|11:18 AM, Jul 23, 2014 • By IKE BRANNON
A wizened soul who worked in the bowels of the United States Treasury in the Eisenhower administration once explained to me all that is wrong with the U.S. tax code.
He opined that every so often politicians perceive—rightly or wrongly—a “problem” with the tax code and resolve to fix it. The fix seems elemental taken alone: If we want more of a good thing we should tax it less, or tax it more if it is a bad thing—or disallow it all together. But do this a couple dozen times a year, and in a mere 28 years—the time that’s elapsed since passage of the 1986 Tax Reform Act—we are left with a profoundly convoluted tax code that is complicated, at odds with itself, and not at all amenable to economic growth. If we took a holistic approach to the tax code and endeavored to create one with few warts but geared towards economic growth, the retired Treasury Mandarin growled, we would have a tax code that made sense and did much less harm to the economy than the one we’re presently saddled with.
We may be about to make such a mistake once again by disallowing corporate “inversions” that result in a U.S. company—through either a merger, takeover, or some ambiguous way station between the two—effectively changes its domicile to another country. The Administration has seized upon this in a major way, with Treasury Secretary Jacob Lew—never a man prone to subtlety—accusing such corporations of not being patriotic, with a gaggle of the administration’s hallelujah chorus in the press singing the same tune. The Senate Finance Committee held a hearing week on the topic as well.
The inclination of anyone who pays attention to the goings-on of Congress is to dismiss the chance of any legislation becoming law as slim and none, given the ever-widening chasm between Harry Reid and the Democratic Senate and John Boehner and the Republican House of Representatives. But some Congress watchers suggest that a spate of inversions in the near future could put pressure on fiscal hawks facing reelection to declare their support for banning future inversions.
That would be a grievous mistake. Stopping inversions by merely outlawing it, without addressing the problems with the tax code pushing multinationals to relocate in the first place, is a short-sighted approach that would make U.S. businesses less competitive and chase commerce elsewhere.
Flaws in our Corporate Tax Code
The main reason inversions make sense is because we have sky-high corporate tax rates. The U.S. currently has the highest corporate tax rate of the 32 developed nations that belong to the Organization of Economic Cooperation and Development, with a top rate (federal plus state) averaging nearly 39 percent—twice the average corporate rate in Europe. In the last twenty years literally every single OECD country has reduced its corporate tax rate, save for the United States.
Will face Democrat Michelle Nunn in November.10:30 AM, Jul 23, 2014 • By MICHAEL WARREN
Businessman and first-time candidate David Perdue pulled off what the Atlanta Journal-Constitution calls a "political shocker" by winning the Republican primary runoff for the U.S. Senate in Georgia Tuesday. Perdue defeated Republican congressman Jack Kingston, who had the backing of much of the party establishment in Georgia, most of the Republican House delegation, and the U.S. Chamber of Commerce.
The runoff was very close, with Perdue winning by fewer than 2 percentage points and fewer than 10,000 votes. The Savannah-based Kingston dominate in rural south Georgia, but Perdue won nearly every county north of the "gnat" line, which includes the populous metro Atlanta region. Perdue is running to succeed retiring Republican Saxby Chambliss and join fellow Republican Johnny Isakson in the Senate. Neither senator endorsed in the primary.
Perdue is the cousin of former GOP governor Sonny Perdue, the first Republican to win the governor's seat since Reconstruction. Despite this pedigree, David Perdue has never run for office and based his candidacy around this fact. His first ad of the primary season cast his fellow four Republican candidates (all current or former elected officials) as whining babies, with the U.S. Capitol in the background, and Perdue' overall message has been that he is an outsider. In Kingston, Perdue had a runoff opponent who had been in the House of Representatives since 1993.
Perdue and Georgia Republicans now turn their sights to the general election and the Democratic nominee for the open Senate seat, Michelle Nunn. Nunn, the daughter of former Democratic senator Sam Nunn, is also running for the first time and has similarly situated herself as an outsider. Georgia has been voting Republican for state and federal offices for years, and the last Democrat to win a Senate election in the Peach State was in 2000 when conservative Democrat Zell Miller won a special election. Republicans hold the majority of the seats in the state's House delegation, both houses in the state assembly, and all eight statewide elected offices. Furthermore, the GOP presidential candidate has won Georgia the last four elections in a row.
