There is a controversy in my synagogue that bears some analysis. The synagogue's bylaws confer on the board of directors the right to deal with the hiring (and dehiring) of clergy. The board, in its wisdom, decided that both clergy's contracts would not be renewed. Of course, when it comes to clergy, there are some who side with the clergy and some who do not. Those who sided with the clergy petitioned that a general meeting of the congregation be called to examine the criteria by which the board decided to allow the clergy's contracts to expire. It was their right under the bylaws of the synagogue.
The ensuing result can only be viewed with deep regret. The general meeting is now seen, by some, as a referendum on the de-hiring of the clergy. Congregants are taking sides. Articles in the Jewish community press take the discussion public. Telephone campaigns are being mounted to "support the board". In other words, the actions taken by the board have become deeply divisive.
The board of many communal organizations are given an absolute right to hire and, at times, fire employees. When the merits and detriments of the clergy's job are openly discussed and, employment law being what it is, the result is often expensive litigation. In many communal organizations the salaries of clergy are private and are shown as a global amount. This is why serving on a board of any communal organization is so difficult.
The dissenters feel marginalized. They have no way of expressing their views and often feel that the board's actions are arbitrary. Boards do not call public forums to decide whether clergy should be kept on and are advised to act together in solidarity. This position is taken by dissenters as outright stonewalling.
The clergy are often in a difficult situation. Any public negative assessment of their work will have an equally negative effect on getting the next job. Congregations are not anxious to hire people who are perceived as troublemakers. The dissenters are often not doing those they support a favour.
Short of criminal behaviour it is unlikely that a board can be made to reverse its position. There is no provision in the bylaws for recall of elected board members. True, the board can reverse its position but that would be disastrous for the congregation. The proper procedure at the board level was for dissenting board members (if there were any) to move for reconsideration. This would have put the matter over to the next meeting. In the interim, dissenting board members could ask for support in lobbying for the dissenting position. However, that was not done.
Whether its a condo board or a board of a communal organization such as a synagogue or church, the lot of board members is not a happy one I have always said that, given any action by a board a third will like it, a third will hate it and a third won't care. That said, those who hate it have to understand that the board was elected to act on behalf of the members. They must do so honestly but having taken an action, no matter how poorly that action is seen by others, the matter should be over. If the membership can repeatedly second guess the board then no one will serve.
It is hoped that cooler heads will prevail. A meeting that turns out to be a pep rally for the clergy will neither help those who organized it or the clergy. Part of corporate governance is that members delegate certain matters to their board. If the dissenters are unhappy with the board's actions they can always run their own slate and defeat the incumbents (if they can) at the next general meeting. Otherwise, and as difficult as it may seem, the dissenters should keep their own counsel. Easier said than done.
Bernie.
Wednesday 30 November 2011
Saturday 26 November 2011
Schools versus Parents
I saw an interesting news item on PBS news. It was an inner city school that was highly interventionist with homework, life skills, educational goals and other issues that might normally be the province of parents. In the United States parents rights are highly guarded. For example, sex education has been highly curtailed because it is deemed to be the right of the parents and should not be taught at schools. This has done very little for teen pregnancies. However, the educational interventionism at inner city schools starts with the premise that there is little if any parental supervision or guidance at home. In many cases the father and sometimes the mother are absent. Kids are being parented by grandparents who have neither the patience or the ability to deal with passing on life skills. So, the schools have taken over. They are, for the most part, dealing with homework by creating after school study halls. They are motivating kids to get better grades by surrounding them with other kids who are striving to do more with their lives then get a go to jail pass. They are helping kids get summer jobs that are an alternative to running drugs. They are tapping into scholarship programgs that enable kids to go to college. In these schools the drop out rate has plummeted and it is now smart to be smart.
As most of you know I am a member of Kiwanis. The Ottawa club is pledged to help at-risk kids. It was heartwarming to know that one of the key factors in turning inner city kids around was Key clubs, youth clubs that are sponsored by Kiwanis. These clubs teach responsibility through community service. By serving others, kids serve themselves. The schools maintain that membership in Key (and other community service) clubs allows kids to interact with one another for a common positive goal. I have always felt that parents can pass off life values to kids--but only up to a point. At some point kid's friends will have as much say (and possibily more say) than anything that the parents can impart. This is where Key clubs and clubs like them have a significant impact. These are normally kids who see study as a positive step in getting better grades. They see getting better grades as a step to enhancing their educational goals and they see getting a better, higher level, education as a step to getting out of the ghetto. While these should be values that are imparted by parents, in many inner city schools parents are either unable or unwilling to do so. There is no study environment at home. There is no goal setting that goes beyond food stamps. In fact, schools have stepped in to provide the child with the kinds of support that would be expected of any middle class family in the suburbs.
