Five Lessons China Can Teach The US Economy (NEW POLL)

I just got back from a two week visit to China, to witness for myself what all the buzz is about.

In today's post I want to share with you the five lessons we could learn from China that would lead America back to being the envy of the world and a powerhouse economy. And guess what? It doesn't include any bailouts, cheap imports, or a falling dollar.

But first, a brief history of China, specifically Hong Kong, for those who aren't familiar.

In 1898 the British government signed an agreement with China to lease Hong Kong for 99 years. That lease expired in 1997, some 13 years ago. At the time many Hong Kong residents, especially the wealthy Chinese, were concerned that it would immediately fall into a communist type regime which frowned on individual success and capital.

When I first visited Hong Kong back in the late 70s, it was a vibrant and bustling city. However, I was always perplexed as to why a country that is surrounded by a much larger communist country could survive and thrive.

Back then you only had to look at the Chinese merchants to see how industrious they were and how much they loved business and gambling.

Again I visited Hong Kong in the 90s to see much the same picture. The only cloud on the horizon was what would the future be like once Great Britain handed over Hong Kong to mainland China.

Well, here we are 13 years later and Hong Kong is booming - and I do mean booming. Contrary to popular belief back in 1997, Hong Kong did not implode, it exploded with new business.

How was all that possible?

The answer is much simpler than anyone can imagine. As a nation, the Chinese people are very pragmatic and decided to create one China with two systems. The system in Hong Kong is very different from the system in mainland China, which I will discuss in future blog postings. Most of all, I believe that China's one country, two system policy has everything to do with the Chinese mentality.

I was pleased to see that during my latest visit, Hong Kong was the same in many ways, but at a much more sophisticated level. The venerable "Peninsula Hotel" with its 18 green Rolls Royce's remains one of the last beacons of British influence and still serves it's legendary high tea at 3p.m.. This is a recommended stop for most visitors and having high tea reminded me of my British roots.

Business, of course, dominates Hong Kong and the business of Hong Kong is money and tourism for the most part. Everything must be imported into Hong Kong for it to survive which is why it was so important for the British to control the China trade in one of the most beautiful natural harbors in the world.

The Hong Kong of today bears little resemblance to the Hong Kong of the 70s when I first got my taste of China. If you ever get the opportunity to visit this part of the world, just do it. You will witness some of the most amazing architecture I have seen anywhere.  In fact, many of the outstanding buildings were designed by American firms.

Now I promised you at the beginning of this article to list the five lessons we can learn to make America strong again. Well, here they are and it's all about taxes:

The Hong Kong economy is booming and here are 5 reasons why:

* No sales tax
* No capital gains tax
* No VAT
* Maximum salary tax of 20%
* Maximum corporate profit tax 16%
>>>>> PLUS NO ESTATE TAXES!!

The US economy is in recession and here's why:

* Sales tax
* Capital gains tax
* Potential VAT coming
* Maximum salary tax of 39%
* Corporate maximum of 39%
* Death Taxes
>>>>> PLUS OTHER TAXES

Now I'm not a politician or an economist, but I think you'll agree that you don't have to be a rocket scientist to figure what makes countries grow, prosper, and become strong.

America didn't grow strong and produce millions of jobs and be the envy of the world by having the second highest taxes in the world. America grew because it gave everyone a fair chance if they worked hard to do well.

I know this from personal experience as I left my native country, Great Britain, like many millions of other immigrants to seek my fortune in America.

Whether you agree or disagree with the Hong Kong model for America, please vote in our survey. If you have another suggestion, we would also like to hear that as well.

Do you agree that the US should emulate the Hong Kong tax model?

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As always you are free to leave a comment on this article here on the Trader's Blog.

I will be making more comments and my views on mainland China in the next few weeks. I think you'll find my views contrary to popular thinking.

So stay tuned!

