New legislation responding to old EU crisis

From BBC Business News on the status of Spain and a potential bail-out:

On Wednesday, the European Commission unveiled proposals designed to stop taxpayers' money being used to bail out failed banks.
The aim is to ensure losses are borne by bank shareholders and creditors and minimise costs for taxpayers.
However, new legislation is unlikely to come into force before 2014 at the earliest, too late to protect taxpayers from any further immediate bank failures.
"The proposal we have today may be only useful for the future but it does not solve the current problems we face," said Sharon Bowles, chair of the European Parliament's economic and finance committee.
There would be new requirements for countries to prepare for a bank collapse, collecting money through an annual levy on banks that would be used to provide emergency loans or guarantees.

Brilliant. The European Commission will have new laws on the books to prevent a redux of the EU crisis occurring again in the future... if the EU even still exists in the future.

It seems European politicians are acting as if their policies could apply retroactively, but even if these sort of reforms could have stopped the current crisis, that's no guarantee that future crises will look anything like the current one.

There's also the chance that this new legislation - "an annual levy on banks that would be used to provide emergency loans or guarantees" - will just add to the moral hazard problem and make excessive risk-taking by banks even more likely.

Responding to the last crisis is of great temptation to politicians, who must be "doing something" in order to satisfy their constituents, but this foolhardy rush to action may do more damage than good. Post-Enron accounting reforms have been blamed for making the U.S. financial crisis worse, and Europe could be reading a parallel story five years from now if these proposals go through.

Tax wedding rings. No one will know the difference.

With our huge budget deficit, there are many ideas on how to raise more government revenue. Most of them involve raising taxes on the highest-earning households. I have a better idea: tax the ultimate in status purchases -- wedding rings.

Not romantic, but practical. The reasoning: wedding rings are purchased largely because they are expensive. No bride wants to feel cheap. Men are usually advised to spend some fixed amount of their income on the ring: somewhere between 5% and two months of salary being the most common advice. If men are looking to spend a certain amount of money, and care very little about the ring's actual attributes, a tax would not affect their purchasing at all!

How much revenue could a wedding ring tax raise? From a little Google-work, here are some starting figures:

• Average price of an engagement ring: between $2,100 and $3,200
• Wedding rings cost an average of $5,000
• Every year an average of 2.4 million weddings are performed in the U.S.

If we split the difference on average engagement ring prices (arriving at mean of $2,650) make the heroic assumption that every bride gets both an engagement and wedding ring, and the less-heroic assumption that wedding ring demand is inelastic with regard to price, it becomes fairly easy to estimate revenue from a tax.

Suppose government taxed half the cost of rings. Price of the ring would remain about the same because it's a status purchase; jewelers would use slightly less high-quality gold, diamonds, etc. to make up lost profits from the tax.

For a quick back-of-the-envelope calculation:  
Revenue = ($1,325 + $2,500) * 2,400,000 = $9,180,000,000 or $9.18 billion dollars per year.

It won't balance the budget but neither will most of the proposals floating around, like turds in the political punchbowl, being pushed back and forth by the Obama Administration and Congress. If taxes are going to be raised, I for one think it would be better to choose targets that will impact consumers as little as possible. From this perspective, wedding rings are an easy target.

Royal Weddings Aren't News.

Heck, royalty in general isn't news. What does the English monarchy even do these days, except splatter their events and "personalities" across global news media at any opportunity?

Here's five things in the news today that I care about more than William and Kate's media circus.

1. India, Mauritius agree on Joint Working Group on Double Taxation
2. In Shift, Egypt Warms to Iran and Hamas, Israel’s Foes
3. Attorneys General Battle NLRB Over Boeing Plant
4. Space Jam: Thousands Flock to See Shuttle Fly, creating potential traffic problems on East Coast
5. Benjamin Moore's "Odorless" Paint Stinks and is Sticky, Suit Charges

Yes, the failure of paint to dry as promised is probably of greater significance than the royal nuptials.... and yet here are the top four items today from Time Magazine.

1. William and Kate: Scenes from a Dazzling Royal Wedding
2. Kate's Grace Kelly Moment
3. Kate Middleton's Sensational Wedding Dress
4. Royal Wedding: The Day's Schedule

The U.S. debt ceiling will be reached in two weeks, the American military is engaged in three different countries, and all we can hear about is royal frippery. If I cared any less, I'd be in a coma.