I have a granddaughter who is well on her way to becoming a teacher. She will be in the workforce next year. There are very few jobs for teachers in the US because of budget constraints and union rules that require the rehiring of laid off teachers before new teachers can be hired. My granddaughter does practice teaching in inner city schools. The amazing fact is that she finds that kids in inner city schools are better behaved in class than in schools where the students come from middle class families. Why? She says that in schools with students from mddile class families kids attend because they have to do so. In inner city schools kids attend, largely, because they want to. So many kids drop out that those who remain are motivated to be there by the prospect of bettering their lives. Many look to teachers are roll models who can help them get out of the ghetto.
There is a curious statistic involving teen pregnancies and teen smoking. While these have been holding steady or increasing with middle class kids, they are sharply reduced with inner city kids. Why? In the case of teen pregnances the new welfare laws that cut off benefits after 2 years have taken the economic incentive out of teens having kids. Formerly, inner city kid believed that having kids was an ecnomic ticket to leaving home. No more. In the case of smoking the adverse health effects of smoking seems to have had more traction in inner cities.
Most government social services have failed miserably in helping inner city kids with either their education or their life skills. Church groups have faired better but still depend on church attendace to make an impact. The schools is where every kid goes--or is supposed to go. It can have the greatest impact on kids if extra cirricular help starts early enough.
Like everything else, scaling up these services cost money. The schools system is largely bankrupt in the US. No child left behind legislation has done little to keep kids in school or improve the skills of those who stay there. America is 17th in a list of 25 when it comes to basic skills like reading comprehension or math skills. Canada is 7th. Most Asian countries are much better. This is because the first priority of most of these countries is education. Kids go 6 days a week and spend from 9 to 6 at school each day. Parents not only take an active role in education but are sometimes over reaching in wanting better for their kids. In the US and now in some parts of Canada, these values are falling away. In an advanced techology society kids with math, science and reading skills will succeed. The first world, so called, will fall behind.
All of this seems straightforward. In the US politicians are so deadlocked that any positve solution seems far distant. In Canada where the eduction system is financially stressed but still working reasonably well, we still have a long way to go before our kids have the same math and reading skills as in Korea. Our kids should be our first priority.
Bernie.
As most of you know I am a member of Kiwanis. The Ottawa club is pledged to help at-risk kids. It was heartwarming to know that one of the key factors in turning inner city kids around was Key clubs, youth clubs that are sponsored by Kiwanis. These clubs teach responsibility through community service. By serving others, kids serve themselves. The schools maintain that membership in Key (and other community service) clubs allows kids to interact with one another for a common positive goal. I have always felt that parents can pass off life values to kids--but only up to a point. At some point kid's friends will have as much say (and possibily more say) than anything that the parents can impart. This is where Key clubs and clubs like them have a significant impact. These are normally kids who see study as a positive step in getting better grades. They see getting better grades as a step to enhancing their educational goals and they see getting a better, higher level, education as a step to getting out of the ghetto. While these should be values that are imparted by parents, in many inner city schools parents are either unable or unwilling to do so. There is no study environment at home. There is no goal setting that goes beyond food stamps. In fact, schools have stepped in to provide the child with the kinds of support that would be expected of any middle class family in the suburbs.
I have a granddaughter who is well on her way to becoming a teacher. She will be in the workforce next year. There are very few jobs for teachers in the US because of budget constraints and union rules that require the rehiring of laid off teachers before new teachers can be hired. My granddaughter does practice teaching in inner city schools. The amazing fact is that she finds that kids in inner city schools are better behaved in class than in schools where the students come from middle class families. Why? She says that in schools with students from mddile class families kids attend because they have to do so. In inner city schools kids attend, largely, because they want to. So many kids drop out that those who remain are motivated to be there by the prospect of bettering their lives. Many look to teachers are roll models who can help them get out of the ghetto.
There is a curious statistic involving teen pregnancies and teen smoking. While these have been holding steady or increasing with middle class kids, they are sharply reduced with inner city kids. Why? In the case of teen pregnances the new welfare laws that cut off benefits after 2 years have taken the economic incentive out of teens having kids. Formerly, inner city kid believed that having kids was an ecnomic ticket to leaving home. No more. In the case of smoking the adverse health effects of smoking seems to have had more traction in inner cities.