All the best,
Adam Hewison
President of INO.com
Co-founder of MarketClub

72 thoughts on “Five Lessons China Can Teach The US Economy (NEW POLL)

  1. There is a grassroots tax change coming to deal with taxes in the United States. I am from Atlanta, Ga. John Linder, U.S. Congressman from Georgia and Neal Boortz wrote a book about this issue. If you would like to see some ideas that they have pick up a copy of the Fair Tax. Also you can listed to the Neal Boortz radio show and get an idea about this common sense approach to operating the federal budget.
    If we can get this passed it will abolish the I.R.S. and stop all this wealth envy that the politician keep using to tax the rich and give to the poor.

  2. as many as one million Medicare recipients will have to choose new coverage, according to AARP. ... For those with traditional Medicare, the biggest change on the horizon is an expansion of benefits. Starting Jan. 1, Medicare will completely cover the cost of many [preventive] services, including mammograms, Pap tests and screenings for prostrate and colorectal cancer, as well as one annual 'wellness' examination

  3. You're stupid or ignorant or Republican or all of the above.
    The difference is that Hong Kong does not have military, social security and Medicare.
    Why don't you think before you post rubbish?

  4. Thank you! Every day above ground is a celebration!

    Adam, this is a wonderful site! I'm a financial advisor and money manager to about 50 really great clients. I gave up on fundamental analysis a couple years ago and rely 99% on technical analysis for my decisions (The other 1% is broad market global political and economic analysis). This site, along with my own analysis really helps to pinpoint turns.

    You've done a FANTASTIC job!!!

    More on the DocVinoDinero thing later.

    Best always

  5. Hi Mr. Robert

    Is the book name Enomics or Economics and appreciate if you can give author and publisher details.

    Regards

    Muralidhar

  6. OK! You know, once I tried those funny mushrooms. Another time I watched Altered States, the movie with William Hurt. Both had the same affect as reading your statement.

    When man first came into awareness his "money" was a club or a bat. He used this to influence the others in the clan and get his way. The effectiveness of a large strong neanderthal wielding a bat went unchallenged - for a while. I know, kind of barbaric. Of course this was 5000 years ago (or more). It worked really well to get what he wanted until somebody created a slingshot, bow and arrow or other weapon of mass destruction....

    Then came commerce. Man used barter, coin, and other currency. This, man figured was much more humane and diplomatic as compared to the bat (club) which created more problems than it solved.

    As we've progressed faster methods of commerce (plastic, wire funds, ACH, etc.) have been created to speed up the natural transfer of goods between humans.

    I'm not sure what transcendental plane you live on but the "philosophy" of not needing money (of some type) WILL NOT happen in our lifetimes - PERIOD!

    This is a (dangerous) idealist vision which does not work! The reason is that while everyone would love for this to work the nature of humans is that many MIGHT follow, but one or a few will ALWAYS skew the goal to their own benefit. In doing so, one or a few will maximize their own gain while enslaving many (sounds kinda Darwinian doesn't it). The many may feel that they are equally benefiting only because the aristocracy, being shielded behind the mask they have created are able to keep the bourgeoisie and proletariat in the dark.

    There will ALWAYS be winners and losers. It's just human nature. In a true democracy there will always be "money".

    Sorry, I had a lovely Malbeck (maybe a couple - tomorrow's my birthday) and then happened upon your blog and couldn't resist.

    1. DocVinoDinero,

      Happy birthday to you and thanks for your feedback.

      I love Malbec and your name VINO (Wine) DINERO (Money)

      All the best,
      Adam

  7. Thanks Adam,

    I welcome a tax revolt. Our branch of governments (mine being from Canada) are far too dependent on an imbalance of tax revenues generated from realty assets, imports and energy versus production. The ideologies and employment opportunities for my children will likely be shaped more by government institutions than that of my own unless I can help it. I'm not implying that my ideas or suggestions are superior, but I want my children to be open minded rather than a product of their institutions. The financial pressures as owner-operator of a small factory makes it very difficult to give my children the personal time they deserve. It may be a path of lesser resistance to just quit making things and outsource it to China, but if I do this I also contribute to the imbalance I am criticizing.

    At this juncture in mid-life I have advanced from a rebel to a freethinker, and now I am questioning myself if I have advanced in the right direction! What good is thought without action?

