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How Large is the Income Shifting Problem?

1 day ago

How Large is the Income Shifting Problem?

I took up this invitation from Dan Shaviro:
tomorrow morning I’ll be participating in a very interesting international tax policy conference with a number of outstanding participants. It’s on Zoom … I’m actually the second speaker on Panel II (although we’re listed above alphabetically), so I will be speaking from roughly 11:08 to 11:15. I’m planning to discuss the OECD’s Pillar 1 and Pillar 2 initiatives, although what exactly I’ll say remains somewhat flexible pending the keynote address, which may offer updates (at least to me) that are of interest
He gives the entire agenda, which can also be found here. This blog post focuses on Panel I, which noted the difficulties of measuring the extent of income shifting

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How Large is the Income Shifting Problem?

3 days ago

I took up this invitation from Dan Shaviro:

tomorrow morning I’ll be participating in a very interesting international tax policy conference with a number of outstanding participants. It’s on Zoom … I’m actually the second speaker on Panel II (although we’re listed above alphabetically), so I will be speaking from roughly 11:08 to 11:15. I’m planning to discuss the OECD’s Pillar 1 and Pillar 2 initiatives, although what exactly I’ll say remains somewhat flexible pending the keynote address, which may offer updates (at least to me) that are of interest

He gives the entire agenda, which can also be found here. This blog post focuses on Panel I, which noted the difficulties of measuring the extent of income shifting to tax havens as we have the papers that formed the basis of the

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Potential Pricing for Remdesivir

19 days ago

Potential Pricing for Remdesivir

The FDA has approved Remdesivir for emergency use and Gilead Science will denote its current 1.5 million vials, which could potentially treat 300 thousand patients as it takes 5 to 10 treatments per patient. The WHO wants more Remdesivir:
The World Health Organization said Monday that it will speak with the U.S. government and Gilead Sciences on how antiviral drug remdesivir could be made more widely available to treat Covid-19 as data of its effectiveness emerges.
At some point we will need to consider pricing. This report considers two approaches with the first being to price at the economic cost of production:
For remdesivir, we used evidence on the cost of producing the next course of therapy from an article by Hill

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Potential Pricing for Remdesivir

21 days ago

The FDA has approved Remdesivir for emergency use and Gilead Science will denote its current 1.5 million vials, which could potentially treat 300 thousand patients as it takes 5 to 10 treatments per patient. The WHO wants more Remdesivir:

The World Health Organization said Monday that it will speak with the U.S. government and Gilead Sciences on how antiviral drug remdesivir could be made more widely available to treat Covid-19 as data of its effectiveness emerges.

At some point we will need to consider pricing. This report considers two approaches with the first being to price at the economic cost of production:

For remdesivir, we used evidence on the cost of producing the next course of therapy from an article by Hill et all in the Journal of Virus Eradication (2020). Their methods

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Corporate Bond Spreads and the Pandemic

April 18, 2020

Corporate Bond Spreads and the Pandemic

The St. Louis FED has an economics blog:
The ongoing COVID-19 pandemic has caused significant disruption in economic activity across the globe. Financial markets, in particular, have experienced surges in volatility that had not been seen since the 2007-09 financial crisis … The figure below plots the median value for our measure of credit spreads (the difference between a corporate bond’s yield and a benchmark interest rate on U.S. government securities) at the daily frequency, since the beginning of the year … The figure highlights two important dates. The first one is Feb. 28, when stock markets experienced the largest single week declines since the 2008 financial crisis. While the median spread had been stable

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Corporate Bond Spreads and the Pandemic

April 14, 2020

The St. Louis FED has an economics blog:

The ongoing COVID-19 pandemic has caused significant disruption in economic activity across the globe. Financial markets, in particular, have experienced surges in volatility that had not been seen since the 2007-09 financial crisis … The figure below plots the median value for our measure of credit spreads (the difference between a corporate bond’s yield and a benchmark interest rate on U.S. government securities) at the daily frequency, since the beginning of the year … The figure highlights two important dates. The first one is Feb. 28, when stock markets experienced the largest single week declines since the 2008 financial crisis. While the median spread had been stable at around 100 basis points since the beginning of the year, it started

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Why was the PREDICT Program Suspended Last Fall?

April 12, 2020

Why was the PREDICT Program Suspended Last Fall?

