Four Days In Europe

No this post is not about travel. It is about Euro 2020 which, because of the pandemic, is in 2021. The Euros start with 24 teams and play in six groups of four to eliminate eight teams. That’s right, they play 18 games to eliminate just eight teams. As many have commented, the group stage games tend to be boring because sometimes there is a wide talent differential so the game becomes offense versus defense. Always teams play it close to the vest as nobody can afford to be put to the sword. The Euro rules, where four of the six third place teams make it to the knockout stages exacerbate these problems. The last (2016) Euro winner, Portugal, qualified for the 2016 knockouts with three ties and then won four games to become the champs.

As bad as the group stages were, the round of 16 was good. There are obviously eight games and there are two each day leading to our title. There were fairy tales, irony, history, comebacks, and goals, especially late goals. One of the fairy tales was Denmark. Their leader and best player, five time Danish player of the year Christian Eriksen, suffered a cardiac arrest and nearly died on the field in the first game in the group stage. In perhaps the only compelling game in the group stage, Denmark thumped Russia in the last game to earn their way into the round of sixteen. In the only one sided game game during the four days in Europe, Denmark put Wales to the sword four-nil.

Sidebar: Soccer matches are two 45 minute half or a total of 90 minutes. The clock doesn’t stop. Ties only go to 30 minutes of overtime in the knockout stages and it is called extra time. On the other hand, additional time, often referred to as injury time, is determined by the referee at the end of each half and in extra time. Goals are identified by the minute they are scored in. So a goal in injury time could be 45 +2 for the first half or 90 + 1 for the second half or 120 + 1 for extra time. End Sidebar

For irony there was Sweden versus Ukraine. Neither team was favored to get to this round but The Ukraine only got there because Sweden beat Poland on the last day. So The Ukraine was the last team to qualify and only qualified because of their opponent. To be fair, it was probably the worst game of the eight. But it had tension when it went to extra time at one-one. If the score is still tied after 30 minutes of extra time they go to a shootout of spot or penalty kicks (PK) to decide the winner. Just as we were getting ready for PKs, The Ukraine scored one of the latest goals in history, 120 + 1 to win the game. We past certain that the vodka supply in The Ukraine is way down today.

For history there was England versus Germany. See Paul Mirengoff at PowerLine for more details. England beat then West Germany in 1966 to win the World Cup but since then Germany had won almost every significant encounter between the two nations. One was when England’s current coach, Gareth Southgate missed a PK in the shootout. England won two-nil to erase a few ghosts.

Three other games went to overtime and had late goals. Italy-Austria was nil-nil in regular time but had three goals in overtime with Italy getting the odd goal. Croatia scored at 85 and 90 + 2 to tie Spain at 3-3 but lost in extra time 5-3. The Swiss, massive underdogs, scored at 81 and 90 to produce an identical 3-3 score line but then they ousted the world champs, France, in PKs. We are not sure how the Swiss celebrate but the party is likely still going.

Like in football, great games early in a tournament don’t necessarily mean great games later. We hope, but doubt, the remaining seven games will match the eight games in the last four days in Europe.

Carbon Tax And Not A Carbon Tax

The correct answer to almost every question is: It depends. Our friends at the WSJ Editorial page disagree. They think if it is a tax then it is a bad thing. A couple of weeks ago they were delighted that the Swiss said no to what they called climate taxes. We were disappointed that the Editors didn’t tell us much about the proposal. Here is part of what they said:

At least the Swiss were honest enough to tell voters that they would have to pay for their climate indulgences with the likes of a surcharge on car fuel costs and a tax on airline tickets. 

Yes you could read the whole thing to see how frustrating it is but there isn’t much to it. Was the proposal a carbon tax or just a tax on a few activities? How modest or draconian was the tax? What would the receipts be used to fund? There is this:

This explains why America’s climate left assiduously avoids putting carbon taxes on the ballot. 

We are not convinced they have the climate left pegged. It depends. We think the climate left craves a draconian carbon tax and we think that would be a political problem for them. Examples like this one from the Brookings Institute and the actual one from Australia, start out modest ($15 per tonne for Brookings) but ramp up over time. The problem is the ramping up. As the Brookings report notes, estimates for the social cost of a ton of carbon range from $3 to $95. We can’t support a carbon tax at the social cost because the determination of the social cost of carbon depends on too many assumptions.