  8. The bust cycle of capitalism is an essential factor to restoring hunger, awareness, balance and character to the population. In such an event, the empirical adjustment of our consciousness is a dramatic but healthy process to recapture a profound respect of honesty and goodness. The ideology of money will one day fade away and be replaced with another, however the truths of honesty and goodness are eternal. When will the multitudes realize that the progress of humanity is diminished by its dependence on the philosophy of money?

    1. Ayachi,

      Translating your blog comments, " Back to international trade is another solutions". if that is correct, then I totally agree with you.

      All the best,
      Adam

  9. Since they are wholly focused on business and not on nation building - they have low needs for security, they have no military, education is up to families and the people of Hong Kong are well educated, extended families and organizations provide for the indigent and infirm, water is a business not a public utility.

    It used to be the same way in this country when it was growing at its fastest rate. Air pollution and harbor pollution are a problem. This is one place that the free market breaks down. Regulation need not be as heavy handed as it is here, but some agreement and regulation is required in these kinds of public goods issues which are few. Given the above, it takes a lot lower level of taxation to maintain the country.

  10. A working population is a happy spending population, here is formula
    (working+tax relief=spending+more jobs)=more tax revenue

  11. The western nations and their ideas have permeated the whole entire world, which have put nation as the guardian of our well being, whereas eastern nations have always put the family first. From young we were taught there is no free lunch, if you are lazy you pay the price and suffer. I am not saying government should not play a role, but limited role only such as providing a proper education, medical care (within limits), security and policing and infrastructure improvements and advancement. Taxes should only be used for those purposes. By over extending credit for the last 70 years, the western nations are in such dire strait with their economies and debt that the only know how is to further the process with QE2, which the Japanese have proven that it did not work. Instead of letting the debt implode and re-educate their people about living within their means, after all the government are made up of people, they continue to pursue unimaginable policy that have not been proven.

    The old adage, "Those who forget history are doomed to repeat it," is alive and well. Throughout history, from the Egyptian dynasty to the Greek and Roman empires and later the Spaniard, Portuguese, British, French and Dutch conquerors, none have been able to sustain the kind of lifestyle of spending frivolously and not pay the price. Debt is like an addiction, once hooked it is very difficult to withdrawn without pain. The Chinese are industrious people, but with so many people, the competition is tremendous, hence Darwin's survival of the fittest still reign. The moral of history is always stay hungry, otherwise you become complacent.

    I remember arguing with a friend in college during President Reagan quadrupling of the deficit upon him leaving office in 1988, the argument was whose is going to pay the piper. His answer, not him. My answer, if you are not going to have any children then fine, otherwise, I am sorry for your children. Our problem did not manifested today, it started a long time ago and it will take a long time to cure this problem and with much pain to go with it for everyone. Taxes is not the problem, but debt is the problem.

  12. That was a no-brainer. Unfortunately, it was too simplistic. One major reason the US is in decline is because we've been exporting our science, technology, & manufacturing jobs. If you teach a man to fish, he doesn't need to buy your fish any more. If he then makes fish sticks cheaper than you can, you will be buying them back from him. That's whats happening to the US. That plus a corrupt political system. Sure go ahead and change the tax code, but the HK-like growth will be decades away and not without much pain along the way.

  13. Today's biggest U.S. problem is the decline of consumer manufacturing at home while importing most goods from other countries. Look at an average home: tv's, computers, shoes, clothing, electronics and other stuff. They're imports from China, Brazil or elsewhere. Look at American streets and highways and see the enormous vehicle imports. If America were to manufacture at least 50% of what it currently imports U.S. unemployment would be non-existent. That would mean very high government revenue from income tax. That would make it necessary to force lowering of most taxes and eliminate some of those taxes altogether.

  14. Secret are incentives. Why to work when results of your labour go only to public sector and this disproportion is getting wider with every day going by. We are in stage where world Depression is looming on horizon. I hope that next generation will learn from past mistakes.

  15. I just came from Hong Kong and Shanghai, VERY IMPRESSIVE, I fully agree with Adam. I wish this model could also spread to Mexico

  16. As one comemtator wrote, the taxes were highest in the 50's when we were the envy of the world....

    In the 50's, WWII was over and by 1953 the Korean war was over. Taxes in the United States helped to pay for these wars but remember, Russia, China, Japan and most of Europe was rebuilding from the ruins of WWII. Their money went into re-building. The U.S. really hadn't been touched for the most part. Thus, without a heavy cost to re-build our nation it would have been easy to be the "envy" of the world.

