Category Archives: Taxation

Ron Paul’s First 2012 Political Ad Warns Republicans to Avoid Repeating the Mistake of Trusting Democrats on Taxes and Spending

Can the Republicans trust Democrats and compromise by raising taxes in exchange for spending cuts in this debt ceiling debate? Ron Paul says “no” in his first 2012 political ad.

Why not trust Democrats? Ask former President George H.W. Bush what happened to him when he broke his infamous “Read my lips” promise that he wouldn’t raise taxes.

Hopefully, Republican’s will listen to Dr. No for a change, if only on this critical issue.

Kevin Drum Is An Innumerate Hack

Kevin Drum don’t grok numbers. I think we all knew that. But occasionally he goes so far over the edge that it calls for correction, and today’s one of those days.

Kevin has taken a handy chart (originally here), and drawn some trendlines onto it to proclaim that we don’t have a spending problem at all:

I’ve added some handy lines to show the general trajectory of spending and taxes over the past three decades. Putting aside the Great Recession, which has temporarily cratered revenues and imposed a burst of stimulus spending, the trend is clear: spending has generally gone down, but so have taxes. Future healthcare expenses are a big issue, but the current deficit just hasn’t been primarily a spending problem. It’s been a tax cut problem.

So let’s start at the beginning:

  1. Based on his graph, we don’t have a problem at all. Spending as a percentage of GDP is clearly trending down, as is revenue. If his trendlines are accurate and continue, I’m a happy guy.
  2. In fact, spending is trending down FASTER than revenue, so deficits as a percentage of GDP would be shrinking. Also makes me happy.

The fact that Drum doesn’t even SEE either of these points when he draws his trendlines is further proof that he’s an innumerate hack. If his trendlines were accurate (and they’re not, which I’ll cover later in two ways), they actually suggest that we really don’t have much of a problem at all. Certainly that’s not what he’s trying to prove.

Further, he blames the tax cuts on the spending drops, despite seeing a big jump in revenues after the Bush tax cuts. What he overlooks is that the mid-90’s revenue boom was economy-related, based on the tech bubble, and the mid-00’s revenue boom was economy-related, based on the housing bubble. The current 15% revenue is caused partly by tax rates but mostly by the recession, just as the current 25% spending is caused partly by stimulus spending but also largely by stagnation in GDP. He sees lines on the graph but doesn’t understand their meaning.

But all that analysis belies the point that his trendlines are utter bunk. First, they’re hand-drawn with no rhyme nor reason whatsoever. Warren Meyer at Coyote Blog used Excel to draw proper trend lines, and while the direction of trend is accurate, the slope of the spending drop is MUCH more gentle than Drum’s line. Drum shows spending dropping from 23% of GDP in 1981 to roughly 19% in 2010. Warren’s line shows spending dropping from 22% of GDP to only 20% of GDP. Doesn’t look so striking, does it?

Further, Meyer takes Drum to task for his selection of 1981 as a start point. 1981 was a local maxima of revenue as a percentage of GDP (remember that we were just trying to come out of stagflation at the time), so Meyer draws a similar graph with 1950 [chosen to ensure the extreme spending spikes of WWII were not a factor] as a start date instead, and when you look at Meyer’s graph, you see a much more stark difference in trendline. Frankly, believing as I do that Drum is an innumerate hack (and seeing the source of his graph), I don’t suggest that Kevin Drum chose 1981 deliberately; I personally think Drum isn’t capable of even understanding the point of Meyer’s criticism here.

So I decided to take Drum at face value, and use the President (via OMB) & Congress’ (via CBO) projections of spending and revenue over the next 10 years, keeping Drum’s 1981 start date, to see how those trend lines line up. After all, if we’re going to criticize Obama’s spending and taxation, we should probably criticize the spending and taxation that this President and this Congress are authorizing, not the past.

Here are the trends:

As you can see, 1981-2010 revenue & spending is identical, but the projections diverge somewhat.

