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August 12, 2013

Superannuation is inequitable and unsustainable | | MacroBusiness

I agree with Leith van Onselen that Australia’s aged pension/superannuation regime will be sorely tested over the next 30 years as the number of workers per retiree falls to below 2.5 to 1:

Workers per Retiree

But I don’t agree with his proposed solution:

…The flat 15% tax on superannuation contributions should also be axed in favour of a flat 15% concession. As illustrated above, under the current 15% flat tax arrangement, the amount of super concessions rises as one moves up the income tax scale, resulting in a system whereby higher income earners receive the most super tax benefit, despite being the very people that are the least likely to rely on the aged pension in retirement. A flat 15% concession, by comparison, would improve the equity and sustainability of the system by: 1) providing all taxpayers with the same taxation concession; 2) boosting lower income earners’ super savings and thus reducing reliance on the aged pension; and 3) reducing costs to the budget.

Argument that the flat tax on superannuation contributions is inequitable is based on the presumption that the present system of progressive tax rates is equitable. No doubt high income-earners benefit more from the flat tax than low income-earners, but the proposal ignores the fact that they pay more income tax in the first place. And even after the larger tax savings on their super contributions, the high income-earner will pay a significantly higher average tax rate.

May 28, 2013

Congress Still Puts Out For Wall Street | Robert Scheer – Truthdig

Robert Scheer quotes Democrat Jim Hines on the corrupt relationship between Wall Street and Capitol Hill:

“I won’t dispute for one second the problems of a system that demands immense amount of fund-raisers by its legislators,” Jim Himes, a Democrat from Connecticut who supported the bankers’ recent bills and conveniently heads fundraising for House Democrats, conceded to the Times. Himes, who worked for Goldman Sachs before pretending to represent the people’s interest as an elected representative, is one of the top beneficiaries of Wall Street payoffs but claims to be distressed by the corruption that is his way of life. As he told the Times, “It’s appalling, it’s disgusting, it’s wasteful and it opens the possibility of conflicts of interest and corruption. It’s unfortunately the world we live in.”

May 27, 2013

Charter schools study shows better outcomes with less public funds

Charter schools receive less funding than equivalent public schools, but in many cases are achieving improved outcomes for disadvantaged kids. Ray Fisman writes:

Minnesota’s charter school law allowed educators and other concerned individuals to apply to the state for permission to operate a government-funded school outside of the public education system. In order to obtain and keep their licenses, these new schools needed to show they were serving their students effectively, based on goals laid out in the school’s “charter.” City Academy, America’s first charter school, opened in St. Paul the following year. Its mission was to get high-school dropouts on track to vocational careers, and it is still operating today.

Principals are able to operate outside the constraints of the public education system and are assessed on results.

…..While they’re funded with public money, they generally operate outside of collective bargaining agreements (only about one-tenth of charter schools are unionized) and other constraints that often prevent principals in public schools from innovating for the good of their students (so the argument goes). In exchange for this freedom, they generally get less funding than public schools (though they’re free to look for private donations, and many do) and have to prove that they are making good on the promises set out in their charters, which often means showing that they improve their students’ performance on statewide standardized tests.

The program has been so successful that there are now almost 6000 charter schools nationwide. Fisman reports on a study of enrolments at six Boston charter schools between 2002 and 2008:

“….Getting into a charter school doubled the likelihood of enrolling in Advanced Placement classes (the effects are much bigger for math and science than for English) and also doubled the chances that a student will score high enough on standardized tests to be eligible for state-financed college scholarships. While charter school students aren’t more likely to take the SAT, the ones who do perform better, mainly due to higher math scores. The upshot of this improvement in college readiness is that, upon graduation, while charter and public school students are just as likely to go on to post-secondary education, charter students enroll at four-year colleges at much higher rates. A four-year college degree has historically meant a better job with a higher salary……. a ticket to a better life for many students.”

He warns that “Not every charter school is right for every kid” but they do highlight the benefits of a decentralized education system where schools are assessed on outcomes rather than conformity to a program. Other studies have shown that increased public funding does not improve education outcomes. Ever wondered why bureaucrats continue to promote this as a solution?

April 7, 2013

Australia: Unsuspecting super investors are being sold a pup

David Potts at the Sydney Morning Herald writes:

Retirees with far less than $2 million in superannuation face extra tax bills…… the new tax will apply to all earnings above $100,000 a year from 2014, no matter the size of the nest egg.

The tax net is far broader than the 16,000, or 0.4 percent of retirees, mentioned in the recent announcement. Treasury estimates cited are based on a projected 5 per cent rate of return on investment and ignore the fact that returns can fluctuate widely, from 30% in a good year to -30% in a really bad year. Super funds with as little as $200,000 or $300,000 are affected if they earn more than $100,000 in any given year.

The problem is further exacerbated by capital gains, especially for self-managed funds that are not widely diversified. If a super fund sells a property or large block of shares, the asset may have been held for many years but the entire capital gain is recognized in the year in which the asset is sold. Despite some phase-in concessions, lumpy capital gains could lift a retiree over the $100,000 income threshold.

This is a deliberate tax grab that affects ordinary Australians while being sold to them under the smokescreen of “taxing the rich”.

Hat tip to Ody for bringing this to my attention on Incredible Charts forum.

March 26, 2013

Conflict of interest: Will Wall Street put their interests ahead of their clients?

You bet they will. Here Cullen Roche explains why he quit Wall Street to become an independent advisor:

One of the reasons Roche transitioned to becoming an independent advisor was because of [the] perceived conflict of interest that exists at big Wall Street firms. “Those big firms are revenue-driven – they’re fee generators. They’re not able to do what’s in their clients’ best interest – a lot of the time the best interest of the client is to reduce fees,” he notes. According to Roche, the financial advisor model needs to change, with more and more advisors needing to act as independent consultants or fee-only advisors. “I think the conflict comes mostly from the big wirehouses: public companies that need to maximize profits – profits largely derived from generating fees from clients,” he concludes.