Most government social services have failed miserably in helping inner city kids with either their education or their life skills. Church groups have faired better but still depend on church attendace to make an impact. The schools is where every kid goes--or is supposed to go. It can have the greatest impact on kids if extra cirricular help starts early enough.
Like everything else, scaling up these services cost money. The schools system is largely bankrupt in the US. No child left behind legislation has done little to keep kids in school or improve the skills of those who stay there. America is 17th in a list of 25 when it comes to basic skills like reading comprehension or math skills. Canada is 7th. Most Asian countries are much better. This is because the first priority of most of these countries is education. Kids go 6 days a week and spend from 9 to 6 at school each day. Parents not only take an active role in education but are sometimes over reaching in wanting better for their kids. In the US and now in some parts of Canada, these values are falling away. In an advanced techology society kids with math, science and reading skills will succeed. The first world, so called, will fall behind.
All of this seems straightforward. In the US politicians are so deadlocked that any positve solution seems far distant. In Canada where the eduction system is financially stressed but still working reasonably well, we still have a long way to go before our kids have the same math and reading skills as in Korea. Our kids should be our first priority.
Bernie.
Thursday 24 November 2011
On American Thanksgiving
We tend to believe that Americans are too sappy when it comes to patriotic events. They are too apt to give in to jingoistic slogans like Black Friday and Tripple Witching (see stock market). Howevewr, when it come to Thanksgiving the American's can't hold a candle to anyone.
In Canada, Thanksgiving is mainly a civil service holdiay on which the only thanks that is given is for the day off. We approach the day phelgmatically. We either have nothing to be thankful for or thankfulness is something best kept to onself. If we are cynical we believe that the only reaon the US date is later than the one in Canada is that it is closer to Christmas and that the holiday can be leveraged into a frenzy of holiday shopping. While that may be true, in part, for most Americans Thanksgiving is a special holiday that transcends the commercialism that has been grafted onto the holiday.
If we think about family and holidays, there is nothing quite like Thanksgiving. Celegrating Christmas may not go over with the non Christians. Channuka is only for Jews. Kwanza for African Americans. And so on. Thanksgiving is the only non sectarian holiday that is as laced with tradition as it is with turkey. We are fortunate that we have kids and grandkids on the US side of the border. We therefore get the benefit of both kinds of Thanksgiving, ours and theirs and there is no comparison.
Like salmon returning to the place of their birth, most everyone that can goes "home". It is a great ingathering that tops family disagreements. It is a time when inlaws are welcomed as warmly as parents. Brothers and sisters visit freely even if they talk infreqyently during the year. Best of all it is non sectarisn (notwithstanding that the holiday was said to have been created by the Pilgrims, a religious sect). It has remained relatively commercial free because the shopping bingers are largly limited to Black Friday and the ensuing Christmas crush. The propriety of stores that open late on Tbursday is roundly debated in an otherwise relentlessly commerical culture.
Given the latest commercial and economic upheavals the Americans have a lot to learn from Canada. But on the matter of Thanksgiving we have a lot to learn from our American cousins. So, turkeyday, here I come--pumpkin pie and all.
Bernie,
In Canada, Thanksgiving is mainly a civil service holdiay on which the only thanks that is given is for the day off. We approach the day phelgmatically. We either have nothing to be thankful for or thankfulness is something best kept to onself. If we are cynical we believe that the only reaon the US date is later than the one in Canada is that it is closer to Christmas and that the holiday can be leveraged into a frenzy of holiday shopping. While that may be true, in part, for most Americans Thanksgiving is a special holiday that transcends the commercialism that has been grafted onto the holiday.
If we think about family and holidays, there is nothing quite like Thanksgiving. Celegrating Christmas may not go over with the non Christians. Channuka is only for Jews. Kwanza for African Americans. And so on. Thanksgiving is the only non sectarian holiday that is as laced with tradition as it is with turkey. We are fortunate that we have kids and grandkids on the US side of the border. We therefore get the benefit of both kinds of Thanksgiving, ours and theirs and there is no comparison.
Like salmon returning to the place of their birth, most everyone that can goes "home". It is a great ingathering that tops family disagreements. It is a time when inlaws are welcomed as warmly as parents. Brothers and sisters visit freely even if they talk infreqyently during the year. Best of all it is non sectarisn (notwithstanding that the holiday was said to have been created by the Pilgrims, a religious sect). It has remained relatively commercial free because the shopping bingers are largly limited to Black Friday and the ensuing Christmas crush. The propriety of stores that open late on Tbursday is roundly debated in an otherwise relentlessly commerical culture.