Still, the state's increasingly diverse population may be weakening the GOP's stronghold, and national Democrats see Nunn's run as a possible way to take back a Republican-held seat in a tough year for the party throughout the country.
10:01 AM, Jul 23, 2014 • By GEOFFREY NORMAN
Vladimir Putin does not seem inclined to talk nice and patch things up with the West. To the contrary, he is drawing lines. They may, or may not, be “red." He seems confident enough not to need the modifier.
As Radio Free Europe/Radio Liberty reports:
Russian President Vladimir Putin has warned of NATO forces strengthening positions closer to Russia's border. Speaking at a July 22 session of the Russian Security Council in Moscow, Putin said Russia needs to react "appropriately and proportionately" to NATO's moves but he added he currently sees no direct threat to Russia's sovereignty or territorial integrity.
Meanwhile, France will proceed with plans to deliver a state-of-the-art warship to Russia. Which, to use the parlance of international statecraf, “sends a message."
9:39 AM, Jul 23, 2014 • By MICHAEL WARREN
Daniel Halper, THE WEEKLY STANDARD's online editor and author of Clinton, Inc.: The Audacious Rebuilding of a Political Machine, writes for Politico magazine:
When I started to write Clinton, Inc: The Audacious Rebuilding of a Political Machine, I knew the reaction to expect. I was well aware that the former (and perhaps future) first family and its massive retinue of loyalty enforcers, professional defamers and assorted gadflies would rue my intent to examine the real Clintons—especially in my search for the real Chelsea Clinton, who until now has been a media-protected nonperson despite her aggressive public activities on her family’s behalf and despite raking in hundreds of thousands of dollars from her role as former first daughter.
MSNBC’s David Shuster learned this the hard way when he was suspended from the network for saying, “But doesn’t it seem like Chelsea’s sort of being pimped out in some weird sort of way?” in a live TV hit on how the former first daughter was being used by her mother’s 2008 campaign. The Clintons hit the roof over the single relatively banal comment, as I report in my book, and lobbied the head of parent company GE to get Shuster off the air.
I also had a feeling that some of the sources I spoke to, for and not-for attribution, including alleged Clinton mistresses who’ve stayed out of the press and remain loyal to Bill, would alert the Clintons to what I was doing and help them prepare a counterattack.
Read the whole thing here.
9:06 PM, Jul 22, 2014 • By MICHAEL WARREN
The Federal Aviation Administration banned U.S. airlines from flying to Israel on Tuesday afternoon. Mike Bloomberg, the former mayor of New York City, issued the following statement Tuesday night:
This evening I will be flying on El Al to Tel Aviv to show solidarity with the Israeli people and to demonstrate that it is safe to fly in and out of Israel. Ben Gurion is the best protected airport in the world and El Al flights have been regularly flying in and out of it safely. The flight restrictions are a mistake that hand Hamas an undeserved victory and should be lifted immediately. I strongly urge the FAA to reverse course and permit US airlines to fly to Israel.
El Al, an Israeli airline, has maintained its flights to Tel Aviv from New Jersey's Newark airport.
7:58 PM, Jul 22, 2014 • By GEOFFREY NORMAN
The Islamists of ISIS are, as Maggie Fick and Isra' al-Rubei'i of Reuters report
… crushing resistance across northern Iraq so successfully that its promise to march on Baghdad may no longer be unrealistic bravado.
The have accomplished this not so much through tactical brilliance as ruthlessness and brutality. For instance
… when its fighters met armed resistance from the town of al-Alam for 13 days running …They kidnapped 30 local families and rang up the town's most influential citizens with a simple message about the hostages: "You know their destiny if you don't let us take over the town.” Within hours, tribesmen and local leaders caved in to save the families. The black flag of the Sunni militants, who are bent on overthrowing the Shi'ite-led Iraqi government, was soon flying over government buildings and police stations in al-slam.
