Economist 10/7/15

  1. Meth labs are relatively rare in the American south-west. Although meth-usage rates are reported to be highest in the West, states in the Bible belt have the most meth labs. A survey in 2010 noted that counties containing meth labs tend to be disproportionately poor, white and evangelical.Those same communities also happen to be the ones with stiffest restrictions on the sale of alcohol.The authors argue that local prohibitions lower the price of drugs such as meth relative to alcohol. This is hard to prove, because dry counties share many traits with counties that have meth problems.
  2. Economists argue that a good tax should focus on revenue streams that cannot avoid payment by moving away, and that a levy should change behaviour as little as possible. Land taxes are particularly attractive for this reason. Property taxes are second-best, because the investment in a plot of land can vary, but unlike land taxes they have the political advantage of already being in place.The Big Apple’s other edge comes from taxing the stock of property rather than flows as houses or flats change hands.
  3. Almost 90% of New York’s property-tax take stems from an annual levy on each home’s estimated current price. The corresponding figure for London is just 55%. In Britain much more revenue comes from a stamp duty applied each time a property is bought and sold.London also has plenty to teach New York. First, its property tax is more progressive than that of its transatlantic cousin. Following a series of recent tweaks, London now collects more than twice the rate on homes worth over £10m ($16m) than it does on those worth less than £1m.But London’s approach is better than the regressivism of New York, where the cheapest homes pay the highest rates.London also gains from ensuring that its tax regime is more consistent. New York has made itself a lobbyists’ paradise.Qualifying projects can reap tax cuts of up to 95%, costing the city over $1 billion a year, while identical buildings must pay full whack.
  4. In all, the finance arms of the world’s top ten carmakers have almost $900 billion of assets on their books. Four firms—VW, BMW, Daimler and Renault—account for half of the $350 billion of debt on the consolidated balance-sheets of carmakers that needs to be refinanced this year.Loans to motorists are fairly short-term, and cars can be repossessed if drivers stop making payments. So this is a relatively low-risk form of lending. But the carmakers are highly dependent on using finance deals to drive sales.The risk now is that worries about the cost of cleaning up the emissions scandal trigger a cash squeeze. VW is most at risk. It has €67 billion of existing debt due over the next 12 months.In America each year, carmakers and others package up about $100 billion of loans and sell them to other investors.If carmakers can no longer finance their sales this way, they would have to load their balance-sheets with more debt.
  5. THE bare expanse of Anna Creek cattle station (as Australians call ranches) belies its strategic attraction to investors. Straddling the river plains of the state of South Australia, and reputed to be the world’s biggest cattle ranch by area, Anna Creek belongs to an empire of ten stations that Sidney Kidman, the “cattle king”, started in 1899.The Kidman herd of almost 200,000 cattle sprawls across a swathe of the outback about three-quarters the size of England, making it Australia’s biggest private landholding. Australia is the world’s biggest beef exporter after India and Brazil.About half the 12 shortlisted bidders, whose identities have not been revealed, are foreign. Many may be Chinese.Australians are becoming more used to Chinese investment. Four years ago, China ranked ninth by stock of foreign direct investment (America, Britain and Japan, three of Australia’s oldest trading partners, top the list). Now Australia’s biggest trading partner, China’s inward investment has taken off: by 2014 it had moved up to fifth place.Agricultural investments of all kinds, however, were just a fraction of that year’s inflow: a mere A$32m.Now the prospect of Kidman falling into Chinese hands has given extra piquancy to broader Australian anxieties about “selling the farm” to foreigners.
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