Given the latest commercial and economic upheavals the Americans have a lot to learn from Canada. But on the matter of Thanksgiving we have a lot to learn from our American cousins. So, turkeyday, here I come--pumpkin pie and all.
Bernie,
Monday 14 November 2011
On Original Sin
The recent events at the University of Pennsylvania bring up some interesting thoughts. Clearly the acts involved were heinous. Clearly there is a good old boys network that protects, or at least shelters, members of the "team". Clearly football is such a money maker that if you touch it you die. Clearly Paterno and the President of the University had to go.
That said there was a debate on Meet the Nation this past Sunday that merits discussion. I am not familiar with one of the commentators but I am familiar with David Brooks, the much celebrated columnist of the New York Times. While all agreed that the actions taken by the University were justified, one commentator said that crimes of this nature are part of the fabric of society. While regrettable, the only recourse was to make sure that the laws had stiff penalties for those who did not report either the crimes or reports of the crimes. In other words lock the barn, fully, after the horse has escaped.
Brooks, who I had always known as the lone conservative commentator at the Times had a different view. He believed that society has lost its "yardstick" that differentiates between good and evil. Evil acts were the subject of legislation. In effect, moral instruction of the young and old alike had been forsaken. People no longer knew what was morally right and were without a moral compass.
From my perspective it looks like Brooks is "right on". You can look at garbage television where risqué language is now the norm in prime time. You can look at a raft of movies that sell potty humour very well. You can look at people who are attacked in the streets while onlookers move on. On a more human level you can see the devaluation of the sexual act to almost zero among teens and even pre teens. However, this kind of reaction is normal for any person of advanced years who always claimed that the youth were going down the drain. I can remember a time when Jack Benny was banished from the airwaves for a risqué remark that would not raise an eyebrow today. So, what's happened.
In the United States the slippery slope was founded in first amendment rights. Much of what we would have called pornography in my youth was permitted as an exercise in free speech. Books that were formerly banned were given a reprieve under the same rights. Movies that had formerly only shown a bedroom occupied by husband and wife as one with twin beds were replaced with movies that open showed gay sex. Hee Haw was the first of a string of television shows that featured (albeit funny) sexual innuendos. These shows, while mildly in bad taste, bear little resemblance to current television shows where specific sexual references are common. These shows are said to reflect the current ethos among the 18-24 year old viewers.
That being said, sexual predators are hardly new. The Catholic Church bears witness to sexual crimes that go back well over 50 years. Nor are sexual deviants a new phenomenon. Better reporting and better detection have shone a better light on these unfortunate crimes.
And then there is the "pill". The pill was introduced just after we were married. No one, at that time, could foretell the sexual revolution was was to follow. The hippie mantra of "make love not war" was followed literally. These hippies grew up to be fairly normal parents but they were parents who had smoked pot and had a liberal attitude toward sex. They were hardly the ones to come down on casual sex.
Add to that the societal acceptance of what was once known as sexual deviance. I am referring to gay and lesbian relationships. During my youth I am sure that there were as many gays and lesbians as there are now--not in number but in proportion to the population at large. However, this kind of behaviour was not talked about and rarely accepted as any kind of norm. If course all that has changed, and for the better.
So where are we on the subject of "original sin". Clearly moral values have changed dramatically in the 75 years of my life. For the better? Not always. For the worse? Sometimes. I do want to point out two things that I think are the hallmark of this kind of discussion. The first is casual sex. If sex is a fundamental act of procreation, if sex is the ultimate act of selflessness between partners, then I believe that casual sex is a devaluation of that "sacredness". The second point is one of taste. If the only humour that is current is based on four letter words and bathroom references then I think that there has been a devaluation of this art form. If bystanders see a crime being perpetrated and say and do nothing or laugh at racist jokes then humanity has been devalued. The roll of organized religions are not very helpful in that regard. The task must be taken over by responsible parents and educators who can point out that certain thing are, plain wrong. Unless this is done we will all revel in the garbage can of human relations.
Bernie.
That said there was a debate on Meet the Nation this past Sunday that merits discussion. I am not familiar with one of the commentators but I am familiar with David Brooks, the much celebrated columnist of the New York Times. While all agreed that the actions taken by the University were justified, one commentator said that crimes of this nature are part of the fabric of society. While regrettable, the only recourse was to make sure that the laws had stiff penalties for those who did not report either the crimes or reports of the crimes. In other words lock the barn, fully, after the horse has escaped.
