Paul L. Caron

Tuesday, January 25, 2011

Dilbert on Tax Policy

(Hat Tip: Andy Morriss.)

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Okay, tell me what I'm not seeing in Anon's comment. I see what's on the surface, but I think that there's something underneath it that's better.

Posted by: Woody | Jan 26, 2011 7:03:24 AM

Anon nails it . . . and it's out-a-here!

Posted by: Steve Adams | Jan 26, 2011 6:10:39 AM

Yeah, we really need more "investments," i.e., Stimulus, the Sequel, on technologies that offer no return on the money and will keep sucking away valuable resouces to be maintained, such as solar energy, electric vehicles, high-speed trains, global warming studies, training a higher number of teachers rather than addressing real education problems (teacher unions), and training for "green jobs" for which there is almost no private market at all. Heaven forbid that the government invest in projects that have a demand in the market place. Just use that money to pay down the debt, dummy.

Posted by: Woody | Jan 26, 2011 6:07:16 AM

Adams is illustrating here, what we have seen time and time again when the government starts picking winners and losers, then funding THEIR winners, when it comes to technology.

It is akin to the effect of a black hole ... focus and resources rapidly gravitate towards the "winners", and are sucked away from the "losers" ... regardless of the technical and economic merits (or lack thereof) of either.

Why? Because the government-funded "winner" appears to be more of a sure thing. After all, it has the government behind it, y'know ... and it allows one to bypass some or all of that ugly competitive-market stuff in the quest for greater revenue. And let's not forget the crony-capitalism opportunities available in such environments ... the ability for business (especially large businesses) and our elected leaders to scratch each other's backs, now and later.

I find it ironic that those who shout the loudest about the "oppression" of "Corporate America", are the ones who are the greatest advocates for increasing the size and reach of government ... and expanding the environment that facilitates such oppression. We are setting up those like Jeffrey Immelt at GE to become the John D. Rockefeller's of our time ... even as we denigrate the legacy of Sam Walton, whose ability to grow his business from a single store to the world's largest retailer proves that established corporations - that is, absent government favoritism -- are quite limited in their ability to keep us down. Were corporations as oppressive as some say they are, Sears and Penney's would have come against Sam and never let him get past Wal-Mart #2.

Posted by: Ritchie The Riveter | Jan 26, 2011 5:05:55 AM

Great timing! This was in my morning paper yesterday, and I'll be showing it to my class today. We just discussed tax neutrality and investment distortions on Monday.

Posted by: MochaLite | Jan 26, 2011 4:59:01 AM

Anon for President!

Posted by: grichens | Jan 26, 2011 4:23:26 AM

Its going to be a GM kinda day?

Posted by: Gary | Jan 25, 2011 8:20:41 PM

You don't follow? Ponder what might happen if the government did the following 8 things:

1. Enact a tax deduction for interest paid on GM car loans, exempt from tax the gain from the sale of GM cars.

2. Buy GM car loans from lenders to replenish the capital of GM car lenders.

3. Guarantee GM car loans so lenders can sell them and replenish the capital of GM car lenders.

4. “Sponsor” a lender, let’s call it General Motors Sponsored Enterprise (GMSE), to keep the program off the gov's books.

5. Provide "sponsors" special favors (e.g., GMSE pays no income taxes, its securities are deemed government securities, etc.). Require the sponsor to impose requirements on the GM lenders who sell to the sponsor, for example, lend to GM car buyers who have no regular income, no down-payment and terrible income/debt ratios under a program called, say, “MyCommunity GM car loan”.

6. Reduce lending standards below the standards used on ordinary loans.

7. Have GMSE issue bonds to finance the purchase of GM car loans and payment of guarantees and (a) implicitly guarantee the bonds and (b) have the Federal Reserve, FDIC, Comptroller of the Currency, and Office of Thrift Supervision upgrade GMSE bonds in its risk differential for capital cushion under Basel I Accords. (That way banks can “leverage up” by replacing a $10 capital cushion per $100 with a $2 capital cushion per $100.)

8. Upgrade GM car loans that are “bundled” and sold by GMSE. A bank that owns 1,000 GM car loans with a 50% risk weight should sell them to GMSE, which can sell all 1,000 loans back as a GM car loan bundle with a 20% risk weight. Now GMSE can sell bonds and bundled loans to fund its purchase of GM car loans.

Posted by: guy in the veal calf office | Jan 25, 2011 2:47:52 PM

Not sure I follow. Not his best work.

Posted by: anon | Jan 25, 2011 12:31:42 PM