Sunday, November 26, 2006

more on college football

I still don't understand why USC's win over a clearly inferior Notre Dame game has anything to do with who should play for the national championship in January. Michigan went into Columbus, shook off an impending blowout, and succumbed 42-39, the game being in doubt until the concluding minutes. It beat the same Notre Dame team, on the road, in a decisive fashion. So USC should play, and Michigan shouldn't? Simply because their schedule ends later?

Maybe Michigan should build a domed stadium and schedule, say, Columbia for the week after the Ohio State game. With their luck, Columbia might win.

italian senate backs new tax bill

The Italian Senate this week passed a new tax bill, tied to the larger Finanziara (budget legislation) by a 162-155 vote. The decision was made without recourse to a vote of confidence and by a margin which did not require support from the small number of senatori a vita (life senators), both of which augur well for the passage of the full legislation when it comes up later this year. The measure approved last week includes, inter alia, a revamped successions (i.e., estate) and gift tax system; tougher enforcement measures for small businesses, business use of automobiles, and sports sponsorship contracts, coupled with an exemption from tax for small agricultural producers; and various nontax measures. The new estate and gift system would imposed rates of 4, 6, and 8 percent depending on the relationship to the recipient, with a one million euro exemption provided for children and other direct discendants.

Thursday, November 23, 2006

democrats confront tax issues

The Democratic Congress has begun to consider its tax priorities for the next two years. According to press reports, these will include, inter alia, efforts to restrict the scope of the alternative minimum tax (AMT) and a possible compromise on the estate tax, together with various base-broadening and anti-evasion measures. The AMT is a particular priority since it hits many voters in high-tax states like . . . New York, where new Ways and Means chairman Charles Rangel makes his home.

The AMT issue demonstrates the difficulty of pushing taxes into a simple left-right dichotomy. The tax is surely unpopular, both because of its financial bite and its sneaky character, pretending to be an anti-tax shelter measure when it is in fact a rather poorly hidden tax increase. Yet the people hit by it--people like me, for example--tend to be upper middle class and reside in the better off parts of the country, which are mostly the ones that can afford to impose higher taxes in the first place. Is relief for these people really a "progressive" measure, or is it simple politics?

The estate tax presents similar quandaries. Surely a fair tax system should tax large bequests with no less enthusiasm than it goes after small gobs of income. Yet as John Langbein has persuasively argued, the tax tends to be arbitrary in nature, reaching farms and businesses while lacking the capacity to confront those forms of inherited advantage--good schools, personal connections, the right way of thinking and speaking--that are most important in a postindustrial society. For this and other reasons, some liberals actually oppose the tax, while others are relatively lukewarm in defending it. One way to deal with such complexity is simply to split the difference, keeping the tax but with a relatively high ($3 million? $5 million?) exemption amount: which is exactly what Congress may do.

chinese leader visits india

Chinese leader Hu Jintao has made an extensive visit to India in which agreements were reached to expand trade between the world's two coming superpowers. Hu told his hosts that India and China were friends--something they haven't always been--and pledge to coordinate the countries' efforts on a variety of economic and other issues. An interesting moment came when Hu told an assembly of Indian leftists to adopt a "more pragmatic and positive approach" toward the development of infrastructure and of the economy, in general. Globalization had provided new and unprecedented opportunities, he said, and the left must be prepared to capitalize upon them. India has meanwhile continued to debate its tax system, including proposals to reduce some taxes on business but parallel discussion of efforts to expand other levies, notably the wealth tax which--owing to a wide range of loopholes--currently brings little revenue despite the increasing affluence in the country.

Sunday, November 19, 2006

the unbearable lightness of college football

Ohio State beat Michigan 42-39 to guarantee at least one Big Ten representative in the national championship game this January (whether Michigan goes also is yet to be determined.) Like Texas's win over USC in last years Championship Game, the game was exciting and fast-paced, but I found both contests dissatisfying, and am struggling to understand why. Here are a few possible reasons:

1. Televised games have become so slow, as a result of advertising, as to lose a great deal of their usual flavor. The Ohio-State Michigan game started at 3:30 and wasn't over until about four hours later. (At least I didn't fall asleep as I did during last year's game which finished at or after midnight.) The endless interruptions make it inevitable that one will lose attention and deprive the games of the needed intensity.

2. Good college football, indeed any sport, requires a balance of offensive and defensive skills. Rather than displaying this balance, the recent "classics" have been lopsided scoring contests in which the winner appears to be outlasting rather than genuinely outplaying the losing side. The games haves just come to resemble computerized rather than real football and, as in professional basketball, discouragedviewers from watching anything before the fourth quarter.

3. The endless hyping of the games, not to mention the nonstop talk about national rankings, have made it all but impossible to live up to their billing.