March 22, 2013

Exploding Australia’s nuclear delusion | Business Spectator

Geoff Russell writes:

France has been producing most of its electricity using nuclear power stations for an average carbon dioxide intensity of about 80 grams of CO2 per kilowatt hour (gm-CO2/kWh) for two decades. In that time, Australia’s electricity has just gotten dirtier, rising from 817 in 1990 to 841 gm-CO2/kWh in 2010.

….Switzerland and Sweden have been using a mix of hydro and nuclear to achieve even lower carbon dioxide intensity than France.

March 22, 2013

The science of breast milk: Evolution is smart

Nicholas Day describes the astonishing findings of Katie Hinde, an assistant professor of human evolutionary biology at Harvard. Here is just one example:

….Hinde primarily studies the food and the signal elements of milk. “The signal is in the form of hormones that are exerting physiological effects in the infant,” she explains. “Infants have their own internal hormones, but they’re also getting hormones from their mother. They’re binding to receptors in the babies, and we’re just starting to understand what those effects are.”

Hinde works with rhesus macaques, and she’s tracked the effects of the hormone cortisol in their milk. Cortisol is often thought of as the stress hormone, but its function is far more varied, and Hinde has found that the amount and especially the variation of cortisol successfully predicts how the infant macaques go on to behave. It’s a stunning finding: The composition of early milk seems to mold infant temperament. But—and here’s the twist—the males were much more sensitive than the females. Roughly, the more cortisol, the more bold and exploratory the male rhesus macaques were.

March 20, 2013

The Power of Swarms Can Help Us Fight Cancer, Understand the Brain, and Predict the Future | Wired Science | Wired.com

Ed Yong reports on the latest advances in the study of collective behavior:

For more than a century people have tried to understand how individuals become unified groups. The hints were tantalizing—animals spontaneously generate the same formations that physicists observe in statistical models. There had to be underlying commonalities. The secrets of the swarm hinted at a whole new way of looking at the world.

But those secrets were hidden for decades. Science, in general, is a lot better at breaking complex things into tiny parts than it is at figuring out how tiny parts turn into complex things. When it came to figuring out collectives, nobody had the methods or the math.

Now, thanks to new observation technologies, powerful software, and statistical methods, the mechanics of collectives are being revealed. Indeed, enough physicists, biologists, and engineers have gotten involved that the science itself seems to be hitting a density-dependent shift. Without obvious leaders or an overarching plan, this collective of the collective-obsessed is finding that the rules that produce majestic cohesion out of local jostling turn up in everything from neurons to human beings. Behavior that seems impossibly complex can have disarmingly simple foundations. And the rules may explain everything from how cancer spreads to how the brain works and how armadas of robot-driven cars might someday navigate highways. The way individuals work together may actually be more important than the way they work alone.

March 19, 2013

Reform universities by cutting their bureaucracies

Insight into the growth of bureaucracy in universities from The Conversation:

In earlier times, Oxford dons received all tuition revenue from their students and it’s been suggested that they paid between 15% and 20% for their rooms and administration. Subsequent central collection of tuition fees removed incentives for teachers to teach and led to the rise of the university bureaucracy.

Today, the bureaucracy is very large in Australian universities and only one third of university spending is allocated to academic salaries.

Across all the universities in Australia, the average proportion of full-time non-academic staff is 55%……….Australia is not alone as data for the United Kingdom shows a similar staffing profile with 48% classed as academics.

This is a fine example of Parkinson’s Law, first proposed by Cyril Northcote Parkinson in a light-hearted essay in The Economist in 1955:

Work expands so as to fill the time available for its completion.

Parkinson cited the British Colonial Office as an example: the number of staff continued to grow even when Britain had divested itself of most of its colonies. He explained the growth as due to two factors in a bureaucracy:

An official wants to multiply subordinates, not rivals; and

Officials make work for each other.

He noted that bureaucracies tended to grow by between 5% and 7% a year “irrespective of any variation in the amount of work (if any) to be done” — even if the amount of work is declining.

March 18, 2013

Australia: Sydney is reaching a liveability crisis

Professor Percy Allan kindly sent me a copy a report, to which he contributed, on living conditions in Sydney — prepared by the Urban Taskforce. Here are some interesting excerpts:

Over the next 20 years Sydney will need at least 600,000 new homes located in infill sites and in greenfield sites on the fringes of the metropolitan area. But Sydney has not built sufficient homes over recent years with its current production only half that of Victoria on a per capita basis. Already the average house cost in Sydney is one of the highest in the world and this is impacting on affordability for many families. The Sydney median house is $100,000 more expensive than the equivalent in Melbourne. The average weekly earnings of a first homebuyer can afford a mortgage of $331,000 while the average house price in Sydney is $563,300. The lack of housing supply has led to an increase in rents by 40% over the last 5 years…….

Conclusion

Local government has aggravated Sydney’s housing crisis by:
• Not rezoning sufficient land for affordable multiple dwellings,
• Not adopting clear consistent plans and regulations to guide permissible development,
• Not ensuring individual development assessments are independent of political and vested interests,
• Not spending enough on capital works thereby creating a large backlog of unsatisfactory community infrastructure,
• Using depreciation provisions and reserves for non-capital purposes,
• Under-borrowing for infrastructure enhancements thereby forcing new homebuyers to contribute disproportionately towards this end,
• Not sharing the cost of greenfield infrastructure with existing communities that inherited free public assets from previous generations, and
• Not sharing or outsourcing activities that would benefit from economies of scale and scope nor focusing on specific place management to better respond to community needs at a street level.