Tuesday assorted links

1. How judges change their behavior to court Supreme Court nominations.

2. Finland contributes to the drone wars.

3. Markets in everything would YOU ride the death simulator culture that is China.

4. The coffee shop wars of Seoul.

5. Why aren’t there more Americans in the Panama Papers?  And Henry’s primer on tax havens.  And Cass Sunstein on the same.  There is some evidence this kind of tax evasion is declining (NYT).

6. Benjamin Kunkel’s tweet: “Clinton’s achievement: liberals who once complained abt Citizens United now insist it’s a slur to suggest big donors influence politicians.”  Here is Paul Krugman: “Clinton, who has said that coal is on its way out, is a tool of the fossil-fuel industry because some people who work in that industry gave her money? Wow.”

7. More interesting data on taxis, Uber, and Lyft in NYC.

Comments

If you can't trust Cass Sunstein, who can you trust?

"Cass Sunstein on the same".

That should read "Gabriel Zucman on the same as interpreted and regurgitated by Cass Sunstein". I'm not sure why a book reviewer should get more credit for a book's contents than the author of a book. For fun, count the number of times "Zucman" is the first word in the paragraphs of that piece.

The reason is because it's Cass Sunstein, and his bowel movements draw more academic attention than most even actually-useful academic scholarship, because Cass Sunstein.

It's infuriating.

If a political party were to descend into content free babble as policy, it would be after many such cascades. Let us all agree on who we hate, make that group include anyone reasonable enough to balance individual and societal goals, and then vote t***p.

1. is just begging for the companion piece - 'How professors change their behavior to court policy institute positions'

It's really begging for a companion piece on how male fish change their behavior to court female fish during spawning season

5. The devil made them do it - with zero tax rates, there wouldn't be any need for tax evasion. But that doesn't solve the dilemma of husbands (debtors) who must hide assets from their wives (creditors). Easy answer: no alimony (no debts). No taxes, no alimony (debts), problem solved. Mr. Jefferson was way ahead of his time: he proposed generational sovereignty: all debts are forgiven at the end of each generation (which he defined as 19 years).

Mr. Jefferson may have been ahead of his time, but alas not ahead of his creditors; with Jefferson, the feud with Hamilton (and his banker friends) was personal.

Actually, it was the feud with Britain that was personal, given that most of his debts were to London bankers.

The feud with Hamilton was also intensely personal, but more as a matter of professional jealousy and aristocratic disdain for a bastard immigrant than pecuniary interest.

That rivalry also foreshadowed a lot of today's interracial resentment between African-Americans and Hispanics since Jefferson was black and Hamilton was a Peurto Rican

A Puerto Rican Jew, no less.

I keep wondering whether this is actually a leak like Snowden or Manning, where they wanted to disclose information to inform public debate. It seems quite plausible to me that this is instead a blackmail operation, either:

a. An attempted blackmail against Mossack Fonseca, leaked because they didn't pay up.

or

b. A blackmail against a few high-value people in those files, whose information was withheld in exchange for some money

or

c. A blackmail against a few high-value people in those files, where the point of the blackmail is coercing them to go along with something, rather than extracting money from them.

For (b) or (c), leaking a whole lot of records is actually a sensible first step. Imagine you are a corrupt but rich/powerful person and you know Mossack Fonseca had information that would be enough to put you in prison or end your political career. Imagine the leaks come out, but you don't appear anywhere in them. And then, you get an email offering to ensure that you continue not to appear anywhere in the future releases of them, for a small fee....

As an aside, I had the same thoughts about the Ashley Madison leaks.

Like all conspiracy theories, this fails the test of scale. Over 300 news organizations around the world were given access to the data; how would they all agree to not release this or that tidbit? Why would they rationally do so? Prisoner's dilemma, etc.

Whoever leaked the data to WikiLeaks could have purged it before handing it over.

