Your new barons. When and how did the super-rich escaped taxation?

Together with Benno Torgler and Katharina Gangl, I published a piece recently on how to tax the powerful and sophisticated. Our substantive argument on what one should do becomes relatively simple once you understand what happened in the world of Western taxation the last 50 years. Consider the story of what happened in three graphs that essentially cover the question who, when, and how did the few escape taxation?

The first graph is from a 2019 AER paper by Alstadseater (et al.) and is mainly an analysis of the leaked 2016 Panama papers that uncovered the accounts of lots of Western tax-evaders who used a specialised firm in Panama. The graph adds that information to information on tax amnesties and what regular tax audits in Scandinavia find.

The way to read this graph is consider that for instance for the P40-P50 group, which is the 10% of the population just under the median level of wealth in Scandinavia, that random audits by tax officers find no more than 2% extra tax that was hidden, and no-one from that wealth group shows up in tax amnesties or in the Panama papers. They are hence very law abiding citizens. Audits find an extra 4% in the P99-P99.5 group (the poorest half of the top 1% in wealth). The Panama papers (plus tax amnesties) find that that group hides another 1% more than shows up in audits. Even up to the P99.95 group (everyone below the top 0.05%), implied tax evasion is less than 5%.

The implied tax evasion really only takes off in the P99.99 group and above, so only the very richest person out of 10 thousand individuals. The estimate of the level of tax evasion at the top is 30% in this graph, but that of course still misses a lot of ‘legal’ evasion and other illegal methods not picked up in this paper, so the reality is much worse. Note for instance that the majority in the top 0.01% is still poor enough to have to organise tax evasion via intermediaries like firms in Panama and could thus get caught by leaks. Billionaires have their own people and their own laws, so they dont have to run the risk of discovery via some dodgy Panama office.

The answer to the question who evades taxes is thus that whilst the bottom 99.95% of the population pays nearly all their taxes, the very richest (the top 0.01%) does not and has escaped taxation. Note that these people will not be in most surveys or even official income statistics, so we are talking about a group that most researchers looking into tax evasion wont even have in their data.

The next graph is taken from a recent Financial Times articles and answers the question when the big increase in tax evasion happened. Continue reading

Posted in Democracy, History, Law, Politics - international, Politics - national, regulation, Society | 2 Comments

Fair and Balanced

The Fairness Doctrine was a 1949 policy that required holders of broadcast licenses (so TV and radio) to air contrasting views on controversial issues of public importance. It was upheld by the Supreme Court in 1969 but eventually was abolished in 1987 by the FCC commission under the influence of Ronald Reagan. An attempt to reinstate it by Democrat controlled congress was vetoed by Reagan. It was perceived that the doctrine was, in practice, anti-conservative.

Some have argued that this event was the beginning of the partisan broadcast media. Notwithstanding the difficulty of administering a requirement of fairness, I think that it is hard to argue that abandoning the principle even as an aspiration would have no effect on media culture. And Rush Limbaugh’s malign influence seemed to intensify and spread at exactly this time. He would not have been able to broadcast his deliberately provocative nonsense before 1987. Indeed, he got fired from his first radio job at KQV in 1974 for over-stepping the mark.

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Posted in Uncategorized | 2 Comments

Two more interesting articles on covid mass hysteria

Guess which crackpot started his article on covid in that notorious right-wing publication ‘The Guardian’ with the sentence “The virus has been used as a pretext in many countries to crush dissent, criminalise freedoms and silence reporting”?

It’s that obvious conspiracy-nutter the UN Secretary General. He went on to write a message you have all been reading on troppo since March:

Frontline workers, people with disabilities, older people, women, girls and minorities have been especially hard hit. In a matter of months, progress on gender equality has been set back decades. Most essential frontline workers are women, and in many countries are often from racially and ethnically marginalised groups.

Most of the increased burden of care in the home is taken on by women. Violence against women and girls in all forms has rocketed, from online abuse to domestic violence, trafficking, sexual exploitation and child marriage.

Extreme poverty is rising for the first time in decades. Young people are struggling, out of school and often with limited access to technology.

