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Article Artículo

Think of the Money Physicians' Families Would Save on Health Care Costs If We Ended Protectionism for Doctors

One positive item that is on the agenda of the Republican Congress is an overhaul of the corporate tax code. The basic plan is to hugely simplify the tax in a way that would eliminate almost all deductions, most importantly the deduction for interest payments.

I am big fan of this change because the tax shelter industry is both an enormous source of waste in the economy and major generator of inequality. In particular, the private equity (PE) industry is largely about tax arbitrage, with much of the profits in the sector due to the fact that PE companies can radically reduce the liability of the companies they buy. This allows them to make a fortune when they resell them to the public, typically within a few years after they buy them. (See the book by my colleague Eileen Appelbaum and Rose Batt, Private Equity at Work: When Wall Street Manages Main Street.)

PE is the source of many of the biggest incomes in the country. Think of folks like Mitt Romney and Peter Peterson. PE partners often make tens of millions of dollars a year, and paychecks in excess of a hundred million are not uncommon. Eliminating this sort of tax arbitrage, as the Republican tax reform would do, would get rid of this source of waste generated enormous inequality.

For some reason, this part of the story has barely been mentioned. Ironically, the issue that has been highlighted is the treatment of imports and exports. While the tax is not directly a value-added tax like the ones in place in European countries, it has many features of a value-added tax. (A value-added tax is essentially a sales tax.) The proposed tax can be thought of as a hybrid between a value-added tax and an income tax.

Anyhow, the proposal would treat the tax in the same way that countries treat a value-added tax. It is applied to all imported items and refunded on exported items. Some proponents of the tax argue that this tax treatment is one of the great advantages of the tax since it would promote U.S. exports. The econ theorist types dismiss the argument by saying that changes in currency values, specifically a rise in the value of the dollar, would offset any gains in the competitiveness of U.S. goods and services from the tax.

Color me as skeptical on the full offset argument, but ironically the prospect of a full offset is being put forward as an argument against the tax. Neil Irwin makes the case in his column in the NYT this morning.

CEPR / January 09, 2017

Article Artículo

Rural Folks Versus City Slickers

I see from the Twitterverse that this NYT column by Robert Leonard, on why rural voters don't like Democrats, touched some nerves. The main complaint stems from Leonard's comment that rural voters see themselves as subsidizing the big cities:

"In this view, blue counties are where most of our tax dollars are spent, and that’s where all of our laws are written and passed. To rural Americans, sometimes it seems our taxes mostly go to making city residents live better. We recognize that the truth is more complex, particularly when it comes to social programs, but it’s the perception that matters — certainly to the way most people vote."

The gist of the angry Twitter comments was effectively "who cares about the hicks' perceptions, the reality is that the tax subsidies go the other way."

Well, this might a good teaching moment. Only the ignorati would focus exclusively on tax and spending flows. As everyone who has read the good book (Rigged — it's free) knows, the government directs income flows in a wide variety of ways that go beyond normal tax and spending flows.

CEPR / January 06, 2017

Article Artículo

Haiti

Latin America and the Caribbean

World

Senator-Elect and Former Paramilitary Leader Guy Philippe Arrested on Drug Charges

UPDATE 1/6/2017: The federal indictment against Philippe has been unsealed. It is available here. 

Guy Philippe, a paramilitary coup leader and DEA most-wanted fugitive who was elected to Haiti’s Senate late last year, was arrested on Thursday, just days before he would have been sworn into office and obtained immunity. Philippe has been wanted under a sealed drug indictment in the United States for years, but previous attempts at arresting him failed. Last year, the DEA confirmed to me that they maintained “apprehension authority” for Philippe, but would not confirm if any active efforts were underway to do so. He will now be extradited to the United States to face charges, though no indictment has been unsealed as of Thursday night.

Although Philippe has spent most of the past decade in Haiti’s rural Grand Anse department where he maintains strict control, he became more active in the country’s politics over the past year as he campaigned for senator. President-elect Jovenel Moise, from the PHTK party, openly campaigned with Philippe and his party allied with Philippe’s early in 2016. A PHTK adviser, Renald Luberice, tweeted shortly after the arrest that it was “illegal and arbitrary.” Fires and roadblocks almost immediately went up in Phillipe’s hometown and surrounding areas, according to local news reports.

After last year’s elections were scrapped due to fraud and Michel Martelly left office without an elected successor, Philippe became one of the most outspoken critics of the new interim government that took over. In February 2016, he threatened "civil war" if elections were not held by that April. In May, with elections still yet to occur, Philippe was alleged to be the ringleader of an armed raid on a police station in Les Cayes, in southern Haiti. Elections were eventually held in November 2016 and Philippe won a seat in the Senate, representing the Grand Anse department. Parties allied with PHTK and Philippe will make up the majority of the incoming parliament to be sworn in next week.

Over the summer, a source close to the Haitian government, who requested anonymity, suggested that the US would move against Philippe before he became Senator to “send a message” to the incoming parliament, which includes other figures accused of corruption and drug trafficking. Now that appears to have happened, but not before he helped his allies secure an electoral victory this past November.

Philippe, however, is widely believed to have been involved in murders, atrocities and other human rights abuses over the past 20 years, while serving a political agenda backed by Haiti’s elite and their international allies. He received training by the US military while a cadet in Ecuador in the early 90s before returning to Haiti in 1995. However former president Jean Bertrand Aristide had disbanded the military that same year, due its long history of involvement in atrocities, human rights abuses and coup d’etats. Philippe, who has, in his own words, “always dreamed of becoming a soldier,” instead became police chief in the Delmas neighborhood of Haiti’s capital Port-au-Prince. During his tenure, according to Human Rights Watch, “dozens of suspected gang members were summarily executed, mainly by police under the command of Inspector Berthony Bazile, Philippe’s deputy.”

In 2000, Philippe was accused of orchestrating an attempted coup d’etat against president Rene Preval, but before he could be apprehended he fled to the neighboring Dominican Republic. At first, the Dominican authorities told the Haitian government they would help arrest the fugitive police officer and his allies. According to a former Haitian government official, who requested anonymity, Dominican police apprehended Philippe and were set to hand him over to Haitian authorities, but later reversed themselves. Philippe would remain free until this Thursday.

From his safe-haven in the Dominican Republic, Philippe was accused of leading attacks on Haitian police stations and supporters of president Aristide, who had just been elected for a second time. In an interview with author Peter Hallward, Philippe denied his involvement but added, “don’t worry, when the time is right people will learn what really happened.” At the time, the Aristide administration was under attack both internally and externally. A “civil society” group calling itself the Group of 184, led by Evans Paul, Andy Apaid and Reginald Boulos among others (all now political allies or financiers of PHTK), advocated for Aristide’s ouster. Philippe, when asked about the role of the Group of 184 in the various police station assaults, responded, “I know that certain political leaders and representatives of civil society can help you with this, since they know everything about what happened … Since they’re cowards, however, they’ll just tell you that they know nothing about it.”

Jake Johnston / January 06, 2017