(1) They didn't leak it to WikiLeaks;

(2) How does one person purge 2.6 terabytes of data, including tons of images, without attention-drawing massive computing power;

(3) Now the scenario has become one lone individual blackmailing the world's most powerful people, not exactly plausible

I think you are missing the point. The black mailer wouldn't need to purge out the 2.6 terabytes of data, but only to delete the specific documents that involved the people that paid up. How do you know there wasn't 2.65 terabytes of data originally before the "leak"?

if this was blackmail directed at Mossavk Fonseca, all the attacker had to do was share the document with all those media outlets once the victims failed to pay up.

If it's intended to support future blackmail, that assumes the ability of the attacker to search documents and remove ones he doesn't want disclosed. That doesn't sound unreasonably hard to me, but it does require that the documents are organized and kept in a format that permits it.

The other point Jake is missing is that albatross's theory is cool, if unlikely.

I like the way albatross's mind works.

Note to self: stay on the right side of albatross.

It seems to me it is you guys who are missing the point.

Suppose Trump and Obama "pay up". Now the blackmailer has to "remove" them from 2.6TB of data.

2.6TB is A LOT of data. Most of it is images, not text, so not directly searchable without MASSIVE computing power for optical character recognition.

It has taken thousands of journalists a whole year just to begin processing this data. The effort of running it all through OCR alone takes massive resources, and OCR isn't perfect, so a lot of eyeballs still have actually look at the results.

There is simply no way for one individual, or even a dozen individuals (rendering the conspiracy less likely), to achieve this in any reasonable time frame. (Note that the Panama papers include docs as recent as Dec 2015.)

Jake - 2) 2.6 terabytes of data is NOTHING in the grand scheme of things. There are plenty of ways to route the data, for example peer-to-peer file sharing tools, and TOR browser, for example, could route it in all sorts of ways that would make it difficult to track (presumably some less known variant of these was used). I know at least a few people who routinely exceed this amount on a monthly basis in the process of creating various types of historical archives.

Or, just send a couple 2TB hard drives at $100 a pop with compressed files to some friends, and share the data uploading bandwidth to spread things out from the uploading end of things.

3) Yeah, definitely not that plausible that some lone actor would be able to pull of such an extortion at such a large level. But, maybe they tried to blackmail some handful of less politically connected and less powerful individuals before sending all the data (like, that would be supremely retarded to try to blackmail Putin, for example).

JWatts - yes, that makes a lot of sense, although of course the idea that it could happen is not proof that it did. But I read in Washington Post that the main explanation for few American figures being named is that Panama just isn't "in style" for American tax cheats. They prefer other destinations.

The documents were organized in folders according to client. You don't need to search anything, just remove the several folders of those who paid up.

Probably blackmail/bad publicity targeting specific individuals. According to WikiLeaks (https://twitter.com/wikileaks/status/716749809609216001), only 149 of 11 million Mossack files have been made public. If there aren't Americans in that .001 percent of released files, it says more about who's doing the releasing than it does about the habits of American tax evaders.

#6 Translating Paul Krugman: "as if revealed preferences could trump stated preferences!"

God damn, he is the smartest person writing stupid bullshit that I know of.

The argument "wow" always suggests empty-headed teenagers to me. Is he regressing towards a second childhood?

But it's dated. Kruggie should keep up. Now it's "Wow! Just wow."

In 2012, 96% of coal industry contributions went to Republicans, according to Open Secrets dot org. Does Krugman's "Wow" makes more sense to you now?

5b. "The law firm whose files had been leaked specialized in setting up such shell corporations, with a nominal board (composed of people who agree, typically in return for compensation, to lend their names) in Panama..." Damn, how do I get in on some of that action? I can pretend to be Director with the best of 'em.

6. We must get the money going to my political opponents out of politics.

5: Maybe Americans prefer a different service firm? With the US following different accounting standards from the rest of the world, and US taxes being extremely complex, I'd imagine one or a few firms would specialize in US tax evasion issues, and it may just be that Mossack Fonseca is not one of those firms.