Brooks, who I had always known as the lone conservative commentator at the Times had a different view. He believed that society has lost its "yardstick" that differentiates between good and evil. Evil acts were the subject of legislation. In effect, moral instruction of the young and old alike had been forsaken. People no longer knew what was morally right and were without a moral compass.
From my perspective it looks like Brooks is "right on". You can look at garbage television where risqué language is now the norm in prime time. You can look at a raft of movies that sell potty humour very well. You can look at people who are attacked in the streets while onlookers move on. On a more human level you can see the devaluation of the sexual act to almost zero among teens and even pre teens. However, this kind of reaction is normal for any person of advanced years who always claimed that the youth were going down the drain. I can remember a time when Jack Benny was banished from the airwaves for a risqué remark that would not raise an eyebrow today. So, what's happened.
In the United States the slippery slope was founded in first amendment rights. Much of what we would have called pornography in my youth was permitted as an exercise in free speech. Books that were formerly banned were given a reprieve under the same rights. Movies that had formerly only shown a bedroom occupied by husband and wife as one with twin beds were replaced with movies that open showed gay sex. Hee Haw was the first of a string of television shows that featured (albeit funny) sexual innuendos. These shows, while mildly in bad taste, bear little resemblance to current television shows where specific sexual references are common. These shows are said to reflect the current ethos among the 18-24 year old viewers.
That being said, sexual predators are hardly new. The Catholic Church bears witness to sexual crimes that go back well over 50 years. Nor are sexual deviants a new phenomenon. Better reporting and better detection have shone a better light on these unfortunate crimes.
And then there is the "pill". The pill was introduced just after we were married. No one, at that time, could foretell the sexual revolution was was to follow. The hippie mantra of "make love not war" was followed literally. These hippies grew up to be fairly normal parents but they were parents who had smoked pot and had a liberal attitude toward sex. They were hardly the ones to come down on casual sex.
Add to that the societal acceptance of what was once known as sexual deviance. I am referring to gay and lesbian relationships. During my youth I am sure that there were as many gays and lesbians as there are now--not in number but in proportion to the population at large. However, this kind of behaviour was not talked about and rarely accepted as any kind of norm. If course all that has changed, and for the better.
So where are we on the subject of "original sin". Clearly moral values have changed dramatically in the 75 years of my life. For the better? Not always. For the worse? Sometimes. I do want to point out two things that I think are the hallmark of this kind of discussion. The first is casual sex. If sex is a fundamental act of procreation, if sex is the ultimate act of selflessness between partners, then I believe that casual sex is a devaluation of that "sacredness". The second point is one of taste. If the only humour that is current is based on four letter words and bathroom references then I think that there has been a devaluation of this art form. If bystanders see a crime being perpetrated and say and do nothing or laugh at racist jokes then humanity has been devalued. The roll of organized religions are not very helpful in that regard. The task must be taken over by responsible parents and educators who can point out that certain thing are, plain wrong. Unless this is done we will all revel in the garbage can of human relations.
Bernie.
Thursday 10 November 2011
Tax Lessons For Greece and Italy
The underlying problem in Greece and Italy is their tax systems. Both leak like a sieve. By admission almost one in three people in Italy works outside the tax system. Some say that the situation in Greece is worse. In recent interviews the "haves" in Italy are not prepared to subsidize the "have nots". This is not so much because of fairness but because so many do not pay any taxes at all. In Greece the problem is worse because of padded social programs that have to be funded out of general revenues. Soon the money runs out.
Israel faced that problem in the 1970s where the largest marginal tax rate rose to 80%. However, one in two Israelis had a second job that was "off the books". This was so endemic that the government allowed businesses to take deductions for expenses where the recipient was not on the tax roll. The problem was exacerbated by the Israeli government printing money when it ran out. This resulted in inflation at over 40% per month! The Israelis solved the problem in a characteristically innovative way. First, they changed the money. On a given day the "old" money would not purchase value. Old money exchanged for new money at a bank had to be reported and many taxpayers, formerly off the rolls, were reluctantly reinstated. Secondly, they reformed the system by lowering tax rates so that beating the system was less cost effective. Thirdly, and most important, they instituted a value added tax, or VAT. that levied tax at point of purchase. The underground economy, while never completely eradicated, was seriously reduced.