We still support a modest carbon tax that replaces the gas tax. If the proposal includes future rate increases then no. If there was an adjustment for inflation we could talk. Because a carbon tax eliminates the rationale for at least part of the subsidies to alternative energy we need to talk about that too.

The Right Choice For The Wrong Reason

Folks want to complicate decisions. We see a classic example of that as IEEE Spectrum tells us about Michelin’s (perhaps) wonderful innovation to make cargo ships more efficient. It is a very modern version of a sail:

The French tire maker unveiled its Wing Sail Mobility, or WISAMO, project earlier this month. The set-up operates with the push of a button. First, the telescopic mast rises from its base, reaching up to 17 meters high. The wing, which starts as a pile of fabric, slowly unfurls as a small air compressor inflates the double-sided material. As wind flows over the 93-square-meter wing, the variations in air pressure create lift, helping propel the vessel forward. When the ship approaches a bridge or encounters rough weather, the system automatically retracts.

It has the WOW factor. Unfortunately, they (we’re not sure if it is Michelin or IEEE) present the wrong reasons for bringing such cool ideas to fruition:

After years in development, these wind-blown technologies are taking off as the global maritime industry faces pressure to address climate change. Cargo shipping is responsible for nearly 3 percent of the world’s annual greenhouse gas emissions, and ships are a significant source of toxic air pollution in ports and coastal communities. For shipping companies, these next-generation sails are a potentially immediate way to reduce emissions, since most systems can be retrofitted to existing vessels. And curbing fuel use can reduce ships’ operating costs—saving money while avoiding CO₂. [Emphasis added]

We have put the only two important word in the quote above in bold. We know nothing about how these were created. We don’t know if the new device is carbon intensive and we don’t care either way. What we know is that, depending on the price, it might reduce the cost of shipping and make profits for both Michelin and the shippers. And it might make lower costs for us consumers.

Of course a nice modest carbon tax might help decision makers to focus on profits because carbon would be priced in. We are not supportive of an international taxing authority but if the major economies adopted a carbon tax it would be close enough.

The object of a corporation is to make returns for stockholders. Corporate management needs to focus on that.

WTF GOP

Using today’s argot, we identify as conservative. When we were young Democrats like Harry Truman and JFK were strident anti-communists. Harry desegregated the armed forces while JFK made substantial cuts to individual tax rates. Harry and JFK would attract many conservative voters. Now conservatives can either vote GOP or stay home. Yes, there actually are many other choices beyond GOP and Democrat in the voting booth but they amount to staying home because those actions don’t influence the outcome.

Jim Geraghty, in NRO’s Morning Jolt reports that a socialist has won the Democrat nomination fo mayor of Buffalo, NY and has effectively been elected:

And thus, India Walton, a nurse and progressive activist who had never been elected to any office before, will be the next mayor of Buffalo.

Yes, you should subscribe to the National Review and take most if not all of their newsletters. Couldn’t you use a Jolt every morning? Jim and others are trying to convince folks if socialism is or isn’t the next big thing. You can go read it but we are not interested in that now.

Spoiler alert: socialism doesn’t work.

But to us the worst sentence is the next. Jim puts it in parentheses:

(Buffalo Republicans did not run a candidate for mayor.)

We are not upset with the Buffalo GOP in particular. We are upset with the whole GOP. Either the GOP is not trying to compete in most major cities or it is trying and being pathetic. There are three reasons to compete. One is to treat an election like preseason and try out people and ideas. It is a chance to widen the GOP base. The second is just in case. One person became our 44th president, in part, because of a sex scandal involving his opponent for the US Senate. The general election in Buffalo might have been a chance for the GOP. The third is that many cities, and especially Buffalo, have fallen on hard times. Almost all of them have fallen on those hard times with Democrat leadership so it is a great opportunity for the GOP. Even if the GOP is only FDR people will remember them as better than Hoover.

Sidebar: Yes the Ryan sex scandal is how the media works. If secret or sealed information is harmful to a GOP candidate then the public has a right to know. If it is harmful to a Democrat then the candidate has a right to privacy. End Sidebar.