Americans don't use Panama as a money laundering hub and haven't for DECADES.

After the US government deposed Noriega in 1991, Americans got the memo and moved their money to different countries.

Yeah, right:

http://www.zerohedge.com/news/2016-04-05/clinton-supported-and-enabled-tax-evasion-revealed-“panama-papers”-…-sanders-opposed

Who needs Panama when you have Delaware ?

6 Setting the rules of acceptable discourse is a common tactic used by the Left to delegitimize the opposition without engaging in debate. Shift the Overton Window, shame and silence the opposition, then push the agenda. We see Krugman doing it here, and we see the SJWs use the tactic in many areas of social and political life. It is unusual that this tactic is being employed to delegitimize a fellow Liberal, Sanders, but Sanders is a white male supported by young white males, so the campaign lack sufficient diversity to protect it from these sorts of attacks. Indeed, Krugman cites minority support for Clinton and other references to race to remind the reader that Sander's campaign is not diverse, and therefore not legitimate and worthy of consideration.

The diversity among the democrat presidential hopefuls is found in where they are going in 2017. Sanders is going to the nut house. Hillary is going to the jail house.

Y'all are gonna be so mad when Hillary gets elected president.

We will see. I don't get angry. I already knew that laws are not enforced when an aristocratic oligarch goes sideways with seven or eight laws.

Anyhow, tell me what she's done that didn't turn to garbage.

The silence deafens.

Compared to the ideal outcome, you could say that about any powerful person in the history of the planet.

Did things turn out worse than others who faced similar situations? That would be the correct point of reference - other people who faced similar situations, not the ideal outcomes.

I ain't saying she's great, and I ain't saying she's awful, but she is your next president.

"Setting the rules of acceptable discourse is a common tactic used by..."
Just about everyone involved in politics.

Interesting conclusion in number 5. While it's good to catch "bad guys" I think it's ominous that governments are getting better at simply monitoring the flow of money everywhere. After all the US is one of the only countries that currently tries to tax its citizens on its worldwide income. I'm not sure about the Big Brother world that will arise once other countries start to impose such rules on its own citizens, vs. the present day when most do not tax citizens who have given up residence in their home country but not their passports. And it seems to put the move to eliminate large bills (200 euro and 100 dollar bills) in a very scary light.

"After all the US is one of the only countries that currently tries to tax its citizens on its worldwide income."

That was not very clearly formulated. More clearly, the U.S. is one of the only countries that taxes its citizens on their worldwide income, irrespective of the place of residence or domicile of those citizens ("residence" and "domicile" used in the ordinary sense and not in the US legal sense that creates a fiction of residence based merely on citizenship or lawful permanent residence status). Almost every country taxes its residents and/or those domiciled in such country based on their worldwide income.

That said, you raise an interesting issue that is not on the radar here yet--but it should be. To what extent should concerns over tax evasion trump concerns over privacy? Should the government be able to find out how much cash Tyler Cowen has stashed under his mattress? We've here got a similar balancing act as we face against terrorist threats--where do you want to draw the line?

And, as far as "bad guys" are concerned, this also warrants closer examination. If for example, a South African resident (illegally) exports and hides some of his wealth outside of South Africa, or a resident of Zimbabwe does the same, out of the perhaps legitimate concern that Mugabe or Zuma will expropriate his wealth, who is the "bad guy" or "who are the bad guys"?

"If for example, a South African resident (illegally) exports and hides some of his wealth outside of South Africa, or a resident of Zimbabwe does the same, out of the perhaps legitimate concern that Mugabe or Zuma will expropriate his wealth, who is the “bad guy” or “who are the bad guys”?"

An excellent point. Even in the case of Russia, sure those overseas funds might all be ill gotten gains, but portions also might be legitimate money that the owners want hidden. The act of hiding might be illegal, but that doesn't automatically mean the money is stolen.

Yes, my understanding is that most countries tax worldwide income, but only if you're a resident.