  • The CBO projections MUST assume that all current law executes without change. As I pointed out previously, this assumes that ALL of the Bush tax cuts expire, ALL of the temporary stimulus spending expires, and actually assumes that discretionary spending tracks inflation, which is lower than historically occurs. Thus, they’re not only assuming that the tax cuts “for the rich” expire, they’re assuming ALL the Bush tax cuts expire, as is currently slated by law to occur.
  • The OMB budget assumes both lower spending and lower revenues than the CBO, but I haven’t looked in detail to see how they’re getting there. I generally trust the OMB less than the CBO, but I wanted to provide both sets of numbers as the OMB is essentially the number based upon Obama’s policy.
  • In both cases, defense spending as a percentage of GDP drops significantly over the course of the decade, as wars in Iraq and Afghanistan wind down. Thus, the spending impact of defense is not driving this spending jump. However, nondiscretionary spending in the Medicare/Medicaid & Social Security ARE big drivers of that spending jump.

That said, you can see in both cases that the trendline for revenues is up, and the trendline for spending is up, BOTH based upon the start date of 1981, which — deliberately or not — skews the numbers to higher start points for both revenue and spending. And you can see in both cases that the slope of the spending line rises faster than the slope of the revenue line. This is true even in the CBO projection, which fully ends the Bush tax cuts in 2012.

What does it mean if you completely end the Bush tax cuts and quickly wind down the cost of Bush’s wars, and spending STILL rises faster than revenues? Sounds like a spending problem to me…

As I said before, I don’t think Kevin Drum is being deliberately manipulative with these numbers. To believe that, I would have to give him credit for understanding these numbers. Instead, I believe he’s an innumerate hack. I’d ask myself why he continues to be paid, but judging by the grunting matches in his comment section between tribes of Republican and Democrat apes, it appears that there’s a market for his particular brand of mindless drivel.

A Brief Constitutional Lesson for Congresscritters… Particularly those from Kentucky…

United States Constitution
Article 1, Section 7


All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

The issuance of debt is a revenue raising measure. The “debt ceiling” is, in fact, legislation initiated in the House of Representatives, which authorizes the executive branch to issue debt through the treasury (and by extension the federal reserve), up to a specific limit.

This “debt ceiling” and authorization of debt issuance; allows the executive branch to raise revenue in a constitutionally legitimate way; because the revenue is raised under the auspices of specific authorization by the house or representatives.

Neither the Senate, nor the House, acting separately or together; has the authority or ability to delegate this exclusive power of the house, to any other entity, including the president. In fact, it would be a clear violation of the principle of separation of powers to do so.

That is all.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Quote Of The Day

From a friend of Billy Beck, relayed on Facebook:

“Oil hearings: Government taxes account for 15% of gas price, company profits only 5%. Follow the dots: The government has 3x the incentive to keep prices high and engage in gouging and restrict further supply as the companies do.”

Wrong. Well, 90% wrong.

The bulk of taxes on gasoline are not charged as a percentage of purchase price, they’re charged as a flat excise cost per gallon. Some states (CA amongst them) also pack a sales tax on top of this, but that’s hardly the key to Congressional hearings, as the federal tax is PURELY a per-gallon tax.

If anything, the Feds actually have an incentive to keep the cost of gas as low as possible, so that Americans will use more of it, and thus pay more excise taxes on that gasoline. In addition, low gas prices help their chances of re-election.

I’ve got my reasons to call the feds hypocritical (they claim to be trying to help the “Average Joe”, but you don’t see them offering temporary reductions in gas taxes) on this issue, but they have no economic incentive to keep prices high. The political incentive is a balancing game between pissing off voters and pissing off environmentalists and NIMBYs, but it’s certainly not a tax revenue game they’re playing.

Unjustified self-righteousness

Apparently, a member of the Denver teachers union thinks she knows what work is:

That’s your problem. You’re an entrepreneur, so you don’t work. You don’t know what work is until you get into an educational area.