A discussion from October 29, 2019:
A crucial federal program tracking dangerous diseases is shutting down. Predict, a pandemic preparedness program, thrived under Bush and Obama. Now it’s canceled … Ever since the 2005 H5N1 bird flu scare, the US Agency for International Development (USAID) has run a project to track and research these diseases, called Predict. At a cost of $207 million during its existence, the program has collected more than 100,000 samples and found nearly 1,000 novel viruses, including a new Ebola virus … But on Friday, the New York Times reported that the US government is shutting down the program. According to its former director Dennis Carroll, the program enjoyed enthusiastic

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Why was the PREDICT Program Suspended Last Fall?

April 11, 2020

A discussion from October 29, 2019:

A crucial federal program tracking dangerous diseases is shutting down. Predict, a pandemic preparedness program, thrived under Bush and Obama. Now it’s canceled … Ever since the 2005 H5N1 bird flu scare, the US Agency for International Development (USAID) has run a project to track and research these diseases, called Predict. At a cost of $207 million during its existence, the program has collected more than 100,000 samples and found nearly 1,000 novel viruses, including a new Ebola virus … But on Friday, the New York Times reported that the US government is shutting down the program. According to its former director Dennis Carroll, the program enjoyed enthusiastic support under Bush and Obama, but “things got complicated” in the last few years

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Remdesivir and Transfer Pricing III

April 11, 2020

Remdesivir and Transfer Pricing III

Robert Waldmann posted his Remdesivir III:
I do not understand the need for “evidence-based medicine” or rather I do not understand how the phrase is used by doctors. There is no evidence that Covid 19 patients (without heart disease) do better without Chloroquine. I learn that “evidence based medicine” does not imply choosing the therapy that a fair balance of evidence suggests is best for the patient. Pharmaceuticals are presumed guilty until proven safe and effective. The evidence is treated as evidence in a criminal trial with the burden of proof on the pharmaceutical.
Back on March 2, he wrote:
I think that aside from the trials, Remdesivir should be given to patients and contacts of patients. It is known to be

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Remdesivir and Transfer Pricing III

April 6, 2020

Robert Waldmann posted his Remdesivir III:

I do not understand the need for “evidence-based medicine” or rather I do not understand how the phrase is used by doctors. There is no evidence that Covid 19 patients (without heart disease) do better without Chloroquine. I learn that “evidence based medicine” does not imply choosing the therapy that a fair balance of evidence suggests is best for the patient. Pharmaceuticals are presumed guilty until proven safe and effective. The evidence is treated as evidence in a criminal trial with the burden of proof on the pharmaceutical.

Back on March 2, he wrote:

I think that aside from the trials, Remdesivir should be given to patients and contacts of patients. It is known to be safe (from the trial which shows that it doesn’t cure Ebola). Also a

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Remdesivir and Transfer Pricing Part II

April 4, 2020

Remdesivir and Transfer Pricing Part II

Now that I sketched out the transfer pricing for Gilead Sciences with respect to their successful HIV and Hep C products (as much as I can say based on publicly available information), it is time to speculate a bit on how Remdesivir may play out. There is a lot we do not know including whether this treatment receives regulatory approval and how it will be priced if it does. Note for example this story:
More than 150 organisations and individuals on Monday urged US biotechnology firm Gilead not to enforce exclusivity over a drug that might be used to treat COVID-19 patients. In an open letter, 145 non-governmental organisations, including Doctors Without Borders (MSF) and Oxfam, and 12 individuals claimed Gilead

Read More »

Credit Spreads: Comparing COVID-19 to the Collapse of Lehman Brothers

April 4, 2020

Credit Spreads: Comparing COVID-19 to the Collapse of Lehman Brothers

On March 18, Reuters noted something I have been following of late:
Concerns about the impact of the coronavirus on corporate America’s balance sheets has tripled the premium investors are demanding to hold even the highest-rated corporate bonds. The difference between the average yield of investment-grade U.S. bonds over virtually risk-free Treasuries widened to 303 basis points (bps) on Wednesday, according to the ICE/BofA investment grade index. That’s up from 101 bps at the start of the year and the highest since July 2009, For riskier high-yield securities, the average spread over Treasuries on Wednesday was 904 bps, the highest since October 2011, and more than 2-1/2 times the