The GOP needs to find a way to look like it is trying to compete in major cities. We would suggest school choice, reducing licensing requirements, improving police work, and supporting the gig economy as a start. But most of all, do something GOP.

Right Here In River City

Well, we aren’t River City but we are a city on a the river. The College Fix reported a few days ago

A former Viterbo University student has been charged with one misdemeanor count of negligent handling of burning materials after police say she set a fire inside her dorm in April for “attention purposes.”

Well, what kind of attention did the student want? She

“had already messaged a friend of hers that she was potentially a victim of another hate crime because of the fire started next to her dorm room,” the complaint states. [Emphasis added]

The College Fix has some background on another:

As The College Fix previously reported, the April 18 incident was the culmination of a series of incidents that ignited racial unrest at Viterbo University throughout the spring semester. XX

You should read all of both reports from the College Fix. It is a sordid story. We await the front page news in the local paper as the student goes to court.

Meanwhile, the fictional River City is in the news. Hugh Jackman and others are planning a revival of The Music Man. Ashley Lee, the most androgynous name ever?, at the Los Angles Times thinks it is the wrong revival for this crucial time. Well why is it wrong and why is this a crucial time? Ashley doesn’t like the story. Ashley doesn’t like the story of a musical? Seriously, we cannot convey how unconvincing the argument is with just a quote or two. You should really read the whole thing although we warn you it isn’t very good. Ashley, like the student, is no Harold Hill. Neither one of them can sell the con.

Critical Race Theory: Belittle Don’t Ban

Humor has almost died and it is bad for our individual mental well-being and for our social well-being. Jon Stewart’s rant has suggested that humor might return to our national discussion. It would be curious that the person most associated with making comedy conformist to progressive needs is the person to bring back comedy from the abyss. One place to apply comedy would be making fun of Critical Race Theory (CRT).

We think (gasp) Andrew Sullivan is right when he says we shouldn’t ban it. He says we should expose it and we agree again. Yes, you should read all of his article. We would recommend reading several times. It is an example of a conservative approach to a problem. Rather than focus on the answer, Andrew focuses on the problem and the processes. The crucial point Andrew makes is that folks are not teaching about CRT but teaching CRT. We need to resist. Andrew says:

What parents and principled teachers of all races can do is protest, show up to school board meetings, demand accountability and total transparency, share and spread the evidence of this indoctrination, demand answers from teachers and principals, and, if all else fails, pull their kids from public schools if necessary.

We agree but but the conservative approach is not enough. In addition we need to belittle it and make fun of CRT. There is this epic video from PowerLine of a kid that is leaving public school. Ted Cruz has the right idea:

Sen. Ted Cruz (R-Texas) lambasted critical race theory, calling it an “evil” concept derived from Marxism, and “every bit as racist as a Klansmen in white sheets.” 

We don’t know why the evil is in quotes above but it is important to bring some rhetoric in addition to the reasoning. The point is to turn the tide against CRT we need conservatives, the right, and comedians to make the case that racism is a bad choice. The KKK, CRT, and Black Lives Matters all have share in racism. We will never eliminate racism but we need to grind it back down everywhere we can. Comedy is the gentle way to move toward this goal.

Bridge Defense

Expertise is about dealing with exceptions. Most of the time you go to see a physician you don’t really need all that knowledge because it is usually only the typical thing. But when it is not typical like when one noticed the melanoma on our back or another realized that our grandson had to come Caesarean, their expertise was welcome. The other day we failed bridge expertise by making the standard play.

We were North and opened a club with 5 clubs to the ace, 4 spades to the queen, two hearts to the ace, and two ugly diamonds, East overcalled a heart and partner doubled indicating spades and perhaps diamonds. Then West bid two hearts, we responded with two spades and East ended the bidding with three hearts. As we had bid clubs we were not surprised that partner led the 7 of clubs. Dummy tabled the Q, 8, 5 of clubs. We held the A, J, 6, 4, 2. Declarer called for the five. Standard play would be to insert the jack to try and prevent declarer from making both the K and Q of clubs winners.