It isn’t popular. But, then, it doesn’t have to be. Not when
"One hundred percent of people are angry that the Islamic State is here but there is nothing we can do," said a scared resident who spoke by telephone on condition of anonymity.
Hosted by Michael Graham.3:55 PM, Jul 22, 2014 • By TWS PODCAST
The WEEKLY STANDARD podcast with frequent contributors Adam J. White and Jeffrey H. Anderson on the conflicting court rulings over the legality of the IRS's interpretation of Obamacare subsidies for those participating in the federal Obamacare exchange.
This podcast can be downloaded here. Subscribe to THE WEEKLY STANDARD's iTunes podcast feed here.
2:29 PM, Jul 22, 2014 • By JAY COST
Democratic polling firm Public Policy Polling (PPP) has released a new poll of the North Carolina Senate race, featuring Democratic incumbent Kay Hagan squaring off against Republican state house speaker Thom Tillis, with ostensibly good news for the Democrat: She’s up seven points and expanded on her lead. Their headline: “Hagan continues to grow lead.”
But dig a little deeper and the story is mixed for the Democrat. Hagan’s seven-point lead is due largely to the libertarian candidate, who is polling 8 percent. In no cycle since 1986 has the libertarian pulled more than 3.4 percent in North Carolina; on average the libertarian has won 2.1 percent of the vote. And a deeper dive into PPP’s cross-tabs suggests that a large portion of the libertarian support is actually Republican.
In the head to head match-up, excluding the libertarian, Hagan’s lead is 3 points, which is less than the 4 point lead she posted in their last head-to-head poll. Moreover, she pulls just 42 percent of the vote, a bad spot for any candidate with 90%+ name recognition.
Another complication worth noting: PPP has a peculiar method in the spring and summer months, when they poll “voters.” I do not mean registered voters or likely voters, but people who voted in previous cycles, including presidential ones. This means that they are inevitably sampling an electorate that is much broader than what we will see in November. Turnout in 2012 was 60.2 percent of the voting age population in North Carolina; in 2010 it was 36.4 percent. I know of no other pollster that uses this methodology.
I think the bottom line is that North Carolina joins a list of nearly a dozen states where the real world state of the race is within spitting distance of a tie, with 15 to 20 percent of the electorate still undecided. That is how I would characterize the Democratic-held seats in Alaska, Arkansas, Colorado, Iowa, Louisiana, and North Carolina, as well as Republican-held seats in Georgia and Kentucky.
Moreover, this appears to have been the state of the race a month ago, even two months ago (although Michigan has since slipped from a toss-up to back to favoring the Democrats).
Nate Cohn of the New York Times had an interesting piece suggesting that this was bad news for the Republicans. He wrote:
But as July turns to August, the G.O.P. is now on the clock. If there is to be a wave this November, the signs of a shift toward the G.O.P. ought to start to show up, somewhere, soon. Every day that goes by without a shift toward the G.O.P. increases the odds that there will not be a wave at all.
2:04 PM, Jul 22, 2014 • By JOHN MCCORMACK
Earlier today, a panel of federal judges in the District of Columbia ruled 2-1 that the plain text of Obamacare requires states to set up their own health care exchanges in order for their residents to be eligible for Obamacare subsidies. Thus, the court ruled, the subsidies provided and tax penalties imposed in 36 states that didn't set up their own exchanges were illegal.
But hours later, the 4th Circuit Court of Appeals ruled in a separate case that the subsidies were permissible:
[W]e find that the applicable statutory language is ambiguous and subject to multiple interpretations. Applying deference to the IRS’s determination, however, we uphold the rule as a permissible exercise of the agency’s discretion. We thus affirm the judgment of the district court.
The federal government is seeking to appeal the D.C. court panel's ruling before the entire D.C. circuit court of appeals, which has been recently stacked with Obama appointees. Regardless of how the D.C. court rules, the case may end up before the Supreme Court.