Which leads me to Greece and Italy. The VAT tax in Italy is 20% with some items being taxed at a reduced rate of between 4-10%. In Greece the proposed VAT is 23% up from 13%. The rate rise has yet to be approved by Parliament. Income tax rates range from 18% to 45% for incomes over 100,000 Euros. The problem is that very few people pay income tax. Those with government jobs are punished because their income taxes are deducted at source. Small business and small craft business pay little or no income tax. The tax situation in Italy is only marginally better.
I have posed, on many occasions, that the most efficient tax is a point of purchase tax that allows everyone below the ultimate purchaser to recover tax paid against taxes owing. For example if you charged $100 in HST and paid $50 in HST your tax liability would be only $50. The ultimate purchaser would not deduct for taxes paid. Therefore the HST (really a VAT) is paid on the highest price. Low income taxpayers can be granted rebates depending on level of income. This also causes all taxpayer to register within the system in order to reap the benefits. There is ease of collection and hiding is very difficult. Those who are more wealthy usually consume more and therefore the tax is somewhat progressive. The tax also catches foreign visitors who, in theory, can get a refund of the tax but experience has shown that these refunds are rarely claimed.
The main knock on the VAT is that it adversely effects pricing. It is true because a consumer has to pay the price out of current income. However, imagine ti increase to your take home pay if tax deductions at source were eliminated or seriously curtailed. You would have more disposable income to fund the tax at point of purchase.
In most western countries the tax legislation has gotten completely out of hand. Compliance is difficult without paid tax preparers. Simplifying the tax base is difficult because so many of the tax programs are interactive in that changing one provision affects many more provisions. Consequential changes are now tracked by computer but a reduction in complexity of one provision usually adds complexity to others. A single rate tax is no less complex because it's the tax base that is complicated not the rate. A consumption tax does not take into account the tax base because it's only the value of the goods purchased that determines the tax. There is some evidence that a comprehensive VAT at 20% could eliminate the personal (not corporate) tax in Canada.
Tax is a complicated tool. Paying tax is an implicit agreement with government that your payment will give you value. In Canada a higher personal tax rate was implicitly exchanged for a reduced cost of education and free medical services. This kind of reciprocity does not exist in Greece and barely exists in Italy. Greece has, until recently, bloated social programs that it could not fund on the existing tax base. Increasing taxes and eliminating social programs is bound to fail. Increasing taxes without some kind of social contract is like putting a bandaid on a gaping wound.
It is for this reason that outside pressure from EU countries to reform tax systems and collection is bound to fail. The pressure must come from within. This recently happened in Ireland with good results. What we need is a social reordering in Greece and Italy and that's hard to do.
Bernie.
Israel faced that problem in the 1970s where the largest marginal tax rate rose to 80%. However, one in two Israelis had a second job that was "off the books". This was so endemic that the government allowed businesses to take deductions for expenses where the recipient was not on the tax roll. The problem was exacerbated by the Israeli government printing money when it ran out. This resulted in inflation at over 40% per month! The Israelis solved the problem in a characteristically innovative way. First, they changed the money. On a given day the "old" money would not purchase value. Old money exchanged for new money at a bank had to be reported and many taxpayers, formerly off the rolls, were reluctantly reinstated. Secondly, they reformed the system by lowering tax rates so that beating the system was less cost effective. Thirdly, and most important, they instituted a value added tax, or VAT. that levied tax at point of purchase. The underground economy, while never completely eradicated, was seriously reduced.
Which leads me to Greece and Italy. The VAT tax in Italy is 20% with some items being taxed at a reduced rate of between 4-10%. In Greece the proposed VAT is 23% up from 13%. The rate rise has yet to be approved by Parliament. Income tax rates range from 18% to 45% for incomes over 100,000 Euros. The problem is that very few people pay income tax. Those with government jobs are punished because their income taxes are deducted at source. Small business and small craft business pay little or no income tax. The tax situation in Italy is only marginally better.
I have posed, on many occasions, that the most efficient tax is a point of purchase tax that allows everyone below the ultimate purchaser to recover tax paid against taxes owing. For example if you charged $100 in HST and paid $50 in HST your tax liability would be only $50. The ultimate purchaser would not deduct for taxes paid. Therefore the HST (really a VAT) is paid on the highest price. Low income taxpayers can be granted rebates depending on level of income. This also causes all taxpayer to register within the system in order to reap the benefits. There is ease of collection and hiding is very difficult. Those who are more wealthy usually consume more and therefore the tax is somewhat progressive. The tax also catches foreign visitors who, in theory, can get a refund of the tax but experience has shown that these refunds are rarely claimed.