There are two good reasons not to insert the J. First, it is not going to work. Declarer almost certainly has the 10. If partner had it he would lead it. Declarer has two club winners regardless of what we play at trick one. Our only chance on defense is to ruff a club. Second, partner’s 7 is at most a doubleton because dummy has the 5 of clubs that only leaves the 3 as a possibility. So the solution is up with the club ace and return a club. We would have been disappointed when partner tabled the trey on the second club but then we go up with the heart ace and lead another club and partner gets a ruff of a winning club.

It is only a trick and it doesn’t even set the contract but every bid and every trick is important. Our bidding was successful in forcing them to three hearts and we didn’t go to the disaster that three spades would have produced. Most hands you have to get everything right to get a good score. We didn’t and it cost us.

A Spy By Nature By Charles Cumming

We are going to combine Charles’ first book, A Spy By Nature, with a later book, The Spanish Game, because they both feature Alec Milius as the main character. We know what we like and we really don’t like Alec. We like interesting main characters that we can support despite their shortcomings. We like coming of age stories that the great Dick Francis specialized in. Alec doesn’t even make a good villain because he is sooo stupid. We have read bad books before and these aren’t them but they don’t work for us.

Because Alec is stupid and the narrator, it can make the story hard to follow. We were often uncertain if things happened because Alec is almost always wrong. Did somebody kill his former girlfriend or did she die in an accident? Alec thinks the former. We assume it is the latter because Alec is always wrong. We are unsure about what Charles thinks.

In A Spy By Nature we meet Alec, who graduated from the London School of Economics a few years ago, who works in London scamming Eastern and Central European businesses. By some miracle pulled off by an obscure family friend, he gets an opportunity to interview to be a spy. He, of course, screws it up. Later, the family friend recruits him to do some industrial espionage with the hope of becoming a spy. Was that the plan all along?

The Spanish Game is several years later as Alec is hiding in Madrid in the aftermath of his first misadventures. He is working for a British company. Of course he is screwing his boss’s wife while hoping to keep a low profile. He is Alec. That is how he keeps a low profile. The company is looking to find investments and sends Alec to the Basque part of Spain to see if the conflict should stop any investments there. All of this leads Alec back to the spy milieu.

There are parts that we liked. Charles gives us the lonely life of a spy. You can’t trust anyone. And we get the problems of spies having their own agenda separate from the country they are supposed to be working for. In The Spanish Game we get an interesting view of Spain and Spanish life. One interesting scene was when Alec was being tortured with a bag over his head and his captors said they had a stove. We would have liked some pan fried Alec but our pleasure was denied.

What we didn’t like was Alec. It took us a long time to finish each book because we found it painful to read about Alec’s continuing stupidity. He breaks protocol on a regular basis. If he is supposed to call in case of an extreme emergency, he will call at the first sign of trouble. If someone tells him, “It is important; be on time.” he will show up drunk and late because that will distract them. Don’t go to X Alec. Alec is going to X. Show up after midnight Alec. This is the only time Alec will be early. We understand that lots of shows and books with stupid main characters are popular. If you like shows like The Office you might like A Spy By Nature and The Spanish Game. We don’t.

Late one night at the end of his misadventures in The Spanish Game Alec gets into the almost deserted British embassy in Madrid. We like to think there is a happy ending and they kill him.

Evaluating Bad Tax Proposals

In our last post we discussed The Frontrunner’s IRS scandal with the release of confidential information. Today we want to actually look at proposals to increase tax revenue that the IRS would be in charge of enforcing. We consider the argument on “fair” taxation, expanding the IRS, global minimum corporate taxes, and intangible drilling costs.

Jonah Goldberg at the Dispatch covers the scandal (our last post) and the weakness of the argument those rogues at Pro Publica try to make. Jonah properly calls shenanigans when they say:

“We compared how much in taxes the 25 richest Americans paid each year to how much Forbes estimated their wealth grew in that same time period,” they explain. “We’re going to call this their true tax rate.” [Emphasis added]

Check out his reasoning at the link above. It is a pretty good piece with no snark on The Donald. His answer is, in part, we don’t tax the growth in wealth and uses baseball cards as an example.

Sidebar One: The IRS actually uses unexplained increases in wealth in income tax fraud court cases. Al Capone went to prison for tax evasion. End Sidebar One.