1:14 PM, Jul 22, 2014 • By JOHN MCCORMACK
Daniel Halper sat down with Elisabeth Hasselbeck on Fox and Friends this morning to discuss his new book Clinton, Inc.
"When you cover the Clintons, you have to make hard choices about which scandals and which mistresses to cover," Halper said.
You can buy Clinton, Inc. here.
12:01 PM, Jul 22, 2014 • By GEOFFREY NORMAN
The tensions between Russia and the civilized world – especially Europe – are making for some tough economic decisions. Trade and finance give the U.S. and the E.U. leverage. But sanctions are not a one way street. Things do, however, seem fairly clear cut when it comes to arming Russia with top-shelf weaponry. If the West isn’t willing to cut Russia off when it comes the sale of arms, then it cannot claim to be serious about applying leverage. Which puts France in a bind.
The French made a deal with the Russians to build two warships – carriers configured to operate helicopters and conduct amphibious assault. These are state-of-the-art warships designed with offensive war and power projection in mind. Not the sort of thing anyone would want to see in the hands of a rogue nation with a record of aggressive behavior.
So … what to do?
For now, it appears that the French will deliver the first of the ships since it is bought and paid for. It may be willing to deny the Russians delivery of the second … if it can find another buyer. As Gregory Viscusi and Helene Fouquet of Bloomberg report:
French President Francois Hollande said he’s prepared to cancel the sale of a second Mistral helicopter carrier ship to Russia if the European Union decides to expand its sanctions against Russia.
The second ship, due in 2016, hasn’t yet been paid for, making it possible to withhold the sale if the EU agrees to broaden its measures on Russia, Hollande said yesterday at the annual presidential press dinner.
At the same time, sanctions can’t be retroactive and wouldn’t cover delivery of the Vladivostok, the first Mistral warship, which is already paid for and due for delivery in October, Hollande said.
“Can the rest of the contract be honored?” Hollande told reporters in Paris about the second warship part of a contract with Russia. “That will depend on Russia’s attitude.”
11:24 AM, Jul 22, 2014 • By NOAH POLLAK
Yesterday, moments after Secretary of State John Kerry departed for the Middle East to attempt to broker a ceasefire in the Israel-Gaza war, the State Department issued a warning recommending that “U.S. citizens consider the deferral of non-essential travel to Israel” due to the threat from “long-range rockets launched from Gaza.”
Long-range rocket fire from Gaza has been dramatically curtailed in recent days by the IDF’s ground operation, and was heaviest at the beginning of the war – some two weeks ago. Despite Hamas and Islamic Jihad barrages of M75 and M302 rockets fired at Tel Aviv and Jerusalem on July 8th, 9th, and 10th, no travel warning was issued.
Israel earned over $10 billion last year from 3.5 million visitors, the plurality of whom were Americans. Coming at the height of summer tourism season, State's warning could cost Israel many millions of dollars in lost revenue.
So why did the State Department issue this warning not when long-range rocket fire was a more serious threat, but only yesterday, days after such fire had decreased sharply, and coinciding with Kerry's trip to the region?
The answer may be that the Obama administration is using the travel warning to exert pressure on Israel to agree to a ceasefire. It could be a shot across the bow – a deniable but very real signal to Prime Minister Netanyahu that the Obama administration’s support for Israel’s operation in Gaza has come to an end, and that there will be consequences for its continuation. And at the same time the State Department was delivering a blow to the Israeli tourism industry, Kerry was showing solidarity with Gaza by announcing a $47 million aid package, much of which is slated to be administered by UNRWA, the corrupt and terror-linked UN agency that has been in the news for storing Hamas rockets in one of its schools.
Reporters who cover the State Department could be forgiven for asking some probing questions today about whether travel warnings are being used as an impartial means of ensuring the safety of American travelers – or whether the warning system has been transformed by the Obama administration into a means of deterring a close ally from doing what it believes necessary to protect its civilians during wartime.