    The only entitlement was social security through 1965 or OASDI - Old Age, Survivors and Disability Insurance. In 1965 Medicare was added as part of Johnson's Great Society. Since then other entitlements have been added and our taxes have gone up and down.

    Currently we pay 13.8% of income into OASDI and almost another 2% into Medicare. If you add up the 13.8% "contribution" which could have gone into your own account a below average income person working from 25-65 could have over $750,000. With a draw done of 5% this would be much better than the "entitlment income" from Social Security.

    I strongly believe that if we (the United States) continues to enable social irresponsibility via welfare programs and increased taxes we will become a third world nation as it tends to create a lax population. We're seeing that in France and Greece right now.

    Currerntly, the administration is considering adding new entitlemt programs in addition to Obamacare which would supplement social security. This would come in the form of government gauranteed bonds or gov't. gauranteed variable annuities. Yes, the plans are on the drawing board!

    It's been proven time and time again - lower taxes, do away with welfare programs and the economy is stimulated. Legislated programs for charitable contributions toward welfare programs have a much better effect.

    1. DocVinoDinero,

      Thank you for a very well-thought-out post and one that addresses the 50s.

      I think it is hard for the average person to understand that they would have more money, $750,000 had they managed or had access to the own money.

      Once again thank you for a very well thought out post.

      All the best,
      Adam

  17. People in Hong Kong do not need to pay taxes because there are no entitlement programs. The parents save and are able to pay for the school and university tuitions for their kids and in the meantime are able to take care of their aging parents. They do not tell their kids: " Now you are 18 years old and you are an adult now, and you are on your own from now on". They nurture the kids until they are ready to be adults. Let's be honest, some kids mature sooner than others. Some kids are mature and can be on their own at 18 years old and some need to wait until they are older. The old aging parents can live with their daughters or sons in the same household. And the aging parents give their savings to their children without the government to bother them with all sorts of taxes. So the strong generation takes care of the young generation and the aging generation and all are happy.

  18. Thank you Adam for the information. I wish that there was a way to transmit this information to all American people.

  19. Thank you for your comments on Hong Kong, Adam!
    I am amazed how the Chinese have been able to use a communist regime to implement a capitalist system. Just by looking at the way they have dealt with the financial crisis and their own real estate bubble has been quite "correct" from an economical standpoint as far as I can see. Of course they have a regime that can enforce these measures without so much restriction as would be encountered in the US. Nevertheless the measures are correct, and would probably have prevented a lot of the problems in the US, had they been applied in time.
    Any way, I would encourage all readers of your blog to read a short little book titled: "Understanding Enomics in One Hour".
    It is really worthwhile and very enlightening as to what happens with government.
    Cheers,
    Robert

  20. My recent suggestion on how to save at least some homes was to declare a 6 month moratorium on all foreclosures to allow homeowners to find a job, and make a single mortgage payment with the missed payments tacked onto the back end of the mortgage. That might save as many as 10-20% from foreclosure. The others must be allowed to foreclose and put those homes on the market which, while it would temporarily cause further sharp price declines, it would open the market to a base where potential buyers would come into the market without fearing supply overhead.

  21. Hello Adam,
    nor am I a professional economist, but I can´t see how You can recommend a tax model for the American economy similar to Hongkongs model when the economical structures are so dissimilar. The American economy is based upon consumption and production - foreign trade and tourism being small parts of the whole - while Hongkongs economy is being based on trade and tourism, at least that is what You say.
    Adam, will You say that there is a general tax model for every country irrespective of their economical conditions?

  22. You write, "America didn’t grow strong and produce millions of jobs and be the envy of the world by having the second highest taxes in the world. America grew because it gave everyone a fair chance if they worked hard to do well."

    I don't know, Adam. Sounds like a false dichotomy to me. You suggests the United States can either have a growing robust economy or continue to tax its citizenry, but we can't do both. You also suggest there is something inherently unfair about taxation. It's an historical fact that income taxes in the United States were significantly higher during the 50's, for example, when the United States became the "envy of the world."