Sidebar Two: Some measures of wealth like Amazon shares have an active market with reliable measurements. Many, like baseball cards or private companies, do not. Taxing wealth or changes in wealth as income is fraught with measurement problems that will cause friction. End Sidebar Two.

Our example of explaining the tax code is fringe benefits. Like many Americans, even in retirement, we have our health insurance (beyond Medicare) paid for by our (former) employer. It is clearly income but the federal government has decided to exempt it from tax. We haven’t run the numbers but if it was taxable it would be a sizable haul for the IRS and the federal government. Income taxes are largely cash basis because income taxes need to be paid in cash. Thus, gains in wealth are taxed when realized, i.e., when turned into cash. Taxing fringe benefits is a superior idea for fairness and lack of a cash problem.

So the kindest way to say it is Pro Publica is wrong to call the quantity federal income taxes divided by changes in wealth the true tax rate. It is a division of two unrelated numbers. The data provide zero evidence that the tax code is unfair. Oh, and we already have the Alternative Minimum Tax (AMT) for “fairness”. On the other hand, the failure to tax fringe benefits a way better argument of being unfair. Those that pay for insurance or medical care with after-tax dollars are getting a raw deal.

Next we move to The Frontrunner’s proposal to substantially increase the size of the IRS to increase tax revenue. Here is the summary from Red State:

President Biden’s budget proposal calls for increasing funding for the IRS by $80 billion, much of which would go toward hiring nearly 87,000 new workers over the next 10 years. If Congress adopts Biden’s plan, the size of the IRS would double, with its workforce increasing by about 15 percent every year.

Red State says that conservatives should be concerned about this plan. We think that all citizens should oppose it. The good news about The Frontrunner’s IRS scandal is it makes it clear that we can’t trust the IRS. That recognition should (!) eliminate any possibility of this passing. A much better idea would be to simplify the tax code so there are less conflicts between the IRS and taxpayers. We could start with eliminating corporate taxes. It is unlikely that anybody will propose a complete tax overhaul that will lead to a sensible tax code but we should try to move in that direction with each change.

The global minimum corporate tax is a particularly foolish idea that, in part, combats an even more foolish idea of digital taxation and unfortunately combats the good idea to reduce or eliminate corporate taxes. The Capital Note, NRO’s newsletter from Capital Matters has a tidy summary:

The big headline from this weekend’s meeting of G-7 financial ministers was an agreement to set a global minimum tax rate of 15 percent on corporations. But an equally consequential pillar of the deal pertains to the taxation of digital services.

Yes, you should read the whole thing, get the newsletter, and subscribe to the National Review. France had levied a three percent tax on gross revenues for large digital services companies. It is a much larger tax than it initially appears because it is on gross revenues rather than income before taxes. Income divided by revenue is quite high for some digital companies like Facebook but it would still amount to ten or more percent of Net Income. The deal is to tax digital profits rather than revenues and have a minimum tax on corporations. The best argument one can make is it might be less bad than the previous situation. As is usually true in taxation, bad ideas generate even worse ideas. We need to find ways to simplify the tax code to provide certainty to taxpayers and so we don’t need to expand the IRS.

Our last example is Bernie Sanders technical attack on oil and gas production. We say technical because it is about Intangible Drilling Costs (ITC)as explained by the Committee for a Responsible Federal Budget. Really. ITC are

[D]efined as costs related to drilling and necessary for the preparation of wells for production, but that have no salvageable value. These include costs for wages, fuel, supplies, repairs, survey work, and ground clearing. 

It would make a good topic for a financial accounting income seminar but for taxes it is just about complexity and that means full employment for accountants. We may decide to dedicate another post to the subtle inaccuracies in the Committee’s post.

The argument is about timing. Everyone agrees that ITC should be deducted. Should they all be deducted immediately? Should they be amortized or deducted over a period of years or should failed wells be deducted immediately and successful wells be amortized over a period of years? We would vote for the third choice as being theoretically correct but the first choice as the most practical solution. Bernie wants the one that will hurt oil and gas production the most.

We would consider a compromise if Bernie wanted to end subsidies to many energy areas but he doesn’t. Don’t make the code more complex. Make it simple. Don’t make it a challenge to finance economic expansion. Make it easy. Bernie goes in the other direction.