10:49 AM, Jul 22, 2014 • By JOHN MCCORMACK
A federal court has ruled that the IRS illegally rewrote Obamacare to provide subsidies and impose tax penalties in states that did not establish their own health insurance exchanges. The Washington Post reports:
A federal appeals court panel in the District struck down a major part of the 2010 health-care law Tuesday, ruling that the tax subsidies that are central to the program may not be provided in at least half of the states.
The ruling, if upheld, could potentially be more damaging to the law than last month’s Supreme Court decision on contraceptives. The three-judge panel of the D.C. Circuit Court of Appeals sided with plaintiffs who argued that the language of the law barred the government from giving subsidies to people in states that chose not to set up their own insurance marketplaces. Twenty-seven states, most with Republican leaders who oppose the law, decided against setting up marketplaces, and another nine states partially opted out.
The government could request an “en banc” hearing, putting the case before the entire appeals court, and the question ultimately may end up at the Supreme Court. But if subsidies for half the states are barred, it represents a potentially crippling blow to the health-care law, which relies on the subsidies to make insurance affordable for millions of low- and middle-income Americans.
You can read the court's decision in Halbig v. Burwell here. Excerpt:
Section 36B of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act (ACA or the Act), makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces—known as “American Health Benefit Exchanges,” or “Exchanges” for short—that are “established by the State under section 1311” of the Act. 26 U.S.C. § 36B(c)(2)(A)(i). On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia. See 42 U.S.C. § 18024(d). But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under section 1321 of the Act. See 26 C.F.R. § 1.36B-2(a)(1) (hereinafter “IRS Rule”).
Appellants are a group of individuals and employers residing in states that did not establish Exchanges. For reasons we explain more fully below, the IRS’s interpretation of section 36B makes them subject to certain penalties under the ACA that they would rather not face. Believing that the IRS’s interpretation is inconsistent with section 36B, appellants challenge the regulation under the Administrative Procedure Act (APA), alleging that it is not “in accordance with law.” 5 U.S.C. § 706(2)(A).
7:59 AM, Jul 22, 2014 • By GEOFFREY NORMAN
There is a fairly robust debate about inflation going on these days. Is there too much? Not enough? Any at all? And just how much is too much? Can we hit the Goldilocks sweet spot?
What does not appear to be debatable is that government is getting more expensive. Even the bad and unpopular elements of government want more money. Which means, of course, that they will get it. The IRS has trouble archiving e-mails? Has to be because it didn’t have enough to spend on technology. VA so strapped that after it has paid bonuses to its senior executives, there isn’t enough left to take care of old soldiers with cancer? Must have more money.
And now, the Transportation Security Administration, which is the love of travelers everywhere, is feeling strapped. The only solution for it is…to raise ticket prices. As Catey Hill of Market Watch writes, as of yesterday, the TSA
… will more than double the mandatory fee they charge many passengers and will no longer cap these fees. Under the old law, the fee, which is used for security, was $2.50 for each leg of a flight with a $5 cap on each one-way trip or a $10 cap on each round trip. But beginning July 21, the fee is $5.60 for each leg of a flight and that is not capped; if your layover is more than four hours on a domestic flight or 12 hours for international destinations, that counts as a second leg of the flight and you will be charged an additional fee. While that may not sound like a lot, consider what this could mean for your wallet. If you book a domestic round trip and have two total connections (and the layover is four hours or more during each connection), you’ll end up shelling out nearly $25 to the TSA. That jacks up the average domestic airline ticket price by more than 5%.
No reason to think the money will enable to TSA to do better work. The “screening process” will not become less unpleasant.
But, the bureaucracy will be appeased. Maybe it isn’t inflation. But there ought to be a word for it.
10:20 PM, Jul 21, 2014 • By MICHAEL WARREN
Online editor Daniel Halper is out with a new book Tuesday titled Clinton, Inc.: The Audacious Rebuilding of a Political Machine. Halper joined Fox News's Megyn Kelly Monday night for an exclusive first interview about the book's revelations on the former and would-be first family, Hillary's likely 2016 presidential run, Chelsea's role as the family's "CEO," and the misdeeds of the former president.
Watch the videos below:
Browse 15 Years of the Weekly Standard