Consider a possible case with the US, however. You're born in the US, move away when you're 2 years old. Never ever considered yourself an American, never had an American passport or residency, etc. Then, enforcement of these rules comes along, you're 65 years old, and they want to take a quarter of your lifetime income despite never having lived in the country and not being eligible for any social benefits - many Canadians find themselves in this situation.

You can cancel your US citizenship, but not until you pay up. Which means that quite a lot of Canadians, for practical purposes, are no longer able to holiday or visit family in the USA, because, of course, they will never pay up for such a retarded situation.

Nathan W wrote:

"...many Canadians find themselves in this situation.

You can cancel your US citizenship, but not until you pay up. Which means that quite a lot of Canadians, for practical purposes, are no longer able to holiday or visit family in the USA, because, of course, they will never pay up for such a retarded situation."

I'm an American citizen and I have not lived in the US for 37 years. Yet, yesterday, I finished my US tax return and my FBAR declaration of foreign bank accounts and wrote my check to the IRS (not huge one given foreign tax credits, but, nevertheless, a check). I'm not actually a fan of the citizenship- based taxation system.

However, it irks me when I encounter a lot of misinformation about our tax system disseminated by bloggers and commenters. The internet was supposed to be the place where people would be able to go to learn things, not merely to consume the sputum passed around by others.

I seriously doubt your example is common place and I also very seriously doubt that 65 year-old woke up on his 65th birthday to learn that he or she owed Uncle Sam a quarter of his or her lifetime income. Let me show you the ways you are wrong:

1. I've encountered literally thousands of US citizen (and green card) expatriates. Most of them were aware of their obligations and fulfilled them. Of those not in compliance, many were aware of their obligations and feigned ignorance. That's convenient. The rest, which I guess were not many, were simply stupid (resulting in ignorance).

2. If you want to renounce your citizenship there are relatively recent IRS "expatriation rules" (IRC section 877A and prior to 2004, section 877) that entail filling out some paperwork and *perhaps* paying US tax. Prior to 2004, the rules really had no "bite" if your principal purpose in revoking your status was not to avoid US tax.

Some high-net-worth individuals *might* be subject to US expatriation tax but only those persons who are "covered expatriates". This is defined as someone who 1) has a net worth of $2 million or more; or, 2) has had an average annual net income of $157,000 (both in US dollars, Nathan, not Canadian pesos) or more in the five years prior to expatriation. I suspect that eliminates about 99 percent of your "Canadians". (BTW, while you call them "Canadians", I suspect that many potentially subject to these rules are *US citizens* living legally in Canada without Canadian citizenship). *Even if* you are subject to these rules your expatriation tax is effectively based on appreciated property to the date of expatriation.

3. Now, it is true that in order to renounce US citizenship, one now has to attest that one has complied with the US tax rules for the five years prior to such renouncement. In effect, this means filing US tax returns for those 5 years and paying any US tax due. However, someone living in high-tax Canada would likely 1) qualify for the foreign earned income exclusion if still working; and 2) have foreign tax credits that eliminate any US tax on non-US source income, including passive income. Each case is unique, and yes, it's a hassle; but, really, do you think these rules mean that those "Canadians" are going to be subject to US tax equal to "a quarter of their lifetime income"?

4. I'm struggling to understand how all this prevents your "Canadian" friends from taking a holiday in the US or visiting family.

5. Again, I'm not a fan of citizenship-based taxation or punitive expatriation rules. The latter can operate like a Berlin Wall keeping US citizens in rather than allowing them the freedom to leave. But, Nathan, if you really want to get worked up about something, why don't you start a campaign against Obama's new corporate inversion rules that are designed to prevent a US corporation from being acquired by a foreign corporation and thus a change in "citizenship" of the ultimate parent? That really is a punitive Berlin Wall and rather "un-American" (if not, well, in your case, "un-Canadian"), don't you think? 'Many "American" companies find themselves in this situation.'