So what should we learn from these four examples. The first thing is to simplify. That often means cash basis. Otherwise there is friction. Economic friction as businesses, lawyers, and accountants try to find the lowest tax solution. Then there is friction between the IRS and the businesses. The ITC proposal is an astonishingly bad idea economically but it is also a bad tax idea because of the friction. Any attempt to legislate “fairness” will cause friction just like the AMT already does. And of course, the intent of expanding the IRS is to cause friction.

The best solution for businesses is a zero corporate tax rate. For individuals there should be taxation of fringe benefits and fewer deductions. None of those things are going to happen soon or, probably, ever. So the second issue is: how and when to compromise? Here your milage can vary. What foolish idea will you support to get something good in the tax code? Would you support Bernie’s ITC in return for the elimination of subsidies to “alternative energy”? We wish tax reform was simple but it is not.

The New IRS Scandal

We wanted to write about the silliness of the recent arguments about tax rates based on the illegally obtained IRS information on high income individuals but the scandal of releasing the information requires a post first. We want to compare the new scandal to the previous, and bigger one, under the 44th president.

Like the previous IRS scandal, this one is a disaster for the Democrats for two related reasons. First they are the party of big government. When government is incompetent or, more likely, fraudulent it reflects badly on the Democrats and the impact is exacerbated when the Democrats are in charge. It is why “clean out the swamp” rings true despite the challenges of really doing it. As Charles W. Cooke at NRO puts it, We Can’t Trust The IRS. If we can’t trust the IRS, is there a part of government can we trust? The Democrats are going to suffer when major government agencies are engaged in fraudulent activities.

Just as in the 44th president’s IRS scandal, next steps are going to be bad for the Democrats. The Democrats can’t come thundering down on the illegal and unethical behavior of the IRS and/or other parties because these are their supporters. They have little rhetorical room to maneuver. They can’t go The Donald and fire folks willy-nilly.

The only good news for the Democrats is that they have a compliant media to support them. Here is a CNN Business story on the Administration investigating the illegal disclosures. CNN put the word illegal in scare quotes. We think investigation would have been a better choice for scare quotes. We will be shocked if heads roll and prison time is the result. We have seen this story before.

The IRS is part of the Treasury Department. Here is CNN’s quote from the Treasury Department:

“The unauthorized disclosure of confidential government information is illegal,” said Treasury spokeswoman Lily Adams. “The matter is being referred to the Office of the Inspector General, Treasury Inspector General for Tax Administration, Federal Bureau of Investigation, and the US Attorney’s Office for the District of Columbia, all of whom have independent authority to investigate.” [Emphasis added]

First, if Treasury says it is illegal what is CNN’s problem? Second, this is about as unthreatening that Treasury could be. Third, the illegal disclosures could have come from hacking. Treasury doesn’t mention this suggesting that they know that is not what happened.

Sidebar: We have seen no discussion of this data being bona fide. We know from the W era that the press is willing to accept bogus documents that support their narratives. It is a minor point but we are curious. End Sidebar.

As weak as the Treasury Department statement is The Frontrunner’s press secretary, Jen Psaki, makes them look like Churchill. She starts out by pointing out that it is illegal:

“Any unauthorized disclosure of confidential government information by a person of access is illegal and we take this very seriously,” [Emphasis added again]

There is no mention if Jen winked at the reporters as she said this. She didn’t need to because then she walks back the previous statement:

“I’m not going to comment on specific unauthorized disclosures of confidential government information. I can tell you that, broadly speaking ,we know that there is more to be done to ensure that corporations, individuals who are at the highest income are paying more of their fair share. Hence, it’s in the President’s proposals, his budget and part of how he’s proposing to pay for his ideas,”

We hope that nobody in the administration thinks that this data supports the need for higher taxes on either high income individuals or corporations. We thought about calling this a lie but that would suggest that Jen or her briefers were well informed.

The Frontrunner’s IRS scandal may not match the IRS scandal of his former boss but he still have attempted cover-ups to increase his score. Will The Frontrunner match the number of scandal’s of his former boss? Will the media care? If it wan’t our country it would be fun to watch.