Warren over at Coyote Blog replies:

Yep, some day I will have to stop loafing around and take on a brutal assistant principal job somewhere. All I have to worry about is that every dollar I own (and more) is invested in my business and could disappear at any time if I make a mistake

Now, as an IT professional, my viewpoint on hard work is a little more extreme than most. Fifty hours, the point at which every teacher at that protest would be complaining bitterly, is a moderate week for me. My worst work week topped out at just under 100 hours. To put that number in perspective, remember that a week is only 168 hours long. My worst continuous stretch was 42 hours straight of emergency work. Why work so hard? Because I’ve got customers who are impacted if things aren’t working. Because development delays can cost companies thousands of dollars a day.

Compare that to the life of a teacher, and that’s pretty damned rough. Compare that to truly high-stress, high-demand professions, and it’s not that bad. I wouldn’t trade places with a power company lineman who has to labor under potentially-lethal conditions and extreme pressure to get people’s power back on in an emergency. Nor would I trade places with an ER doctor or nurse who works long hours tending to sick and shattered people. Nor would I trade places with a harbor pilot or air traffic controller, who run the risk of causing massive damage with a moment of inattention.

Millions of people in this country do jobs that make teaching look like a cakewalk. Now, in a perfect world, that quote from a teacher wouldn’t cause someone like me the least bit of offense. But it’s an imperfect world where this teacher is using completely unjustified self-righteousness as a weapon to stifle debate on the issue of public sector compensation. I find that offensive.

The Trillion-Dollar Zero-Cost Stimulus Program

Want to inject liquidity into the market, support American jobs, and do so without raiding the US Treasury or overheating the printing press? The answer is simple: get out of the way.

Now, some may say that’s a libertarian’s answer for everything. And they’d usually be right. But I’m not signing you up for a precipitous decline in federal revenue. I’m not resorting in protectionist and mercantilist policies destined to impoverish American consumers in favor of American exporters. All I’m asking — or relaying the request of Cisco CEO John Chambers and Oracle President Safra Catz, more accurately — is that the US Government make it easier to bring foreign profits back to our shores:

One trillion dollars is roughly the amount of earnings that American companies have in their foreign operations—and that they could repatriate to the United States. That money, in turn, could be invested in U.S. jobs, capital assets, research and development, and more.

But for U.S companies such repatriation of earnings carries a significant penalty: a federal tax of up to 35%. This means that U.S. companies can, without significant consequence, use their foreign earnings to invest in any country in the world—except here.

The U.S. government’s treatment of repatriated foreign earnings stands in marked contrast to the tax practices of almost every major developed economy, including Germany, Japan, the United Kingdom, France, Spain, Italy, Russia, Australia and Canada, to name a few. Companies headquartered in any of these countries can repatriate foreign earnings to their home countries at a tax rate of 0%-2%. That’s because those countries realize that choking off foreign capital from their economies is decidedly against their national interests.

By permitting companies to repatriate foreign earnings at a low tax rate—say, 5%—Congress and the president could create a privately funded stimulus of up to a trillion dollars. They could also raise up to $50 billion in federal tax revenue. That’s money the economy would not otherwise receive.

The tax picture described is very simple, and it makes American companies make some difficult decisions. A company with overseas profits and a need to reinvest can choose to invest them abroad or here in the US. Those overseas profits can be invested overseas with little or no tax penalty, or they can be invested here with significant tax penalty. The decision becomes simple. It is only smart to invest foreign profits in the US if it is investment that simply cannot be effectively done overseas, because the cost of repatriation is enormous. It’s a trade war, but it’s aiming the artillery inward, not outward.

Anyone who has read my work knows that I am not a fan of government subsidies. I personally think that American corporations and American workers can compete quite handsomely on the world market. We don’t need our government to actively help industry here; we have an educated workforce, developed infrastructure, stable institutions and a strong rule of law. We have everything we need to make it profitable for companies to invest here. We could have a country where overseas profits are re-invested in American workers and the US economy. What we have instead are government policies actively hostile to that end. All I ask is that those policies be rescinded.

