Month: May 2004

At the risk of inciting a riot, let me propose that the alternative minimum tax may not be the worst idea since the designated hitter rule. Bear with me a little while before you start looking for something to throw.

The alternative minimum tax is widely unpopular for good reason. It obliterates itemized deductions, including state taxes and mortgage interest not directly related to the purchase or construction of one’s home. It comes as a surprise to the unwary individual taxpayer. Originally intended to keep rich people with clever accountants from escaping income tax, it applies at income levels that hardly qualify for tycoon status ($40,250 for single filers, $58,000 for married couples). The capital gains rate has been temporarily lowered to 15%, but will revert to 20% unless new legislation is enacted. So what is there to like about the AMT?

There are actually a couple of things to like about this tax. First, it is almost perfectly flat. The rate is 26% up to $112,500 for single filers, $150,000 for married couples. Above that, the rate increases, but only to 28%. Depreciation schedules are either straight-line or at least not as accelerated as the MACRS tables used for regular income tax. This brings the cost of tangible assets closer to the way they are presented for financial purposes. Elimination of the state tax exemption keeps the effect of state taxes inside each state’s borders.

The hidden beauty of the alternative minimum tax is that it is almost free of the effects of using tax law for social engineering. There is no income redistribution effect. Most of the rewards and penalties for economic behavior are removed, leaving it an essentially neutral revenue-raising device. It is nearly everything Jack Kemp or Steve Forbes could have asked for. If no legislative remedy is applied, it will slowly become the most common tax regime. Rather than abolishing this tax, perhaps we should consider abolishing all the others.

Today’s WSJ has a front-page article (subscription only) about women who return to paid work after taking years off to raise children. The women profiled in the article are having a tough time.

Some of these women may have unrealistic expectations. They want to resume their careers at their old pay and responsibility levels, but they seem not to understand that the business world changes rapidly and that career skills decay if not maintained. People who want to remain employable at a high level, even if they already have jobs, have to keep learning and updating their skills. (The article’s example of an ex-securities trader who took 14 years off to raise kids, and wants another finance job but goes to an interview without being familiar with current industry terminology, is telling.)

(And of course there’s bias in the selection of the women interviewed for the article. The writer didn’t interview women who had kept up their career skills and found jobs easily. Nor does she give more than passing recognition to societal changes that create other options besides conventional employment. Surely there are now more instances than ever of mothers who, upon returning to the work force and finding conventional options wanting, make their own opportunities by starting businesses, telecommuting or otherwise taking advantage of new technology.)

But another thing struck me about this issue, and that was the attitude of some of the people who do the hiring.

Many women quit work in their 30s, prime career-building years. By the time they think about going back, they’re into their 40s, or older. Women like this “are going to have to be a little realistic — they don’t have the perfect package,” says Kevin Ryan, CEO of DoubleClick, a New York computer company. “They’re going to have to take a step back” from the salaries and positions they left.

That’s one way to look at it. Another way is to realize that good people who lack recent job experience can be trained, and that mature but out-of-practice workers may be bargains for employers. The reluctance of some managers to hire competent women who are returning to the work force creates opportunity for employers who are more flexible, and for the people they hire.

You may have noticed some new names around here. The Conspiracy welcomes Michael Hiteshew, Mitch Townsend and the mysterious “Carl Ortona” (about whom I can reveal only that he is a true-blue Chicago boy).

Thanks for joining us, guys.

There is a very good interview on the Council on Foreign Relations site with Walter Russell Mead. (Interview here.) Mead is pitching his new book entitled Power, Terror, Peace, and War: America’s Grand Strategy in a World at Risk. (Order from Amazon here.) Mead was the author of the brilliant book Special Providence: American Foreign Policy and How It Changed the World, which brought us the word “ Jacksonian,” which may be the most powerful meme in all blogdom.

Another widely blogged-about meme is the Anglosphere. I notice that Mead makes a few points which are noteworthy to those of us who are interested in the present and future of the Anglosphere.

On the economic dynamism of the Anglosphere, Mead offers this:

[O]ne of the things that I think has made the English-speaking world–kept it kind of in an economic leadership role for centuries now–is that there’s a kind of the trade-off between accepting the risks and rigors of free-market capitalism on the one hand, and that causes a lot of social discomfort and unpleasant change; on the other hand, it brings you benefits in terms of new technologies, higher productivity, faster progress.

The English-speaking world, and especially the United States, has usually been pretty comfortable with pushing that trade-off in the more free-market direction, which, on the one hand, gives us historically a kind of a lead, often, compared to the rest of the world, but, on the other hand, means that our society is sometimes pulling the world in directions it doesn’t really want to go.

(I think “English-speaking world” is the way you say “Anglosphere” in polite society.)

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Presidents have little effect on the economy.

That isn’t me speaking, that’s every professional economist who’s ever remarked on the subject. At best, they can influence things like federal spending, tax policy and trade policy. That’s about it. So why did the USA enjoy an economic boom in the 90’s under Bill Clinton and a recession under George Bush?

In the 1980’s a revolution swept through American business. The following were a few key changes.

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