The main knock on the VAT is that it adversely effects pricing. It is true because a consumer has to pay the price out of current income. However, imagine ti increase to your take home pay if tax deductions at source were eliminated or seriously curtailed. You would have more disposable income to fund the tax at point of purchase.
In most western countries the tax legislation has gotten completely out of hand. Compliance is difficult without paid tax preparers. Simplifying the tax base is difficult because so many of the tax programs are interactive in that changing one provision affects many more provisions. Consequential changes are now tracked by computer but a reduction in complexity of one provision usually adds complexity to others. A single rate tax is no less complex because it's the tax base that is complicated not the rate. A consumption tax does not take into account the tax base because it's only the value of the goods purchased that determines the tax. There is some evidence that a comprehensive VAT at 20% could eliminate the personal (not corporate) tax in Canada.
Tax is a complicated tool. Paying tax is an implicit agreement with government that your payment will give you value. In Canada a higher personal tax rate was implicitly exchanged for a reduced cost of education and free medical services. This kind of reciprocity does not exist in Greece and barely exists in Italy. Greece has, until recently, bloated social programs that it could not fund on the existing tax base. Increasing taxes and eliminating social programs is bound to fail. Increasing taxes without some kind of social contract is like putting a bandaid on a gaping wound.
It is for this reason that outside pressure from EU countries to reform tax systems and collection is bound to fail. The pressure must come from within. This recently happened in Ireland with good results. What we need is a social reordering in Greece and Italy and that's hard to do.
Bernie.
Wednesday 9 November 2011
The Gay Village
Lest you think that I am homophobic, I am far from that. I worked with the gay community years before they were accepted in polite and not so polite company. The sad truth is that every last one of them is dead, a victim of HIV-AIDS.
Having said that, my post today deals with the recent decision to designate a specific area on Bank Street, in Ottawa, as a gay community. If I were gay I would be offended. Until recently gays, lesbians and trans gendered folk were segregated--if not physically, then socially--by society. Most down trodden communities are sequestered into their own communities. Jewish ghettos come to mind. Segregated areas in San Francisco come to mine. While there was a great deal of interaction between Jews and the rest of the community on a work level there was little or no interaction on a social level. Jews who wanted to leave the ghetto were almost always converted to Christianity. This is not an option for a gay, lesbian or transgendered person. The idea was that a small area on one street in Ottawa reflects the acceptance--or maybe the lack of acceptance--of gays, lesbians and transgendered people. Most of the gays that I know lead normal lives and integrate into a community that has no business in anyone's bedroom. They do not march in parades and flaunt their sexuality. They are embarrassed by it as would be any straight person who saw straight people flaunting their sexuality. I am equally uncomfortable with religious fanatics who flaunt their religiosity. But that's another story.
You see, I think that segregating gays into their own part of Ottawa, be it for trade or for places where they can feel "comfortable", sends the wrong message. I can only imagine the stress that accompanies any teen in coming out not only to his or parents but to his or her friends. No one "comes out" to his or her parents when that person has a girl or boyfriend of the opposite gender. Does one "come out" to his or her parents because they left handed? Why put this pressure on gays? The answer is that we still see gays as people who are out of the mainstream. The dedication of a small block on Bank street perpetuates the notion that gays are freaks. I'm sorry but as a straight person I am offended. Take the bloody signs down as lets treat everyone with the respect that is their due.
Bernie.
Having said that, my post today deals with the recent decision to designate a specific area on Bank Street, in Ottawa, as a gay community. If I were gay I would be offended. Until recently gays, lesbians and trans gendered folk were segregated--if not physically, then socially--by society. Most down trodden communities are sequestered into their own communities. Jewish ghettos come to mind. Segregated areas in San Francisco come to mine. While there was a great deal of interaction between Jews and the rest of the community on a work level there was little or no interaction on a social level. Jews who wanted to leave the ghetto were almost always converted to Christianity. This is not an option for a gay, lesbian or transgendered person. The idea was that a small area on one street in Ottawa reflects the acceptance--or maybe the lack of acceptance--of gays, lesbians and transgendered people. Most of the gays that I know lead normal lives and integrate into a community that has no business in anyone's bedroom. They do not march in parades and flaunt their sexuality. They are embarrassed by it as would be any straight person who saw straight people flaunting their sexuality. I am equally uncomfortable with religious fanatics who flaunt their religiosity. But that's another story.