2) It was in the news lots in Canada a couple years ago when the crackdown started - many thousands of people discovered that they owed hundreds of thousands or millions of dollars to a country they had basically never lived in. I consider thousands of people to be a lot of people.

4) If someone who owes a huge tax bill to the USA shows up, they could be detained for non-compliance with taxes. Whether or not this would often happen in practice is irrelevant to the perceived risk that it might.

5) I don't see why I should really be concerned about that. While I fully recognize that corporations are very useful in providing jobs and driving the economy, I'm very much more concerned about the rights of actual persons than corporations. I really have no idea if it's the best approach, but it seems as though the US should have an interest to ensure that essentially American-based corporations are not dodging taxes.

Nathan, your anecdotal stories aren't really worth much except to spread a lot of misinformation. I think you are wasting your time and everyone else's.

"Nathan, your anecdotal stories aren’t really worth much"

Actually Vivian it's *your* anecdotal stories which aren't worth much.

"entail filling out some paperwork"

Some paperwork? You're fucking kidding me. Do you have a clue?

#6: Krugman has become a parody of himself at this point. Republicans are evil incarnate because they are beholden to Big Business and Wall St., but hey, they donate to Hillary out of the goodness of their hearts. No strings attached.

But it's still fun to see nutcase BernieBros get butthurt at Krugman's columns these few months. "I'm canceling my NYT subscription!!" goes the typical comment.

"been motivated by the perception that Clinton is dishonest, which comes — whether they know it or not — not from her actual behavior but from decades of right-wing smears; "

The above line is hilarious.

We have the recent examples of a series of lies Hillary Clinton has told in relation to the Email server scandal, which was fundamentally about her attempt to hide her behavior and communications from FOIA requests.

It's odd that, as I'm sure Krugman has said, the "right-wing" absolutely hates Obama, but has been unable to smear him in the same way despite the fact that he has actually been President for nearly 8 years. Somehow it's Hillary that they've been able to manufacture a vast right-wing conspiracy against, to give the appearance of decades of shady, dishonest behavior. Truly amazing.

Did you forget Obama's secret religion, fake citizenship, and terrorist connections?

You make TV's point. Obama was correct in his assertions regarding those. Whereas, Hillary has clearly been caught in various substantial lies.

If only there were a more banal explanation for why one set of allegations has stuck and the other has not than "because Roger Ailes willed it so"

My point is that between say 2009 and 2014, the right wing firmly believed all kinds of conspiracy theories were about to break their way.

Hilary's "substantial" crimes have the same kind of desperate hope about them.

Obama does have terrorist connections. That is not fake. Bill Ayers didn't pretend to murder people. He murdered people.

anon April 5, 2016 at 6:33 pm

Hilary’s “substantial” crimes have the same kind of desperate hope about them.

I am sorry maybe I am misunderstanding you - you're saying that the Right has moral standards they expect everyone to share, but that the Left has none whatsoever when it comes to their own so they do not care what Hillary has or has not done?

An interesting defense.

I am not left. I remember Nixon being elected. Twice.

SMFS - yeah, and the Bush family has ties with the house of Saud, and Saudi is probably the biggest exporter of terrorism on the planet.

Perhaps we should try to keep things in perspective here.

Coal companies give large sums of money to Hillary from the kindness of their own hearts. Coal companies give large sums of money to climate skeptics as part of a massive international conspiracy to deny the science and cook the planet.

I am sure many people believe both these things at the same time.

Hillary did not receive large contributions from coal companies. In 2012, coal companies gave 96% of their contributions to Republicans. I'm not sure about this year yet, but I imagine it will be about the same.

Cass Sunstein misfired right away. "But whatever your political party, you are unlikely to approve of the illegal use of tax havens." I'm a Libertarian!

You sound Greek, and they do investigate what happens when too many support illegality.

Really? Libertarians support fraud or was that sarcastic comment?

Sounds like a freeloader to me.

What's the libertarian solution to freeloaders who want to uphold a system that enables them to get fantastically rich but don't want to pay a dime to uphold that system?