The virus is also infecting political and civil rights, and further shrinking civic space. Using the pandemic as a pretext, authorities in some countries have deployed heavy-handed security responses and emergency measures to crush dissent, criminalise basic freedoms, silence independent reporting and restrict the activities of nongovernmental organisations.

Human rights defenders, journalists, lawyers, political activists – even medical professionals – have been detained, prosecuted and subjected to intimidation and surveillance for criticising government responses to the pandemic. Pandemic-related restrictions have been used to subvert electoral processes and weaken opposition voices.

At times, access to life-saving Covid-19 information has been concealed while deadly misinformation has been amplified – even by those in power.

Nice to see that even the Guardian, which has more than any other newspaper I know been ignoring the collateral damage of the lockdowns it has been egging on, is bending with the new winds.

There was also an interesting letter by Kampf and Kulldorff (he of Great Barrington Declaration fame) published by the Lancet this week. Its significant is more where it was published than what it said. The Lancet was the medical journal that was at the very cradle of the hysteria in January 2020, with the editor of the Lancet going out of his way to accuse governments that did not lock their population down hard and fast enough for his liking of mass murder. It seems that the Lancet is now noticing the change of the winds too and is hedging its bets by publishing letters that effectively condemns those editors of pushing highly destructive policies. Read over the fold for what is a cost calculation of the kind you have been seeing since march. Continue reading

Posted in Coronavirus crisis, Democracy, Health, History, Inequality, Political theory, Politics - international, Science, Social Policy | 21 Comments

Behavioural insights as the new scientism?

I thought I posted this talk from some time ago on Troppo when I gave it back in October, but I can’t find it. So here it is. Apologies if it’s already here. As ever, a raw machine read transcription is over the fold.

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Posted in Economics and public policy | 1 Comment

Cracking the code: How to tell what News Corp really thinks about the price of links

It's in the code

News Corp is telling us what Google should really pay for linking to its sites. It’s telling us in code. And the answer is … $0.00.


What is an Internet link worth? For most of the Internet’s life, this question has been ignored. On the Internet, links have been free, unless they were paid ads displayed by agreement between the linker and the target site.

Now that has changed. Australia has just passed a “news media bargaining code”, which throws this links-are-free philosophy out the window.

The nation’s competition regulator, the ACCC, dreamed up the code. It requires effective agreement about the price of a link that goes from a digital firm like Google or Facebook to a news site like those of News Corp or Nine/Fairfax. And if the parties don’t agree, an arbitrator has to decide between their two offers.

News Corp and other media companies are saying or implying that if only the digital giants were not so powerful, those giants would pay the media companies for links. The ACCC is pretty much saying this outright; it’s the justification underlying the entire code.

But in fact News Corp seems to have already declared that it really believes Google is right, and the correct price is $0.00.

News Corp is saying it in code.

Literally. “Code” is not a metaphor here. News Corp is disclosing its intent right there in its HTML code. If you know where to look, you can see it immediately.

So here’s where to look, and why.

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Posted in Bullshit, Business, Economics and public policy, Information, Intellectual Property, IT and Internet, Media, Politics - national, regulation, Web and Government 2.0 | 19 Comments

Why “final offer arbitration” is Russian Roulette for Google

The legislated “bargaining” process between Google and News Corp is unmoored from reality. Its “final offer arbitration” is unsuited to the task.


Rupert Murdoch

He’s loaded the gun. (Photo provided by Eva Rinaldi on Flickr; CC BY-SA 2.0.)

Updated 21/2/2020 to move the detail of News Corp HTML into a separate story here. Apologies for any inconvenience.

In the debate over the federal government’s news media bargaining code, a rather strange thing has happened: the actual news media “bargaining” has been mostly ignored.

That’s a pity. Because the new law employs an interesting and unusual mechanism for resolving disputes: final offer arbitration.

And final offer arbitration looks thoroughly, disastrously, 100 per cent ill-suited to this situation. It essentially refuses to state any principle for setting a price on links to news sites, and then asks Google to guess at what a government-appointed arbitrator might say.

In other words, it asks Google to play Russian Roulette. No wonder the company is cutting deals.