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Remdesivir and Transfer Pricing

April 2, 2020

Remdesivir and Transfer Pricing

Gilead Sciences is conducting phase III trials to explore whether this treatment – which did not turn out to be effective against Ebola – might be effective in treating COVID-19. We all hope it will be and if it does pass phase III trials, national income tax authorities will later have to address the transfer pricing implications of any profits Gilead Sciences generates. This blog post is the first of two with this one setting up some basic transfer pricing principles by noting Gilead’s previous wonder treatments – its recent successes in treating Hepatitis C and its HIV treatments introduced a generation ago. My next blog post will discuss Remdesivir. Gilead was first to market with a treatment they called Sovaldi, which

Read More »

Credit Spreads: Comparing COVID-19 to the Collapse of Lehman Brothers

April 1, 2020

On March 18, Reuters noted something I have been following of late:

Concerns about the impact of the coronavirus on corporate America’s balance sheets has tripled the premium investors are demanding to hold even the highest-rated corporate bonds. The difference between the average yield of investment-grade U.S. bonds over virtually risk-free Treasuries widened to 303 basis points (bps) on Wednesday, according to the ICE/BofA investment grade index. That’s up from 101 bps at the start of the year and the highest since July 2009, For riskier high-yield securities, the average spread over Treasuries on Wednesday was 904 bps, the highest since October 2011, and more than 2-1/2 times the rate at the start of the year, using the ICE/BofA high-yield index … This hit to earnings has come at a

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Remdesivir and Transfer Pricing Part II

March 31, 2020

Now that I sketched out the transfer pricing for Gilead Sciences with respect to their successful HIV and Hep C products (as much as I can say based on publicly available information), it is time to speculate a bit on how Remdesivir may play out. There is a lot we do not know including whether this treatment receives regulatory approval and how it will be priced if it does. Note for example this story:

More than 150 organisations and individuals on Monday urged US biotechnology firm Gilead not to enforce exclusivity over a drug that might be used to treat COVID-19 patients. In an open letter, 145 non-governmental organisations, including Doctors Without Borders (MSF) and Oxfam, and 12 individuals claimed Gilead Sciences held primary patents of remdesivir in more than 70 countries. That

Read More »

Remdesivir and Transfer Pricing

March 28, 2020

Gilead Sciences is conducting phase III trials to explore whether this treatment – which did not turn out to be effective against Ebola – might be effective in treating COVID-19. We all hope it will be and if it does pass phase III trials, national income tax authorities will later have to address the transfer pricing implications of any profits Gilead Sciences generates. This blog post is the first of two with this one setting up some basic transfer pricing principles by noting Gilead’s previous wonder treatments – its recent successes in treating Hepatitis C and its HIV treatments introduced a generation ago. My next blog post will discuss Remdesivir. Gilead was first to market with a treatment they called Sovaldi, which was their Hep C treatment based on sofosbuvir developed through

Read More »

Has the FDA Approved a COVID-19 Treatment?

March 19, 2020

Before I note perhaps the most irresponsible comment from Donald Trump today, let me note I strongly support research into finding an effective treatment. Pardon me for saying the obvious as certain Trump cheerleaders are not accusing people like me as wanting massive deaths just to make their fearless “leader” look bad. Of course, these Trump sycophants have a long history of being utterly disgusting so let’s move on by noting a great post from Robert Waldmann:

I think that it is important to get the FDA out of the way (by executive order if necessary) … I think there should be mass production and use of Remdesivir starting on the 5th of March

Robert notes that I have been following Gilead Sciences phase III trials of this potential treatment as well as their stock price, which can

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Europe’s Response to Coronavirus and the Implications for the U.S.

March 16, 2020

Europe’s Response to Coronavirus and the Implications for the U.S.

As I listened to the morning news about the coronavirus crisis, I was reminded of this critique of the Eurozone:
In a recent conference, the distinguished economist Paul Krugman repeated the oft-heard critique that the eurozone is not an optimal currency area. Waltraud Schelkle disagrees with this characterisation, and argues that no country or group of countries represents an optimal currency area – one region or country always loses out from a single monetary policy. But countries can use fiscal, social and regulatory policies to overcome these difficulties. When Americans criticise the eurozone’s currency policies, she writes, they are forgetting the US dollar’s shaky start and the

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Europe’s Response to Coronavirus and the Implications for the U.S.