    Many of the above posts consider your observations a little too simplistic, and I have to agree. Perhaps there's more to this story, somewhere beyond the plush surroundings of the tea room at the Peninisula Hotel.

    I look forward to your abservations about mainland China.

    1. Brian,

      Thank you for your feedback.

      what I was suggesting is that perhaps the tax code that we currently have is out of control and way too complicated for any one person to understand. This is not just my thoughts but the thoughts of many folks in the US.

      The Hong Kong model is very simple and I think we should go to a more simplified tax code. Even a flat tax in my opinion would be much better than what we have now. The real problem is we have so many vested interests in keeping things complicated I am not sure it will ever change.

      Let's keep our fingers crossed on this one Brian.

      All the best,
      Adam who

  23. Tax cuts would help tremendously if we had an economy of the 1950s or 1960s type with a large industrial base and thriving engineering and science producing new products and new entrepeneurship.
    The Bush tax cuts would have sent the economy through the roof by now.
    As it is today, I do not see how any additional tax cuts would help through Bank of America, Goldman Sachs, McDonald's, Google, Wall-Mart, Monday night football and the movies.

  24. Beyond the tax laws, Hong Kong also has a few key factors that benefit its economy. These include: 1.) very liberal & effective immigration policies, allowing for foreign workers to come and go freely, and reducing the cost of domestic childcare, elderly care. -- industries which consist predominantly of foreign workers 2.) high population density, which allows for a.) a highly efficient transportation infrastructure, b.) high stamp duty revenue per unit of land c.) highly efficient telecommunications infrastructure (low-cost broadband) d.) comparatively low (low skill) labor cost. e.) High utilization of other infrastructural services 3.) Proximity to China, and being a preferred location for real estate investment, tourism, financing. 4.) World-class public housing system. When was the last time you see luxury condos built just 1 block away from public housing in the US? In Hong Kong, this is common. 5.) A cultural ethos that's decidedly pragmatic, driving public policy and societal norms.

  25. Why shouldn't we adopt the Hong Kong tax structure and just give it a try? Nothing else has worked yet or is working to make a dent in this cruel economic bust. Karl Marx and Friedrich Engels knew these boom/bust cycles were intrinsic to capitalism 150 years ago and they were dead on the money in their assessment that it is intrinsic to the nature of capitalism to produce these boom and bust cycles with the result of each bust making the rich richer and everyone else poorer. They predicted, again rightly, that a bust would eventually occur that would not just devastate the working industrial poor (which of course doesn't exist here any more since our industry soujorned over to Mexico/China/India for a permanent vacation) but that would devastate people like YOU and ME who are probably some variety of middle class.middle class .Marx/Engels would of course take one glance at this situation we have here in America and advise that a socialist revolution that eliminated private control of all capital would get us out of this nature. Only problem with that remedy is that when tried it tends to lead to the crushing of all human freedom, dignity, all civil rights and culminates often in genocide. So my own personal solution to this economic nightmare, which I devised for myself alone but recommend it to you as well, is to take full advantage of the awesome resources of this site (it really is an absolutely magnificent blessing with everything it gives us), invest, make enough money to rise above this economy and be completely financially independent, and of course adopt the Hong Kong taxation model as described above so as to protect our fortune(s). That way we recognize reality, roll with the punches, and gain financial freedom for ourselves.

    Harry

    1. Harry,

      Thank you for taking the time to post your thoughts on our block. We appreciate the kind words you have to say about MarketClub and our service. As many members know, we are dedicated to helping you become financially independent through the use of disciplined trading strategies that work.

      All the best,
      Adam

  26. 1. Campaign finance reform is just censorship of free speech by unelected bureaucrats or incumbents using such laws against opponents, or even worse using taxpayer funding to force taxpayers to support untenable wingnut candidates. Contribution limits have been in place since the 1970's and the result has been the rise of millionaire, self-financed candidates which have no limits. Campaign finance reform is all bark and no bite; it simply doesn't work and there is no evidence of it ever working. Additionally, just about every form of organization in the country today is a corporation; thus corporations are THE people. Dispense with the silly Marxist claptrap and join the 21st century. So there's nothing inherently evil about corporations; on the other hand unions are expressively formed for political purposes to rape as much as they can from taxpayers and yet that is somehow not controversial...

