

    In the 21st century, as we've just learned, Panama is the new Switzerland. That's where many of today's most wealthy prefer to shelter their money, and for the same reasons: to hide their personal fortune and avoid paying taxes. All you need is a shady law firm to grease the skids, and many families worldwide found just what they were looking for in the boutique Panamanian firm of Mossack Fonseca.

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Obama's sly dig at conservative decline

    You have to admire the multi-level trolling by President Barack Obama. Obama speaks Thursday at the University of Chicago law school, where he taught in the 1990s, and give an interview to Fox News. The law school discussion is targeted at Republican Senate leader Mitch McConnell and his obstruction of Obama's Supreme Court nomination. The interview is an assault on contemporary American conservatism.

    The Supreme Court nomination of Merrick Garland, chief judge of the United States Court of Appeals for the District of Columbia Circuit, is the proximate cause of Obama's visit. "We are going to continue to make the case to Republicans in the United States Senate that they should fulfill their constitutional responsibility," White House press secretary Josh Earnest said. "The president will certainly make that case."

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Monopolies are no fun and games for economic growth

    A basic lesson of economics is that monopolies are bad news. When there's only one company in a market, it can jack up prices to above their efficient level. That gives a big boost to profits, but results in too few people being able to afford to buy what the company is selling. Most markets are not monopolies, but a similar principle holds for situations where there are only a few companies, called oligopolies. A lack of players stifles competition, raising profits but lowering overall economic output.

    It's therefore natural to ask whether the U.S.'s subpar economic growth is caused by a decrease in competition, and in fact, a bunch of people have been suggesting this explanation lately. In an article entitled "Too much of a good thing?," the Economist cites high rates of profit, record levels of merger activity and increasing industrial concentration as evidence of reduced competition.

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Lawmaker raped as a child can't get his bill passed for sex assault survivors

    For the second year in a row, he put it all out there: the shame, the fear, the self-loathing, the pain, the dark details of his horrific, repeated rape.

    An Army veteran and lawyer, Maryland Del. C.T. Wilson, a Democrat from Charles County, stood before his colleagues in Annapolis, confessed that he "really, really" didn't want to be there and told them why he doesn't sleep much at night. Why he hoped his children would never be boys. Why knows he is "a monster on the inside."

    And for the second year in a row, his fellow lawmakers in the Maryland legislature put all that in a drawer. And closed it.

    "It's usually the case when we tell our stories," Wilson said. "Nobody wants to hear this. And we want to be heard."

    Wilson wants his fellow delegates to understand what the adult survivors of childhood sexual abuse endure. And what recourse they have years and years later. And for two years now, he has sponsored legislation aimed at helping them

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