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February 2005

A Flat-Tax Revolution

OpinionJournal, a Wall Street Journal's editorial page, features an article on how many former communists countries are adopting and implementing the idea of flat tax. Surprisingly even China is toying with the idea:
Mr. Rabushka's book "The Flat Tax" has just been published in Chinese, with a preface by Lou Jiwei, the vice minister of finance. If China were to climb on board the flat-tax train, more than a quarter of the world's population would be filling out their taxes on the back of a postcard.

Here is the best part:

Despite all of its advantages, the flat tax faces enormous ideological opposition. Envy and the lust for the political control that complicated tax regimes can provide are powerful motivations to keep progressive tax systems in place. Karl Marx in "The Communist Manifesto" was among the first to call for "a heavy progressive or graduated income tax" at a time when a flat rate was the norm in advanced countries. He listed it as second in the list of priorities for a new society based on the class struggle.

It is therefore ironic that every country that has adopted the flat tax is a former communist nation--except Hong Kong, the modern originator of the concept, which has seen its new communist rulers retain the flat tax as a centerpiece of its economic policies.

If only India jumps on the bandwagon, half of the world's population will be freed from the burden of heavy and complicated taxation.

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Socialism by choice?

I was going through some of the exchanges I had on IndiaPolicy discussion group. I found very interesting exchange about India being a socialist country by choice.

In response to the demand that "socialist" word be removed from preamble to our constitution, Ram Karan claimed,

The people of India choose to adopt socialist pattern of economic development.

Can people really choose socialism? I don't think people can! Here is my response:


Mr. Ram Karan do you think people, whose properties were appropriated
by Indira Gandhi's Govt. in the name of Nationalism, choose to have
socialism? If they indeed "choose" to have socialism why was force
necessary to take their property.

Oh, I see. You mean to say MOST of the people chose to adopt
socialistic pattern of economic "development". Indeed, according to
same logic a village can "choose" to make a widow sati. You see, in
socialism people have freedom to choose for others. What a craze!


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Dollars and Oil

Daniel Drezner asks, "How stable is Bretton Woods 2"?
Economists are labelling the current monetary arrangements as Bretton Woods 2. Under this system, the U.S. is running massive current account deficits to be the source of export-led growth for other countries. To fund this deficit, central banks, particularly those on the Pacific Rim, are buying up dollars and dollar-denominated assets.
Why do most of the countries accumlate dollars? If all they wanted to subsidize export-led growth they could have purchased any other currency, say Euro. I think a major reason is because their biggest import is oil from the Middle Eastern countries. To buy oid they need dollars. Why?

Because M.E. countries demand dollars for oil! Oil selling countries need a currency which has low inflation and also make it easy for them to invest in a relatively low-tax property-safe environment. US provides a reasonably low-tax, property-rights based economic and political environment to the Oil selling countries. Plus, US also protects them from invasion by maintaining bases in the M.E. region.

If oil selling countries in M.E. region decide to switch to Euros, they may not be sure if US will protect them with the same enthusiasm. Also, in order to invest in US economy they will have to again convert Euros to US dollars.

Therefore, dollar may reign as an international currency of choice until countries in M.E. region decide to do something different.
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What's the deal with "Off the Record"?

This post at Coyote Blog puts things in the perspective:
Anyway, I mention it here because whether his comments were "off the record" seems to be an important part of the controversy. I can't think of any ethical justification for this distinction. I can understand when comments are "private" (say with my family around my house) or "confidential" (say with my managers about what we are paying someone) or even "anonymous" (such as when a source might be blowing the whistle on their boss). What, though, does it mean if public comments in a public forum are "off the record"? ... The only other argument I can come up with is that the media tends to be so incompetent that they can seldom summarize a speaker's remarks correctly or quote them in context, and speakers know this, so they use "off the record" to protect themselves from the media's incompetence.

Two is a company, three is a crowd

Reason Magazine on St. Valentine
Around 270 A.D.—according to one tradition, at least—St. Valentine, a Roman cleric, was imprisoned for his opposition to Emperor Claudius' decree that young men (his potential crop of soldiers) could no longer marry. Valentine performed their ceremonies anyway and was thrown in jail for his obstinacy. His belief was that marriage is too sacred a rite to relegate to the incompetence of state bureaucracy. And, on February 14, he was executed for that belief. ...

It is time to privatize marriage. If the institution is really so sacred, it should lie beyond the withering hands of politicians and policy makers in Washington D.C. There should be no federal or state license that grants validity to love. There should be no state-run
office that peers into our bedrooms and honeymoon suites. If the church thinks divorce and homosexuality are problematic, it should initiate the real dialogue to address these problems in-house rather than relying on state-sponsored coercion to affirm doctrinal beliefs. And if tax-codes and guardianships need some classification for couples, let's revise civil union standards to reflect those needs.

I agree, it's getting awfully crowded in marriage!