Wednesday, March 28, 2007

TAXING A NATIONAL SYMBOL

Whenever we go off island, one of the many things that symbolize our national pride is the Vailima beer. Not the Tausala, the Bud Light, the Miller, or the Heineken. When we think of Samoa, we think of Vailima. The Senate might as well impose a 500% excise tax on Manu Samoa.

This is what happens when government is in the business of picking winners and losers. The ASG says it needs revenue, but the Senate has decided that only a few should bear the burden for the rest by making various targets out of their tax increases. What this says to those who want to do business in our territory is that you had better have connections in government in order to be spared the whip of taxation.

A flat tax rate, on the other hand, ensures fairness because everyone bears the burden equally. A flat tax rate ensures transparency because there would be no one to bribe to obtain a more favorable tax rate. A flat tax rate assists with people's future planning because businesses wouldn't have to worry about new taxes being imposed on their enterprises after they've established themselves.

With all the fraud, waste and abuse going on, we know revenue is not the problem. It's the failure of our leaders to control spending by accounting for and prioritizing our money.

While Senator Fa'ivae's support for this excise tax doesn't prove intentional discrimination against a competing business, we need to recognize that our tax policies are corrupt simply for its unfairness. Too bad they've decided to make this clear with Samoa's Very Own Beer.

Saturday, March 24, 2007

SAVED BY THE PROFIT MARGIN

Before any of us invests our own money in a stock, one of the first things we ask is what is the company's bottom line, how much profit does the company make or stands to make. Most people navigate their dollars to companies making the most money now or potentially in the future. It's not hard to understand that the idea of making more than what you put in (revenues over expenses equal profit) drives many of us to find that new idea and to take a risk on it.

Not too long ago, HAL and other airlines went through bankruptcy. At that point, it would not have been wise for anybody to invest his or her money into a money-losing venture like a bankrupt airline company. During these companies' restructuring, they promised potential investors that if they steer capital their way, they would be well rewarded. It was a risky venture, and as such, the interest rates, or rates of return, were high.

But is there ever an appropriate amount of profit for someone's investment? Should it be 5%, 55% or 95%? If the person doing the investing doesn't like 5%, would he not take his money to an investment with a higher percentage or choose to not invest at all? Does Togiola know which profit margin will attract just the right amount of investment an airline needs to operate the Pago-Honolulu route?

Every business needs capital to operate and if you look at the stock exchanges, thousands of companies are competing for your investment dollars. If a company can't get your money willingly by giving you the best offer for your money, the only other way to obtain capital is to get the government to tax it out of you and receive it in the form of a bailout.

That always seems to be the Togiola Administration, Faleomavaega and the Fono's answer to everything. "Bailout". "Handout". "America must do more for American Samoa". "American Samoa cannot do more for itself in a vacuum".

Togiola says if we have cheaper fares, our economy would grow. But even if three airlines were operating the Pago-Honolulu route, I don't think our economy would grow at all. Cheaper fares won't address our terrible pot holes, flooding due to inadequate drainage systems, high taxation, ridiculous licensing requirements and competition from a government airplane to a government bank.

The obligation is on the ASG to fix the lousy state of our economy to attract more airlines not on HAL to lower airfares in an attempt to resuscitate an economy our government beats to death on a daily basis.

Our airline market has been saved by HAL's high profit margin because without it, investment in our airline market would dry up and we would be depending on the ASG for air travel to our parent nation. If the quality of service at your nearest ASG department is anything to go by, the last thing we would want to do is hand over our airline market to their lack of care.

Friday, March 09, 2007

ENVIRONMENTALISM

The problem I have with environmentalists is that their arguments always seem to put the environment before people and depict people as the problem rather than the solution. The trees, the coral reefs are sacred while we, the people, deserve the sacrificing of our homes, our standard of living, our livelihoods and for some extremists, our lives.

What environmentalists seem to ignore is that people (yes, people) find value in being clean. People value the attractiveness of a clean personal appearance, the comfort of a clean home for their children and guests and the higher revenues of a clean business area that attracts customers away from the competition. Being clean is not only good, it can also be profitable!

But food on the table, clothes on your back and a roof to shield you from the elements trump cleanliness any day. Which is why poor countries are always dirtier than their richer, more wealthier counterparts. It’s not that poor countries have plenty of resources to throw wastefully around on their streets, in their gutters and into the coral reefs, but that they don’t have the resources for something that is simply not their priority at the moment.

When people can afford to spend more than on their priorities of food, clothing and shelter, they buy the more expensive car that emits less unattractive smog from the rear of their vehicles. They buy the more expensive light bulb that uses less energy to illuminate their homes and chase away the dark. It’s in people’s self interest to be clean, but they personally have to balance that luxury with their own circumstances. Unfortunately, environmentalists and the ASG always seem to put the cart before the horse when comes to this issue.

Economist Ronald Coase won the Nobel Prize for his work demonstrating that pollution is more of a problem of undefined property rights. When something is owned by no one or owned by everyone, it usually falls into disrepair. When no one owns something, who is to be held responsible for its maintenance? And when everyone owns something, what’s the incentive for one person or group to sacrifice their blood, sweat and tears only for others to reap the rewards and trash the area again and again?

The Coase Theorem laid the groundwork for the emissions market in the U.S. , where the government sets caps for different gases emitted by businesses. Companies that need to emit more than their limit allows could buy other businesses’ caps if those other businesses need not exhaust as much or have found ways to reduce their own emissions. The caps set by government took something that was being treated like common property (the atmosphere) and defined out of it private property for which businesses could trade and be compensated for.

Such a policy forces us to factor in the costs of the by-products of our activities into market prices, as should be the case. We should be paying for the real costs of the proper disposal of our waste, from the garbage pickup to the landfills. And if the ASG would only get its butt out of the way, businesses would rise to make a profit for such services, and we’ll see the efficiency of the private sector improve our environment. As they say, one man’s trash is another man’s treasure.

Whenever we go on these populist campaigns, we should always be mindful of the importance, value and rights of the individual. When we lose that focus, the argument goes from protecting the environment to sacrificing our homes to abandoning our pursuits of happiness to bashing our foreign brothers who do nothing but make an honest living providing us with choices in goods and services essential to our standard of living.