March 14, 2020

As I listened to the morning news about the coronavirus crisis, I was reminded of this critique of the Eurozone:

In a recent conference, the distinguished economist Paul Krugman repeated the oft-heard critique that the eurozone is not an optimal currency area. Waltraud Schelkle disagrees with this characterisation, and argues that no country or group of countries represents an optimal currency area – one region or country always loses out from a single monetary policy. But countries can use fiscal, social and regulatory policies to overcome these difficulties. When Americans criticise the eurozone’s currency policies, she writes, they are forgetting the US dollar’s shaky start and the adjustments which had to be made to the financial system in the 19th century.

Why mention the optimal

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Let’s Talk About Biden’s Tax Plan

March 7, 2020

Barkley Rosser elevates the political debate by trying to find common ground regarding health care reform. I posted a link to an interesting tax proposal, which I want to mention briefly after acknowledging this comment:

As to Biden’s fiscal plan, I’m assuming this is really Jared Bernstein’s plan. Biden has a lot of virtues, but he’s never been known for being the smartest guy in the room. And with age he’s definitely lost a step. Sometimes I listen to him and wonder if he hasn’t had a few mini-strokes. But whatever his faults, he does seem to have a knack for surrounding himself with smart folks, and Jared Bernstein is clearly one of the smart guys…a trained sociologist who is also an accomplished economist.

OK I get the Twitter and Facebook is lit up with pathetic attacks on

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Trump Brags About Record Defense Spending

December 22, 2019

Trump Brags About Record Defense Spending

Niv Elis covers the latest in the Trump fiscal fiasco:
President Trump on Friday signed two spending packages totaling $1.4 trillion, averting a government shutdown at midnight. The bills included all 12 annual appropriations bills for the 2020 fiscal year that started Oct. 1. They also included a slew of tax cuts, extending expiring and expired tax breaks and eliminating other taxes that amount to an additional $426 billion in lost revenue, bringing the total cost of the bill to more than $1.8 trillion.
Reagan used to complain about “tax&tax and spend&spend” so he replaced it with spend&spend and borrow&borrow. Trump is doing the same but there’s more:
Trump’s signature brings to a close a fraught year for

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Trump Brags About Record Defense Spending

December 21, 2019

Niv Elis covers the latest in the Trump fiscal fiasco:

President Trump on Friday signed two spending packages totaling $1.4 trillion, averting a government shutdown at midnight. The bills included all 12 annual appropriations bills for the 2020 fiscal year that started Oct. 1. They also included a slew of tax cuts, extending expiring and expired tax breaks and eliminating other taxes that amount to an additional $426 billion in lost revenue, bringing the total cost of the bill to more than $1.8 trillion.

Reagan used to complain about “tax&tax and spend&spend” so he replaced it with spend&spend and borrow&borrow. Trump is doing the same but there’s more:

Trump’s signature brings to a close a fraught year for spending. At the same time last year, his refusal to sign a stopgap measure

Read More »

Exaggerated Benefits for U.S. Farmers from the China Trade News

December 15, 2019

Exaggerated Benefits for U.S. Farmers from the China Trade News

How gullible is Reuters?
China will likely hit $50 billion in purchases of U.S. agricultural products, U.S. President Donald Trump said on Friday after earlier announcing that he would roll back scheduled tariffs on Chinese imports as Washington and Beijing finalized an initial trade deal.
That was their opening paragraph. Fortune had a different take:
The Markets Have Spoken: Phase One Trade Deal Between the U.S. and China Is “No Victory” – From Shanghai to London, stocks rallied on Friday morning as a “Phase One trade deal” was reached between China and the Trump Administration—that is, until the details were announced. By noon in New York, the major indices still trading were swooning,

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Exaggerated Benefits for U.S. Farmers from the China Trade News

December 13, 2019

How gullible is Reuters?

China will likely hit $50 billion in purchases of U.S. agricultural products, U.S. President Donald Trump said on Friday after earlier announcing that he would roll back scheduled tariffs on Chinese imports as Washington and Beijing finalized an initial trade deal.