America is seen worldwide as pro-business. In many cases, that is true, but certainly not in our corporate income tax system, as described by the Cato Institute here. Rather than being a low-tax laissez-faire bastion of capitalism, we have the highest corporate income tax rate in the developed world:

Reducing the taxes on repatriated profits can be done in a revenue-neutral way. All that is necessary is to choose a tax rate that will balance the tax revenue earned on repatriated earnings at the current rate with the expected revenue earned on the much larger base of repatriated earnings at a lower rate. Some foreign cash is undoubtedly repatriated; as I said there is incentive not to do so, but that incentive in not insurmountable. However, at a lower tax rate it makes sense for more companies to repatriate much larger sums, and I think a baseline rate of 5% as suggested by Chambers and Catz is a good starting point for discussion if remaining revenue-neutral is a goal.

There is up to a trillion dollars out there that could be injected into the US economy without raising the deficit, without spinning up the printing press, and which would go immediately to the entities who have the best ability to invest it in stimulative ways — companies who are already profitable. While many in Congress may not like the idea, as they have little control over how the money is spent, I think that’s a feature — not a bug.

While I’m not a protectionist, I think we should stop government policy designed to hurt American employment and help employment overseas. Of all the policies in which our government engages, one that actively stops capital from flowing into America from overseas seems rather idiotic.
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Not Extending The Tax Cuts *IS* A Tax Hike

Policy proposals are often advanced in very abstract terms. This is true, undoubtedly, of taxes. Tax rates are seen as numbers on a Washington policy chart rather than what they really are — the amount taken out of every individual person’s paycheck every day of every year.

I hear the refrain on the left that letting the Bush tax cuts expire isn’t a tax hike. It’s just “going back to the rates of the Clinton era.” In one sense, what they say is true. The Bush tax cuts were temporary reductions that had a deliberate sunset (not by the desire of Republicans in 2001/2003, but by political design and political rule). Yes, you can make the argument that because this was a temporary cut, letting it expire isn’t a tax hike.

But this fails to recognize that for longer than six years, Americans have been adjusting to the current tax rates. This is now the “normal” rate. Most have carried these rates through multiple jobs. Many have carried them through home purchases / refinancing, through multiple cars purchased or leased, have brought kids into the world and put others through college. They’ve lived their lives for over six years based upon a certain expectation of income every paycheck.

And if the cuts aren’t expected, that expectation will not be met in January.

You can make every argument you want about this being purely a return to Clinton-era tax rates. That argument will ring hollow on payday. That argument fails to recognize that to every American, this is going to feel like a tax hike. Whatever it’s called in the Capitol, our wallets will be lighter than we’ve become accustomed to, and on Main Street that’s called a tax hike.

Playing the World’s Smallest Violin for Rep. Charlie Rangel

Via CBSNEWS.com:

A House ethics committee subpanel today found Democratic Rep. Charlie Rangel guilty of 11 of the 13 charges of ethics violations against him.

The panel, composed of four Democrats and four Republicans, emerged after private deliberation to announce their findings.

[…]

The subpanel will now submit its findings to the full ethics committee, which will schedule a public hearing to determine the appropriate sanctions to take against the longtime New York representative. Whatever action they decide on during the sanctions hearing will then go to the full House of Representatives. The committee could go so far as to recommend expelling Rangel, but that would be unlikely. Other possible sanctions include a House vote deploring Rangel’s conduct, a fine or a denial of privileges.

[…]

The hearing to consider the charges against Rangel began yesterday, but Rangel walked out of the proceedings in protest because he has been unable to acquire legal representation. Rangel’s legal team dropped the case this fall, reportedly after disagreements with Rangel over their defense strategy, and the lawmaker insists he neither has the money to find new counsel nor the time to set up a legal defense fund. By walking out of the hearing, Rangel chose to leave the evidence in the case against him unchallenged.

“I truly believe I am not being treated fairly,” Rangel said yesterday.

Poor Charlie. Here’s a tax and spend Leftist who lectures “the rich” to pay “their fair share” but when he gets busted for failing to properly file – well, he was just being “sloppy.”

I’m sure there’s a good number of people who were “sloppy” with their tax returns who couldn’t afford to pay for a good lawyer either. I’m also quite certain that most of these people have to worry about much worse consequences than to be censured by their colleagues (censure = “Shame on you, you’ve been a very naughty boy!”).

But as we all know, the rules are just different for the Washington elite because some people are more equal than others.

Pot Freedom: It Works!