Final offer arbitration: fine for baseball

Arbitration applies to a dispute under the new code if the two sides can’t agree a price for links to the news site. It’s the bottom line on the code, the condition that dictates everyone’s conduct.

What’s final offer arbitration (or “pendulum arbitration”)? It’s essentially a game-theoretic solution to the question of how much search engines should pay to post links to the websites of News, Nine and other media organisations covered by the code. In a negotiation between News Corp and  Google, say, each side makes one offer. Then an independent arbitrator simply chooses whichever offer he thinks is closer to being right.  Bang! We’re done.

In the right situation, final offer arbitration seems a neat solution. It encourages both parties to make a reasonable offer, for fear that the arbitrator will choose the other offer as more reasonable. Ideally, the two final offers end up very close together.

Now, this can certainly work well in situations where there’s a lot of market data pointing towards an appropriate settlement – price data, existing case law, a long history of prices and conditions. It has been suggested as a way to settle various labour disputes, and actually embraced in US Major League Baseball.

A final offer nightmare case

But in some situations it looks likely to work badly, introducing enormous uncertainty. And that seems likely to be how a dispute between News Corp and Google could end up.

Here’s why. Right now, there’s pretty much no data that links from Google to News Corp benefit Google more than News Corp. This is very different from US baseball, where there’s widespread agreement that players add some value (obviously!), a long history of payments, and relatively narrow disputes about quantum.

Actually, there is some data. But what it suggests is that the benefits run the other way, and that News Corp is getting the better of the current situation.

For a start, right now no news media anywhere get paid for links from anyone. In other words, the law says that arbitrators would have to decide how much Google should pay News Corp, when reality suggests that if anyone pays anyone, for links, News Corp should pay Google.

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Posted in Economics and public policy, Journalism, Media, Politics - national, Print media | 15 Comments

Saving democracy: one secret ballot at a time

From Encyclopaedia Brittanica: “Australian ballot: Voters participating in the secret ballot, or Australian ballot, system in the British general elections of April 17, 1880. Hulton Archive

 

Though I have a deep interest in and faith in sortition as “the other way of representing the people”, my own view of a good system and of the path of activism to get there is protean, eclectic and pragmatic. I wrote this Crikey! column in that spirit. It makes a passing reference to sortition, but is focused on another very simple and critical building block of our democracies as they’re currently constituted – the choice between where voting should be by public and open ballot and where the ballot should be secret. The basic principles seem obvious – secret ballots for citizen’s votes and public voting for their representatives. But some artful exceptions could make a big difference to our current travails.

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As an Irish parliamentarian, Edmund Burke once said that he owed his constituents not just his industry but his judgment, and that if he voted according to their opinions rather than his own judgment he would betray rather than serve them.

This failure to flatter his audience helps explain why he’s better remembered today as a philosopher than as a practitioner of politics. But the distinction he made gives us a key to mending our democracy.

Today, when push comes to shove, politicians’ allegiance is neither to their judgment nor their constituents’ opinion, but to their party. (It is worth noting that political parties were in their infancy in Burke’s time.)

It is not uncommon for legislative chambers around the world to have voted against the judgment of the overwhelming majority of their members and even against the people’s wishes — all at the behest of party bosses.

In this category I’d include numerous votes of the UK parliament regarding Brexit and various decisions of US congressmen and women culminating in the failure to find Donald Trump guilty during his recent impeachment trial — despite Republican Senate leader Mitch McConnell describing then-president Trump’s conduct as a “disgraceful dereliction of duty”.

That conduct moved Trump’s political opponents to some genuine eloquence rather than the usual play-acting. As Senate majority leader Chuck Schumer put it:

Five years ago, Republican senators lamented what might become of their party if Donald Trump became their presidential nominee and standard-bearer. Just look at what has happened. Look at what Republicans have been forced to defend. Look at what Republicans have chosen to forgive. The former president tried to overturn the results of a legitimate election and provoked an assault on our own government, and well over half the Senate Republican conference decided to condone it. The most despicable act that any president has ever committed, and the majority of Republicans cannot summon the courage, the morality, to condemn it.

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Posted in Democracy, History | 12 Comments