That was their opening paragraph. Fortune had a different take:

The Markets Have Spoken: Phase One Trade Deal Between the U.S. and China Is “No Victory” – From Shanghai to London, stocks rallied on Friday morning as a “Phase One trade deal” was reached between China and the Trump Administration—that is, until the details were announced. By noon in New York, the major indices still trading were swooning, with the S&P 500 and Dow Jones Industrial Average in negative territory, ceding big early gains.

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Liz Cheney Loves Traitors

December 9, 2019

Liz Cheney Loves Traitors

Dick Cheney lied a lot so I guess his daughter feels compelled to do the same:
So I would just ask people to remember that they have failed despite the fact that they had a process that basically put everything tilted in their direction. The Democrats were able to act as judge and prosecutor. The Democrats were able to select every single witness. The Democrats were able to prevent, and did prevent, witnesses from answering Republican questions. The Democrats decided what the American people would see and when. The Democrats decided the timing on the release of important pieces of transcripts, they still have not released the transcript of the IC Inspector General, and so the Democrats essentially stacked the deck in their favor

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Liz Cheney Loves Traitors

December 4, 2019

Dick Cheney lied a lot so I guess his daughter feels compelled to do the same:

So I would just ask people to remember that they have failed despite the fact that they had a process that basically put everything tilted in their direction. The Democrats were able to act as judge and prosecutor. The Democrats were able to select every single witness. The Democrats were able to prevent, and did prevent, witnesses from answering Republican questions. The Democrats decided what the American people would see and when. The Democrats decided the timing on the release of important pieces of transcripts, they still have not released the transcript of the IC Inspector General, and so the Democrats essentially stacked the deck in their favor and despite the fact that they did this, and even with

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The Current State of the U.S. Dairy Industry

December 3, 2019

The Current State of the U.S. Dairy Industry
 I had to endure a discussion of the plight of American dairy farmers where Trump’s trade policies were somehow to blame. Stephanie Mercier confirmed some of the facts:

According to data reported by the National Farmers Union (NFU), the average dairy farm has shown a positive net income only once in the last decade, in 2014. In 2018, the average value of production exceeded the total cost of producing each hundredweight of milk in only one state, California, and nationwide, dairy farmers lost an average of $3.21 per hundredweight of milk produced. For 2019, total dairy production is expected to increase modestly over 2018, by less than 0.3 percent, and the average all-milk price is expected to increase as well,

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Bicycles and Wine Tariffs

December 1, 2019

Bicycles and Wine Tariffs

Jeffrey Frankel has a must read blog over at Econbrowser:
The “bicycle theory” used to be a metaphor for international trade policy. Just as standing still on a bicycle is not an option — one has to keep moving forward or else the bike will fall over – so it was said that international trade negotiators must continue to engage in successive rounds of liberalization, or else the open global trading system would be pulled down by protectionist interests. I don’t know if the theory was ever right. (And, to be honest, I don’t entirely understand why forward movement keeps a bicycle from falling over.) But if we had stood still on trade policy over the last three years we would be a lot better off than where we are now.
It may be

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Bicycles and Wine Tariffs

November 30, 2019

Jeffrey Frankel has a must read blog over at Econbrowser:

The “bicycle theory” used to be a metaphor for international trade policy. Just as standing still on a bicycle is not an option — one has to keep moving forward or else the bike will fall over – so it was said that international trade negotiators must continue to engage in successive rounds of liberalization, or else the open global trading system would be pulled down by protectionist interests. I don’t know if the theory was ever right. (And, to be honest, I don’t entirely understand why forward movement keeps a bicycle from falling over.) But if we had stood still on trade policy over the last three years we would be a lot better off than where we are now.

It may be cold in New York City but after all that Thanksgiving

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The Current State of the U.S. Dairy Industry

November 29, 2019

I had to endure a discussion of the plight of American dairy farmers where Trump’s trade policies were somehow to blame. Stephanie Mercier confirmed some of the facts:

According to data reported by the National Farmers Union (NFU), the average dairy farm has shown a positive net income only once in the last decade, in 2014. In 2018, the average value of production exceeded the total cost of producing each hundredweight of milk in only one state, California, and nationwide, dairy farmers lost an average of $3.21 per hundredweight of milk produced. For 2019, total dairy production is expected to increase modestly over 2018, by less than 0.3 percent, and the average all-milk price is expected to increase as well, from $16.26/cwt in 2018 to $18.40/cwt. While the projected 13 percent

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