    2. No arguments here. I would argue that we should go farther and rely on sortition to select those to "represent" constituents.

    3. Congress DOES participate in Social Security and Medicare.

    4. Reasonable, but politics is not about economocs or efficiency; its about egos and power.

  27. There is no question that tax codes have a huge impact on job creation and entrepreneurship (or lack thereof). Our tax code has been in need of an overhaul and simplification for some time. Here's the rub in the U. S. You can't get any major changes because the corporations own the politicians (both parties)and enact what the corporate and other special interest lobbyists want via their contributions. So here's what we really need:

    1 Campaign finance reform. No individual or corporation can give more than $1,000 per candidate. Their is a set campaign cost per election and every candidate gets an equal amount to spend as they see fit. The balance is paid for from public coffers. Hey, we might get some really qualified, smart candidates who think about the future.

    2. Term limits: 2 terms for Senators. 2 terms for Congressman. Senators are a three year term as are Congressmen. The Constitution didn't envision "career politicians." Congressman start "running" and fund raising as soon as they are in office due to the current 2 year term.

    3. All Congressman and Senators are under the same systems as the rest of us, e.g. Social Security for retirement and Medicare for Health. You would see some very progressive changes when the "aristocracy" has to deal with the same systems as the rest of us.

    4. Privatize everything possible in the public sector including health care and the postal service. BUT, regulate or fix their profit margins because they are providing necessary services for the whole economy. They can make reasonable profits, but not obscene profits like the insurance companies, Wall St. etc. The government doesn't understand profit and therefore can't run things very well at all. Look at the anachronistic postal service, which just doesn't get it. Let UPS or FED EX run it.

  28. Today, the masses seek preservation and security. The human age of popular democracy may have reached the point where the rise of rationality is leading us to a wholly constructed way of life. I'd rather be chased by a knife through a forest, than tied to a tree that bears fruit.

  29. Hey guess what :

    There is no free lunch!

    The chickens will come home.

    Smoke & mirrors only work so long.

    You Get get the government you deserve.

    You get what you pay for!

    and finally,
    The thought you have expands .....

  30. Unfortunately, the US has dug itself into such a deficit hole that reducing taxes isn't practical at this time. The only solutions seem to be increase taxes, reduce spending, and monetize the debt.

  31. We have gone the way of Europe, and traveling the road of depression. I don't see any way a shrinking middle class has a chance in Amerika anymore. The baby boomers are spoiled brats, crummy parents, and drugs over the years of these two generations is destroying what's left. Are greed has destroyed us. Big business has shipped our jobs overseas starting with the emergence of Japan, and now to China.
    The CEOs are paid hundreds of time more than asian CEOs. Board members have allowed them to rape the company of the profits leaving the investor with no reason to invest We can't be the worlds policeman, and bully the rest of the world anymore by war. Our political system is corrupt of all in all three branches. of the federal government. We have moved the pollution to Asia, along with our jobs. We are at a critical time, here, and abroad. Our choice of the present government is a total failure. It is to late to expect a turn around for many years, and we are on the path to a major depression, worldwide like the !920s. Trade wars, corrupt officials, a financial meltdown will do us in. We mover closer each day and this Christmas will probably be the final inning. Gold help us all.

  32. Thank you Adam for your observations on China and Hong Kong.We also have visited China, Hong Kong as well as Tibet. I agree, the Chinese people are great and are certainly on the move industrially. We had lunch in the kitchen of a Chinese family and they have the same hopes, aspirations and dreams that we have.

    However, there is also the dark side. In a rush to catch up, the regime is oppressive to the people and is rapidly destroying the environment. This will ultimately catch up with themand create havoc. The huge dam on the Yangzee River is backing up water for 500 miles. It will raise the average temperature of that part of China by 3-5 degrees changing the whole ecology. Due to the cutting of all the trees in the upper watershed, the Yangzee is a floating mud bath that fiil up the reservior in a short time.

