“Dick Rowland Image”

”Shoots (News, Views and Quotes)”

– Quotes About Government Education from Letters to Citizens For a
Sound Economy http://www.cse.org

“Teacher’s unions are not the primary cause of academic failure and
mediocraty in American public education, merely a painful symptom. The
entire system of compulsary education, financed by property taxes,
surrenders both your children and your property to the government. Until
citizens acknowledge that public education from its beginning was a
means for social engineering, rather than academic achievement, our
children will be sacrificed upon the alter of secularism at the expense
of learning, morality, and social peace.” — Michael J. Murvihill from
Chicago Heights, IL 2/28/2003

“Damn right Dick! The purpose of the education system is not to provide
jobs for teachers or to line the pockets of corrupt union officials.
It’s to educate children. Between maintaining a monopoly so that unions
can dictate policy and outcomes or giving parents the freedom to help
their children, I’ll side with the children and parents everytime!!!”
— Jeff from Houston, TX 2/27/2003

“Dear Sir, Where is the Democrat outcry against this monopoly, like the
one against Microsoft?? Hmmm??? If children are their # one priority,
I’d hate to see 2,3,4,5 etc.” — Don DeSmedt from Bayonne, NJ 2/27/2003

“If we did away with teacher’s union’s entirely and were allowed to fire
poor performing teachers, schools would be reformed in a matter of two
years. The only purpose of the NEA is to make sure its members,
regardless of how poor their performance, continue to be employed.”
— Julie from Kansas City, KS 2/2/2003

”Roots (Food for Thought)”

– The European Union’s Attack on Financial Privacy Will Hurt the World’s
Capital Markets

By Solveig Singleton

The European Union’s tax authorities are moving to get their hands on
capital invested in the world’s low-tax nations, including Switzerland
and the United States. Representatives of several EU nations,
particularly British Chancellor of the Exchequer Gordon Brown, have
urged Switzerland to abandon her centuries old policy of bank secrecy,
purportedly to help EU nations fight tax evasion. And, in late 2002, the
IRS moved to require U.S. banks to report interest on deposits paid to
nonresident aliens residing in the EU nations-Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Sweden, and the United Kingdom.

Tax evasion is a major problem in Europe. But a rollback of financial
privacy in Switzerland, the United States, and other lowtax countries
would not only not help solve the problem, it would harm capital
markets. Here’s why.

For the government of a hightax nation like France, money that its
residents have invested in Switzerland and the United States is a
tempting target. But the real problem is not that the money has left the
country, but why it has left.

France’s government spends far more than it takes in. France has high
taxes, with a tax burden of about 45.5 percent of GDP, including a top
personal income tax rate of 54 percent and a value added tax of about 19
percent. Like other high-tax countries, such as Sweden and Germany,
France faces a significant problem of tax evasion — about 17 percent of
GDP — which is often accompanied by capital flight. In 2000, France’s loss
of earnings to capital flight was about $40 billion. In 2001, $85.8
billion in capital left Europe.

By contrast, low-tax countries have a far better balance of accounts — and
healthier economies generally. Four European countries with low
taxes — Ireland, the Netherlands, Luxembourg, and Switzerland — account for
only nine percent of European GDP, but attracted 38 percent of foreign
direct investment from the United States between 1996 and 2000. At the
same time, U.S. tax rules attract foreign investment here. Ronald
Reagan’s 1981 tax cuts helped increase capital inflows during the 1980s
by increasing the after-tax profitability of U.S. investments. U.S.
businesses deployed the increased capital available to them to buy more
efficient equipment, raising productivity. Workers became better off as
wages and benefits rose.

What would be the likely result of Switzerland and the United States
sharing more information with EU tax officials? Would France catch more
tax evaders and enjoy a rosier economic picture? That is highly
unlikely. French tax and economic policies simply will not foster
growth. There are other ways for French (and other Europeans) reluctant
to pay taxes to avoid paying them other than sending their money abroad.
Here are some alternate fates for French capital:

*The domestic underground economy and other forms of tax evasion.

*The pockets of emigrants leaving for other destinations (25,000 people leave France every year for tax reasons).

*Magically disappearing, as if it had never existed at all, because taxation destroys human capital-accountants become artists; potential entrepreneurs spend 20 years in graduate school.

*Legal tax avoidance and structuring.

As long as France, Sweden, Germany, and other EU countries remain
high-tax nations, they will fail to accumulate capital. Any concessions
Switzerland makes towards transparency will be of little or no use to
them. It is not that tax evasion is a good thing. It is not. But some
approaches to addressing it transgress on the sovereignty of other
nations and rights of privacy — for nothing.

Yet a diminution of financial privacy would be of consequence for
capital markets. Putting a stop to capital flight might not yield more
tax revenues, but it would mean less available capital for the world
economy as a whole. Capital flight is a misnomer. A better term is
“capital formation.” What goes on in the capital markets of Switzerland,
the United States, Luxembourg, Antigua, etc. is not the passive
reception of capital. It is the creation of capital. Low-tax
environments create the incentives in which wealth is born. And not just
monetary wealth-taxes affect the deployment of human capital and
knowledge. Every time a Swedish doctor stays home to paint his own house
rather than hiring a painter to do it, there is a loss of what his human
capital could have contributed to the world economy.

If the United States and Switzerland concede to the tax authorities of
high-tax EU nations the information they seek, those nations will see no
increase in tax revenues as a result. More of their citizens would
emigrate and permanently give up their citizenship. Companies would
continue to be formed abroad. Evasion would continue to rise as a
domestic problem. And the world as a whole would be poorer. Wealth would
be destroyed.

At this point high-tax nations would have an option. They might declare
themselves satisfied. They might engage in tax reform, addressing
domestic deterrents to capital formation and spurs to tax evasion. They
might even reduce taxes, as tax evasion is lowest in lower tax nations
like Switzerland, New Zealand, and the United Kingdom. Or they might
demand yet more concessions from the United States and Switzerland.

Which course are they likely to take? So far, their most likely course
appears to be to demand more concessions, such as “harmonization” of tax
rates, from low-tax countries. European Union economists have begun to
move in this direction. And there is little in the OECD’s literature to
suggest it recognizes the value of tax cuts.

The irony is, only reduced taxes are likely to produce the kind of
economic growth that EU nations require to sustain their standard of
living-including high rates of government spending. For example, in
1997, Switzerland raised the same amount of tax revenues per capita as
Sweden, even though the Swedish tax rate, at 61.5 percent, was then
double that of Switzerland. Reducing tax rates in Ireland changed the
government’s deficit, at 15 percent of GDP in 1980, to a surplus by
1998.

We can only hope that the new Treasury secretary will keep an eye on the
EU and its allies in the IRS. EU folly should not be indulged at the
cost of capital markets.

Solveig Singleton (ssingleton@cei.org) is a lawyer and senior policy
analyst with CEI’s Project on Technology and Innovation.

Above article is quoted from Competitive Enterprise Institution Monthly
Planet January 2003 http://www.cei.org

”Evergreen (Today’s Quotes)”

“The Constitution shall never be construed to prevent the people of the
United States who are peaceable citizens from keeping their own arms.”
— Samuel Adams

“Death and taxes may be inevitable, but being taxed to death doesn’t
have to be.” — Howard Jarvis

“Every child in America can hope to grow up to enjoy their own tax
loopholes.” — Richard Strout

”’Edited by Richard O. Rowland, president of Grassroot Institute of Hawaii. He can be reached at (808) 487-4959 or by email at:”’ mailto:grassroot@hawaii.rr.com ”’For more information, see its Web site at:”’ http://www.grassrootinstitute.org/

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