4. That article doesn't really do the Seoul coffee shop situation justice. You can stand on busy streets in Seoul where and see double-digit numbers of coffee shops, all of different brands (independent shops exist but are rare outside certain places). All of these brands are trying to work slightly different niches--Starbucks still pretty much just sells expensive coffee, Ediya is a little cheaper and has a more diverse tea selection, Paris Baguette sells coffee but devotes most store space to pastries, Paris Croissant is blatantly ripping off Paris Baguette, etc, etc. I don't understand how they all stay in business but apparently Koreans really are drinking that much coffee. I assume they'll eventually settle into some sort of equilibrium, like the chicken-and-beer joints that evolved in reaction to KFC. Hopefully that involves lots of funny pastries--I've never liked coffee but the ability to buy an oddball pastry whenever I'm hungry is pretty convenient.

#5) One way to level the tax playing field between the extremely wealthy and everyone else would be to exempt from taxes all investment income earned from wealth below a certain threshold, say $10M. For example, we could raise IRA and 401(k) limits to be $10M on assets rather than the current limits on contributions per year. That way, people with assets of less than $10M would be on equal footing with the extremely wealthy and their high-priced lawyers and accountants. Essentially, the middle class would get for free what the wealthy need to pay lawyers for. As Scott Sumner and Steve Landsburg have pointed out on multiple occasions, taxes on investment income are double taxation on former wages that have already been taxed and, thus, the neutral tax rate on investment income is zero anyways. The problem is not that the wealthy enjoy tax "havens"; it's that the rest of us don't, and they're not even "havens".

I would do the same, but skip the tax advantaged account skim. It is after all structured for fees not retirement.

Make the equivalent of median income (now ~$48k) in interest, dividend, and capital gains tax free. Come in with a progressive tax above that. It would allow easy, low friction, retirement savings. It would tax those secure in retirement.

The rich would hate it though, as would all those deep pockets firms now raking management fees, so it will probably never happen.

#2 Drone with chainsaw, meet drone that can dodge it http://digg.com/video/drone-dodging

or a supersonic drone https://www.youtube.com/watch?v=u828lawOAF0

#5a From Adam H. Johnson:

Making matters worse for Americans wanting to store their ill-gotten gains offshore, the 2010 United States—Panama Trade Promotion Agreement included a taxation clause that effectively shut down any chance of the rich in the US using Panama as a shelter.

Beside, history has shown that US had marched down to Panama when she feels like it.

http://www.reuters.com/article/usa-tax-fatca-idUSL2N0HN15T20130927

The United States does not have a full tax treaty with Panama, which has been listed in recent years by global authorities as a tax haven. But the United States and Panama did sign a tax-information exchange agreement in 2010.

Re American offshore wealth, that politico article is very muddled.

For Americans seeking anonymity, it's true they can get that at home.

For Americans seeking to avoid taxes and hide money, that has become much harder due to all the US arm-twisting to get cooperation. You can't get that at home and I'm pretty sure you can't get it in Singapore. You would have to do something more dodgy than what this leak exposes. This is a leak of offshore companies in mainstream offshore jurisdictions. Tax-dodging Americans would presumably be hiding in more dodgy ways in the least cooperative places.

I've translated some consulting reports on major bank's efforts to comply with US requirements, and yes, there are specific requirements for reporting on US nationals (in addition to a variety of other specific groups, based on their occupations and positions in politics/listed companies, not nationality). A bank who fails to comply may lose access to the US market, or at the very least, face risk of major fines or other lesser sanctions.

As offshoring Americans go, aren't most of the Kennedy's dead?

5.- Because Americans are way ahead and put their money in the cloud, in the for of Bitcoins.

What is interesting to me, is that Krugman only likes HRC because he assumes that she is lying. She talks as bad a game Bernie and Trump but people like Krugman (and me BTW) assume that she is just lying to get elected and will be more like the mainstream politicians.

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