    The intense smog all over China and into Hong Kong is gradually destroving the health of the people. The rich Bureaucrats flee by plane to Tibet on weekends to get out of it. This air pollution is gradually spreading across the ocean to other countries. Inefficient small coal burning power plants without environmental controls spead all over the country are the culprites.

    Don D

  33. I wouldn't go with "0" as the best broad-based tax rate, e.g., sales tax or VAT. Something along the lines of 2% of corporate sales would be a relatively painless way of raising a lot of revenue, and enable a decrease in some of the very high tax rates. Make it simple, no loopholes (deductions, credits) and no difficult accounting (VAT is too difficult).

    As for Europe, they have perennial high unemployment, low growth, and high emigration, caused mainly by their high tax rates. That's where the US is heading if we are intent on letting government suck up higher and higher percentages of the fruits of our labor. I just read that 52% of all births in Arizona are paid for by the state Medicaid program. Insanity.

    Back to taxes for the US, how about we let Warren Buffet and Bill Gates have their way, partially, as an experiment. Let's have a 50% tax rate on all taxable income over $1M, including capital gains, temporary for 10 years (like the "Bush tax cuts"), and get some data on how much tax is actually collected, compared to what was collected at 35% for the past 10 years. If it works out that those folks are still making as much money and paying more taxes because of it, then make it permanent. My bet is that the revenue from them would fall, not rise, as they sheltered their income. If that happens, then make up the difference from Congressional salaries and retirement pay.

  34. It's my understanding that the British Govenor of Hong Kong kept The British government out of Hong Kong's affairs (no small feat). Capital was allowed to flow freely in and out of Hong Kong (If you can leave whenever you want, you tend to stick around).

    Local government did what local government did best; everything else was the provence of the private sector.

    1. Earl,

      thank you for your feedback.

      To the best of my knowledge there is no tax on gambling. The horse racing which generates so much cash for Hong Kong is run by a nonprofit which I believe the name is the Hong Kong Jockey club. This club distributes their substantial profits for social issues in Hong Kong.

      All the best,
      Adam

  35. re Tango6...which came first, the chicken or the egg? Until Mao took China communist it was another capitalist country. Post Mao takeover it became just another "cradle to grave" attempt leading to the problems you point out China has to deal with...The US problem revolves around the improper use of credit and leftist attempts to "save the world" with our citizens' money and blood...Adam's got it right with the 5 and to those I'd add stay out of other countries' sovereignty and don't ladle the guilt of success on our people so as to put a buck into every foreign basket that's passed, there are plenty to help here at home!

    The Lord helps those who help themselves. That little bit of biblical advice applies to us and "them".

  36. Returning to a so called true free market system is not a reality. Besides the best free market model failed in 1929. Hopefully, history has taught us something. Don't you think an economy partially based on gambling is aberrant? Not a good model but playing the market is a gamble, too. Look at the recent unpredictability with Gold. The environmental impact of a true free market humanity can no longer afford. Plus I will not get into the taxes created by the Fed-aka Banking Cartel because an informed person would know.

  37. I agree that our pork created tax code is damaging to all but the few recipients. However, please try to make your point with an in depth comparison to other large, diverse countries, not rich city-states such as Hong Kong or Singapore with gambling as its tax base.

  38. Well it's not so simple. The problem with taxes is not so much their level, it's the way it is spent. Honk Kong doesn't wage to stupid wars. Hong Kong doesn't bail out its banks and insurances. Hong Kong doesn't have Fany and Freddy. Now, if the US gvmt would spend money on education, health and infrastructure (your TV and Telecom costs are also amongst the highest in the world for a very poor quality), and live within its means, the tax level wouldn't be such a problem. You can visit the whole of Northern Europe and see by yourself that a very high tax rate doesn't necessarily mean "down the drain".