My personal feeling is that #1 and #2, which are to some degree related (a lot of scoring tends to slow down the game clock) are the principal culprits with #3 close behind. I would be interested in hearing other views, if people care enough by this point to comment. If they don't, well, that's a comment in itself, isn't it?

italian budget bill survives vote of confidence

The Italian budget bill, described in general terms here last week, has survived a vote of confidence in the Chamber of Deputies by a 100-vote margin and moves on the Italian Senate where a much closer vote is expected. Demonstrations against the bill, estimated by the media at 300,000 or more participants, were apparently insufficient to sway enough deputies against it. That the demonstrators did not necessarily agree with one another--some seemed to want increased spending while others preferred lower taxes--may have reduced their impact: it is also possible that a certain demonstration fatigue, following an endless series of cortei for and against every conceivable cause, has begun to set in.

One problem with a large volume of demonstrations is that one has to do increasingly outrageous things to get noticed. Even by this standard, this week's pro-Palestianian rally in Rome, in which demonstrators burned effigies of Israeli, American, and Italian (not a misprint) soldiers, was somewhat over the top, and condemned as so across the political spectrum. That a parallel demostration in Milan--more decorous than the capital if hardly less political--went off comparatively peacably did little to calm the shortened tempers.

The interplay of opposites is, of course, a defining feature of Italian (which is to say human) life. Thus the city of Naples, always the poorest of the big Italian centers, is in the midst of its worst crime wave in history, with people being blown away regularly in streets and markets and even some teenagers joining enthusiastically in the destruction. The good news is that the local soccer team, which has been languishing in the C-league for some time, is now nearing the top of Serie B and with luck--not to mention ongoing point reductions for several scandal-plagued competitors--could make it to the A-league for the first time in memory. A vindication of the city by Vesuvius, or a strange coincidence of fate? In Italy the two hardly differ.

Thursday, November 16, 2006

democratic congress at one week

It is very early to judge, particularly in a lame duck session where the new members have not taken office yet. Nevertheless, the first few days of Democratic control in Washington have been, well, less than impressive. My earlier prediction--that the next two years would be among the best Republicans have had in while--looks increasingly likely.

The first misstep by the new Speaker, Nancy Pelosi, involved the support of John Murtha for majority leader. Whether she was right or wrong about this--in my view neither Murtha nor Hoyer are terribly impressive although Murtha has shown more political courage--it is almost unheard of for an incoming Speaker to be rebuked by her own party in this way. It seems unlikely that President Bush, or the Iranians for that matter, will be intimidated by someone who does not control their own caucus.

A deeper problem concerns the issue of committee chairmen. While the Democrats won close elections in the South and Midwest using moderate-to-conservative candidates like Jim Webb in Virginia or Claire McCaskill in Missouri-, it seems increasingly clear their day-to-day leaders will be of a far more liberal stripe. This is especially true in the House, where the power brokers (Charles Rangel, Rahm Emanuel, Henry Waxman, Pelosi herself) are drawn overwhelmingly from liberal, big city districts with a strong minority or counterculture influence. The "bait and switch" factor, always a risk with the Democratic strategy, looks to become more prominent.

An especially perplexing item is the Democrats' choice of Presidential hopefuls. Whatever their personal merits, candidates like Webb and McCaskill have at least demonstrated they can win in formerly red states. By contrast national liberals, of a Hilary Clinton stripe, seem likely to forfeit at least the 3-5 percent of support that would but the GOP over the top (again) in those States. So the most prominent challenger for the Democratic nomination is Barack Obama who is generally perceived as . . . left of Clinton on most major issues. The calculation appears to be that 2008 will be a straight-line extension of 2006, the Democrats continuing to pick up support until northern liberals become acceptable in enough states to win. But the future is never a pure extension of the present, and those who think it is usually pay for the error.

Saturday, November 11, 2006

india battles tax evaders

Indian Finance Minister P. Chidambaram has announced that sophsticated new search engines willl be used to ferret out tax evaders. According to the Minister, tax evaders tend to think of themselves as "clever," but "we have more information than you think we have." The war against tax evasion proceeds on many levels in India: while Chidambaram discussed computer models the Taxprof website recently discussed a program to use eunuchs--a term which apparently has a wide application in India--to gather information about tax evaders on a less high-tech basis. As they say in Washington, an integrated approach works best.

the italian budget bill: a progressive "Counter-Reformation?"

The Italian budget bill was recently passed by the Chamber of Deputies and, although it is likely to undergo further changes before final adoption, looks set in its essential outlines. The bill may or may not be good news for Italians, but it is bad news for those who believe progressive taxation is in a terminal decline, or that vertical equity issues have lost their punch in Western societies. One of the first acts of Italy's center-left government, the bill--if remaining largely moderate in nature--moves unmistakably in the direction of redistribution and away from the tax-cutting philosophy that characterized the preceding Berlusconi regime.

Like the existing system, the new individual income tax (IRPEF) will have five rates topping out at 43 percent. The difference is that the 43 percent rate will apply to incomes in excess of 75,000 as opposed to the previous 100,000 euros and--important psychologically if not practically--will be made a permanent as opposed to temporary feature of the tax code. The bill further assumes a "back to the future" posture by reinstating credits (detrazioni) in place of the simpler, but less vertically equitable, system of deductions introduced in the last reform. Together with changes in the tax treatment of families and other new provisions, the bill is anticipated to reduce taxes on families having below 40,000 euros of income and increase them, if less than spectacularly, on the highest brackets. A reinvigorated war against tax evasion, which is something of a national sport in Italy, completes the package.

