Madagascar update

Last fall I mentioned a deal between Korean conglomerate Daewoo and the gov’t of Madascar, for the former to get half a Belgium’s worth of farmland at basically no charge. Turns out it was more controversial than I thought, caused a revolution, and the new government has revoked the deal. But, as the linked article explains, similar deals are proceeding in several other countries.

This information comes from farmlandgrab.org (“Governments and corporations are buying up farmland in other countries to grow their own food – or simply to make money”), via Alanna Hartzok.

How much fraud is there?

We have an estimate!

Fraud typically gobbles up around 7% of all big contracts.

This is from Watchdog Over Stimulus Spending Toes a Delicate Line, by Neil King, Jr., WSJ 3/9/09. Altho no source is cited, the implication is that this came from Earl Devaney, who according to the article heads the federal Recovery Act Accountability and Transparency Board.

I guess that’s just fraud.  Waste and inefficiency are things entirely different.

The Parasite Protection Act

That’s one of the names Josh Vincent suggests for New Mexico’s SB333, which would reduce real estate taxes on vacant land and make up the shortfall by raising taxes on homeowners and everyone else who actually owns (or rents) land with a structure on it. I imagine some land speculators find themselves in financial difficulty, but they still have enough to influence a few legislators, and I guess this is intended to bail them out. Perhaps they just want to get legally what owners of Cook County vacant land get in practice.

Maybe I don’t know how to search, but I can’t find anything about this bill anywhere on the Internet.

I guess we could name it the “Housing Prevention Act.”

“There was no credit crisis”

This isn’t from some radical leftwing, libertarian, or Georgist journal.

One reason things didn’t fall apart when Congress didn’t immediately act as Paulson and Bernanke demanded [in September '08], may be that there wasn’t any danger of a meltdown in the first place. So say three senior economists working at the Federal Reserve Bank of Minneapolis, who in October examined the Fed’s own data, and concluded in an article titled Facts and Myths About the Financial Crisis of 2008 that the claims that interbank lending and commercial lending had seized up were simply not true. “Bank lending to consumers and to non-financial companies had not ceased, and banks were lending to each other at record levels,” says V.V. Charri, an economist at the Minneapolis Fed.

– Dave Lindorff

Thanks to Econospeak.

Who understands global climate change?

Not me, that’s for sure. I’ve no doubt that command-and-control advocates would have trouble finding a better excuse to tell everyone what to do than to promise us that, if we don’t cooperate, we’ll all be flooded, starve to death, and die of thirst. Yet, maybe there is something to it.

Chicago “leasing” “parking” “meters”

Apparently the City is getting a one-time payment of $1.16 billion (yahoo says $1.15 billion, but what’s $10 million among friends?).  Hopefully this is entirely in cash and will be paid at the start of the “lease.” But what is being given up to one of Morgan Stanley’s financial devices for 75 years?  It’s not really the parking meters, because no meter could last more than a decade or two.  Is it the street space controlled by the meters?   Can the City reduce this space in the future if needed for a driveway, bus stop, hydrant?  What about spaces that currently lack meters but where they might be appropriate in the future?

While the Tribune says rates will quadruple, or more, by 2013, but what happens later?  This deal apparently runs to 2084.  Of course we can be sure it’s fair. The Tribune says

The mayor’s nephew, William Daley Jr., works for Morgan Stanley and lobbies state and Cook County officials on the firm’s behalf.

And according to Reuters

“I think it’s a fair price” for the parking meter system, said Dana Levenson, head of North American infrastructure banking for Royal Bank of Scotland, who helped negotiate the parking lot lease in his former position with the city.

The deal covers “more than 36,000 meters,” which seems to value each space at about $32,000.  Of course that’s a citywide average, surely spaces in outlying districts aren’t worth as much as those in the loop.