  39. Simplistic solutions are most often biased toward one perspective. You choose not to ferret out what may not be instantly visible to your eye. For instance, seeing only a couple beggars in Hong Kong - maybe there is diligent security that keeps them from coming into Hong Kong. As for someone's comment about rewarding hard work instead of enabling non-workers, China is making sure they are providing jobs through innovation for their unemployed whereas the US are only talking heads in Washington about doing this. Just go to ted.com and you'll see brilliant ideas posted by people who have solutions to everything from producing clean water in cities by planting the right plants near sewers to a more accountable system that educates our schoolteachers to engage young children's imagination in arriving at responsible solutions. There are plenty of new innovative businesses that can be funded to build the US infrastructure into a truly futuristic new society. We need to make changes at the grassroots level of our society instead of focusing on how to make it easier for higher income earners to ignore all the rest of the population more. I want a comfortable life as much as anyone else , but I also see that what keeps me alive is the same stuff that keeps everyone else alive. And I see that the continued disparity of classes is an archaic system that's leading to the demise of human life on our magnificent planet. When people collectively start making the choice to care for each other as much as for themselves and when people collectively start respecting the earth which is the host to their being alive rather than honoring wealth and irresponsible spending on all levels these days, that's when mankind en masse will rise to the glorious potential of its mind and imagination which is unique on this planet. What we choose to see is what we tend to create more of. Isn't it time to step outside of the box here and use the creativity with which we've been endowed rather than running the same patterns over and over again expecting different results overall? I see nothing wrong with people making money. It's what we as a civilization vision for each other through the money we make that is most important for our future as a viable civilization on this planet.

    1. Maralissa,

      Thank you for your feedback.

      The reality is man's nature has not changed much in 2000 years of recorded history. I consider that to be a strong trend as much as I agree with many things can you say it would be very unusual for this genetic DNA that's in every human being to change that dramatically.

      Once again thank you for contributing to the blog.

      Adam

  40. Sir,

    Every model or Strategy must be adopted only in accordance with individual factors of relevant economy

    Rasesh shukla

  41. I spent a week in China and found the country to be amazing. I attended the Canton manufacturing Show in Ghong Zough (spelling?). I found the cities very robust and the people very friendly and engaging. They truly love business and gambling as I spent some time in Hong Gong and Macauo. At the Canton show, it was very interesting and the chinese goverment hired students to engage with business people to practice there language skills and engage in conversations. There are many young, aggessive,and educated students.

    I will always remember the Friday night in Ghong Z. We went to a shopping area downtown. I could not believe how many people were out shopping and spending their money. I thought they were a very poor country with much poverty. They are creating a middle class.

    1. Ernie,

      Thanks for your feedback.

      I plan on blogging on my views on mainland China next week. I certainly appreciate your input and your views of mainland China.

      All the best,
      Adam and

  42. Our government needs to CUT SPENDING, eliminate programs like crazy...including entitlements. Allow people to have their own medical insurance, old age plans, encourage the hard working instead of enabling the non working.
    All the tax fixes from Hong Kong would help that happen if our government were on a "balanced budget" (real not fake numbers) road.

  43. very simplyfied system. Who pays for security, military, police, education, social welfare and all other things needed for a standalone country. roads, water, air polution control.

    1. Bradri,

      thank you for your feedback.

      Believe it or not some of it is paid for by horse racing. Let me clarify that, horse race gambling betting on the ponies. The Chinese are incredible gamblers and you see them both in Hong Kong and also in Macau. I'm not sure what the unemployment rate is in Hong Kong but we saw only one or two people begging for money.

      Adam

  44. Incidentally, I note the smog blanketing Hong Kong in the photo entitled "a beautiful day in Hong Kong!"

    1. Tango6,

      You're absolutely right that was smog. In a little over 35 years since my earliest visit to Hong Kong the harbor has become smaller and in many ways not as beautiful as it once was.

      All the best,
      Adam

  45. All good points Adam, but there is another side to the story, at least in mainland China. China has huge social and environmental problems and it will cost big bucks to fix them. Where's that money to come from? Did you like the air quality in the big industrial cities where they are turning out substandard copies of patented American goods at a fraction of the cost?

    1. Tango6,

      Thank you for your feedback.

      Notice that the article is about Hong Kong and not mainland China. I'm putting together a new blog posting to deal with many of the questions that you bring up. I think you'll find it quite interesting and quite controversial.

      Thank you for your feedback and your vote.

      Adam

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