Together with its fiscal implications, the budget bill is an interesting study in what might be called the culture of taxation in different countries. In some countries tax policy is left largely to the experts, the politicians intervening only to set very broad directions. By contrast the Italian tax reform has been front-page news for a month or more, with Berlusconi threatening to lead street demonstrations and a serious threat that the Prodi Government would collapse over the issue. Whether this is really about taxes or simply the continuation of a hard-fought, effectively tied election is difficult to say. One thing is certain: the Italian case demonstrates that tax rates which go down can also go back up, and progressivity, real or imagined, retains its potency as a tax policy mantra.

Wednesday, November 08, 2006

the elections: overnight impressions

I blogged the impending Democratic victory last week, so there's less to say than there might otherwise be. A couple of instant observations:

1. The talk of "tsunamis" and "tidal waves" strikes me as overblown. The Democrats will have something like the same advantage (about 30 or so seats) the Republicans previously had in the House. The Senate lead hangs on a couple of close elections and the support of Joe Lieberman who basically sides with the President on the most important issue--and won decisively, anyway. A forceful correction, but not necessarily a long-term trend.

2. While the Republicans need not panic nationally, they have a serious problem in the blue and even some purple states. Handing out Santorum literature at the polls yesterday, I had it thrown back at me by some voters with a contemptuous look. It was the same look I got in 1980, as a Democrat, campaigning for Ted Kennedy--a look suggesting you are so far removed from the person's concerns that they are not even listening to what you say. If the Republicans don't get more competitive in these locations, they pretty much have to run the table everywhere else--a feat they managed in 2000 and 2004 but, as yesterday's results show, one that you can't always depend on.

3. I think the elections are bad news for Hillary Clinton's presidential ambitions. The national face of the Democrats will now be Nancy Pelosi, a grandmotherly and liberal woman from a big coastal city. Hillary Clinton is a grandmotherly and liberal woman based in a big coastal city. The likelihood that the country will want both its President and legislative leader to be cut from such similar cloth seems remote, although they have in some sense already done that by entrusting power to Bush and the congressional Republicans. Democratic control will also make the Senate a more appealing forum for Clinton; but that is for her to decide.

One interesting point concerns the size of the Democratic victory. As they move from a 25 to a 30 or 35 vote margin in the House, the need to compromise with their own moderates (not to mention Republicans) becomes that much less. That's good news for the leadership, but bad news for the party, which badly needs a moderate face if it is to capitalize on its success more than the Republicans in 1994. The early indications, in which the Democrats have talked in vague terms about "cleaning up" Capitol Hill but offered few genuine prescriptions regarding Iraq or otherwise, are not especially encouraging. I still think the Democrats will win the Presidency in 2008, but their task might actually have gotten harder last night.

Wednesday, November 01, 2006

pre-election musings

All signs in the upcoming election point to a Democratic victory, but how satisfying it will be is another matter. A Republican setback appears to many inevitable, given that the GOP has managed to parlay a more or less 50-50 split into control of all three branches of Government for an extended period, not to mention the unpopularity of the war and a sex scandal that would have seemed unbelievable if it appeared as a fictional plot. Yet Democrats can take little satisfaction in the fact that--with almost every conceivable factor pointing their way--they still manage little better than a tie in most projections. That many people apparently lie to pollsters, and still others refuse to talk to them, make things even more complicated.

One of the more amusing aspects of this election, especially in Pennsylvania, is the Democrats' turn to what are effectively Republican candidates in order to win back control. The candidate to unseat Rep. Curt Weldon (R-Pa.), Joe Sestak, is a former admiral whose commercials show sailors saluting him for effect. The Democrat favored to unseat Sen. Rick Santorum, Bob Casey Jr., is both pro-gun and anti-abortion (we'll leave to the side whether abortion is really a "liberal" position, but it is usually perceived that way). The Midwest has further examples. How these cultural conservatives will adjust to the leadership of Nancy Pelosi, a San Francisco liberal, is less than clear. One candidate proposed to resolve the tension by having the U.S. withdraw its troops from Iraq and then announce that we had won. If this is any indication, the Republicans--as in 1974 and 1992--may find a Democratic victory the best tonic for their party.

A possible positive side, noticed by David Brooks and other commentators, is the return to moderation after six-eight years of extraordinarily polarized politics. I have always believed that the red state/blue state polarity is somewhat exaggerated, an artifact of a series of events (the Clinton scandals and the Iraq war) which tended to balloon partisan differences to greater than their actual level. With Democrats likely to elect a large number of freshman moderates (see above), and GOP hard-liners on the defensive, the way may be clear to a higher degree of cooperation on both domestic and foreign issues. The bad news for the Democrats is that the Presidential candidates most likely to benefit from this new moderation, like John McCain or Chuck Hagel, are primarily Republicans. In a previous column I noted the 40-year cycle in Presidential elections, which predicted a Democratic victory in four of the next five elections (we're now at 1966 in the proverbial pattern). A change this time could make things look quite a lot different four years down the road.