One thing that I don’t doubt: Chicago street parking has been underpriced and raising the rates is a smart move for the City.  HIgh Cost of Free Parking author Donald Shoup recommends…

Charge market rates for curb parking.  He defines market rate as the parking price that will yield 85 percent occupancy

Clearly the City has been losing revenue for years, essentially subsidizing motorists while taxing retail purchasers, homeowners, renters, and the rest of us.

Federal Reserve Banks disagree about financial crisis

Minneapolis says the crisis affects only financial firms but other companies can get along OK, but Boston says no, it really is a serious crisis for everybody tho it’s hard to see. The article is from a couple of weeks ago, one way or another recent declines in retail sales and employment seem to mean the crisis has become real. Maybe ’cause folks are worried about what the government will do next.  Thanks to Tasgall for the link.

Maybe the rich do work harder…

…but part of what they work at seems to be under-reporting their taxable incomes.  A paper (pdf) from economists Andrew Johns and Joel Slemrod estimates that folks with “adjusted gross income” below $50,000 understate their incomes by less than 7%, whereas those “earning” $200,000 to $1,000,000 understate by 21% or 22%.  One reason is that the government monitors some types of income very strictly, whereas others are virtually unrecorded.  So they estimate that 99% of the “tax liability” on wage and salary income actually shows up on the tax forms, compared to only 88% for capital gains, 48% for rent and royalty income and 28% for farm income. The research is based on 2001 tax year data.

It’s a bizarre subject to study. Researchers cannot know what “true income” actually is, but can only estimate it by looking at what IRS agents found in a sample of returns selected for intense audit.  One intriguing assumption they make is that the IRS examiner’s ability to find hidden income is correlated with her pay grade.

Very high income taxpayers, over $2,000,000, are estimated to have a much lower propensity to underreport than their $200K to $1 million brethren.  Do they hide less?  Perhaps, but there remains “the plausible possibility that the misreporting of upper-income taxpayers is more sophisticated and thus harder to detect.”

All the estimates of under-reporting are looking at the tax laws as they actually exist, and do not consider the various special-interest loopholes to be anything other than part of the rules (pretending, of course, that someone actually understands the income tax code).

A surprising result follows from the “progressive” nature of the income tax:  Even tho low income taxpayers hide relatively little income, their underreporting actually reduces their taxes by a much greater percentage than does that of the high income folks. [This is because, if your income is low, only a small part of it is actually subject to income tax.]

Taxing your genes

might be the logical application of the “ability-to-pay” principle in a technologically advanced society.

[W]e consider how progress in genetics – specifically, the proliferation of knowledge about the human genome – may influence the feasibility and  desirability of a tax that is based on individual human endowments, or, to use the economist’s preferred term, a tax based on ability.

Too scary for me to read right now, but you can find the paper here.  I hope it turns out to be an Onion satire, but I’m afraid it probably isn’t.

From the U of Michigan Office of Tax Policy Research.

Can you measure what doesn’t happen?

If global warming is a problem, and if it can be restrained by reducing emissions of greenhouse gases, then Georgists suggest a tax on emissions would be the way to go.  Proceeds of this tax can be used to reduce taxes on productive activity, benefitting everyone who works.

The alternative “cap and trade” approach gives existing polluters a tradeable right to pollute, tho not quite so much as they have been doing.  These emitters can either clean up their operations, or buy credits from others who have reduced net emissions.

And that’s where the problem comes up, how do you measure emissions which didn’t occur?  Today’s WSJ describes how some landfill operators can get credit for capturing methane emissions from their facilities.  The fact that they might already be harvesting the methane and selling it is irrelevant, so WSJ considers that a “double-dip.”  The article notes that not all landfills are eligible, only those small enough that they aren’t legally required to capture methane.

Describing the experience of one Pennsylvania landfill operator, WSJ notes “its first carbon-credit sale, netting $26,600 after paying $11,900 in fees and commissions…”  31% of the revenue goes to the traders.  There’s the free market in action.