You see, I think that segregating gays into their own part of Ottawa, be it for trade or for places where they can feel "comfortable", sends the wrong message. I can only imagine the stress that accompanies any teen in coming out not only to his or parents but to his or her friends. No one "comes out" to his or her parents when that person has a girl or boyfriend of the opposite gender. Does one "come out" to his or her parents because they left handed? Why put this pressure on gays? The answer is that we still see gays as people who are out of the mainstream. The dedication of a small block on Bank street perpetuates the notion that gays are freaks. I'm sorry but as a straight person I am offended. Take the bloody signs down as lets treat everyone with the respect that is their due.
Bernie.
Wednesday 2 November 2011
On Pensions
I recently heard an interview by a CBC reporter with a worker who had recently gone back to work after a lengthy strike. The strike was largely about pensions and whether or not new hires would be entitled to pension benefits. The settlement approved by existing workers did not extend pension benefits to new workers.
In theory, a pension should be a zero sum contract. The company contributes, the worker contributes, benefits are insured with annuity contracts and the pensioner knows what he or she will get during retirement. The fund is usually augmented by workers who leave before pensionable age and forfeit the company’s contribution. However, this only works in theory. The employer rarely has the cash to make its portion of the contributions. They pay as they go and, largely, governments have allowed them to do this. With disastrous effect. When the company runs out of money pensioners are left high and dry. Nortel is a good example of how not to run pension programs.
Add to this the problem of longevity. 40 years back, the usual pensionable age was 65 and the average death age was about 72 to 75. Therefore, the pension account was burdened to pay the pensioner for, at best, 10 years. As people lived longer the pension accounts ran out and employers were put to augmenting the fund to pay pensioners who, in some cases, were retired longer than they had worked for the employer. The only agency that can get away with that is the government who funds retirement benefit out of current taxation. The charge on automobiles made by the “big three” that represented pension benefits was about $3,500 per auto. This made US and Canadian made autos largely either non-competitive or money losers. This problem got “solved” when GM went bankrupt (thereby cancelling all of its future pension obligations) or negotiated with the unions (Ford and Chrysler) to call off pension programs for new hires. What took its place in many contracts was a savings plan—that is the company would make payments to a savings plan and the employee would make payments to a savings plan but there was no guarantee or fixed benefit to the employee. This is what was being offered by Japanese and Korean automakers in the US and Canada and this has become the industry standard. In some other companies there is no pension benefit of whatever kind offered. Workers will have to rely on RRSPs in Canada and IRAs in the US as their main source of retirement income.
This will have profound effect on the next generation of workers. The savings rate in North America is very low. Workers have not gotten a significant wage increase—beyond inflation—for many years. Workers are falling behind and there is good evidence that even modest savings can survive the financial impact of the expenses of a growing family. That means that, other than government workers, the future looks very bleak. Take that together with people living longer and the future looks even bleaker. Giving workers the opportunity to save larger sums of money in a tax-sheltered account makes the mistaken assumption that those workers have money to save. Paying workers more for the same work makes domestic goods less affordable and exported goods less competitive.
There are political forces both in Canada and the United States that call for governments to be less involved in the affairs of the nation. Both of these are conservative movements that have the blessing of the 2% of the population that don’t have to worry about retirement. The Scandinavian countries have solved this problem—to a large extent—through high taxation in return for significant benefits over the taxpayer’s life. These include healthcare, education and, yes, retirement. A Dane or Swede can retire comfortably because he paid into the system over his or her lifetime and is now reaping the benefit. Because 100% of the electorate is funding the pension obligation those who die early, leave the country or otherwise don’t make a claim on the fund provide a cushion for those who do. It works.
There are two camps of political and social theorists. One holds that the market is pure and impartial when it judges human economic behavior thereby optimizing the most efficient course of action. While, in theory, that may be true, the other camp holds that in practice the market is severely imperfect and government intervention is needed to hedge these imperfections. At the present time the free market theorists seem to be at the helm—at least in Canada—and knocking at the door in the US. What has resulted in the US is a serious disconnect between those who have sufficient funds for retirement and those who have no way to obtain them. Add to this the fact that, in the US, the home was the major store of value. Homes in the US have fallen in value and this will contribute to a lack of capital for retirement. So, the poor will get poorer at the expense of those who don’t pay their share. Social security in the United States is in serious trouble because no one wants to increase contributions and no one wants to die young. In Canada CPP and other assistance programs provide only subsistence support. There is a need, in both countries, to look at a long term solution to these problems and there appears to be few is any politicians who will lead the way.
Bernie.
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