A great story that’s a testament to the endurance of freedom, from Portugal:

In 2001, Portugal legalized all criminal penalties for personal possession of drugs—including cocaine, heroin, and meth—and replaced drug sentences with offers of therapy. If that sounds a bit bleeding heart, well, it worked: In the five years following decriminalization, drug use among teenagers has dropped, as have HIV infections caused by dirty needles. More Americans have used cocaine than Portuguese have used marijuana. Portugal has the lowest rate of lifetime marijuana use in people over age 15, at 10 percent; 39.8 percent of Americans over the age of 12 have used marijuana.

As George Orwell put so aptly in The Road to Wigan Pier, “In the end I worked out an anarchist theory that all government is evil, that the punishment always does more harm than the crime and that people can be trusted to behave decently if only you will let them alone.” It’s no business of the state or even in the capacity of the state to brood over what people put in their body.

People have sought mind altering substances for thousands of years. Prohibiting what people will attain anyway only makes it more likely that they will encounter the harms caused by their drug of choice being a crime.

Be Thankful I Don’t Take It All…

Here’s the outrage of the day, coming straight out of the UK:

The UK’s tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer.

The proposal by Her Majesty’s Revenue and Customs (HMRC) stresses the need for employers to provide real-time information to the government so that it can monitor all payments and make a better assessment of whether the correct tax is being paid.

Currently employers withhold tax and pay the government, providing information at the end of the year, a system know as Pay as You Earn (PAYE). There is no option for those employees to refuse withholding and individually file a tax return at the end of the year.

If the real-time information plan works, it further proposes that employers hand over employee salaries to the government first.

Now, I’ve read the full proposal (1st link inside the blockquote), and I should, in the interest of fairness, clarify one discrepancy between what is stated above and the intended proposal: The HMRC would not be gathering salaries first and then disbursing what is “left over” after tax to the employee’s bank account. Rather, the HMRC would be involved as a third party — i.e. when the employer directs a salary payment, the HMRC advises the employer’s bank what the tax percentage for withholding is before the bank itself makes the payment. Some would say that it’s a distinction without a difference, but I would mention that the government is not, be default, a true middleman that intercepts the payment itself on its way to the employee.

That said, we’ve all seen what happens between legislation’s introduction and its passage, and I definitely am concerned that a) this little distinction could be removed quickly, or b) that this simply notches the gov’t one step further to being the actual middleman.

The article above goes on to express concern at the likelihood of mistakes in the system, but the real issue is greater government ability to step in and damage your ability to live if they see fit. Assuming that they don’t get direct control over the bank account itself, the government is likely to get compliance from a bank if, for example, they decide that someone’s “deduction” should be 100%. Right now the system is decentralized, so the employer has to calculate deductions based upon published rules and pay their employee accordingly. It doesn’t allow for the government to directly, invisibly, and immediately intrude on the arrangement. That would change, and certainly not for the better.

Even without the nightmare scenario, it allows for much less visible and more immediate changes to the tax code. Enabling centralized deductions ensures that if the legislature approves a tax rate or policy change, they don’t need to inform employers and set up a long lag time — citizens just start seeing a slight change to their take-home pay. This will make it easier to raise taxes.

Finally, I’ve often said that the nanny-state and regulatory-state policies of Britain are a leading indicator for the US (although oddly, reading deeper I think we may have beat them to withholding by a year — lucky us!). If this is being pushed there, it is no stretch to think that it’ll be very long before our own politicians want to follow their example.

Of course, it’s only appropriate to close with the song “Taxman”. While I’m partial to the Stevie Ray Vaughan version myself, with this being a story from the UK it’s gotta be the original: The Beatles.

Hat Tip: Billy Beck

Tides of Change in Latin America

After Cuban leader Fidel Castro excoriated Iranian President Mahmoud Ahmadinejad for his anti-Semitism, Venezuelan president Hugo Chavez appeared to get the message:

During a visit to the International Tourism Fair in Caracas yesterday, Venezuelan President Hugo Chavez announced he would meet with leaders of Venezuela’s Jewish community. “We respect and love the Jewish people,” said Chavez, who added that opponents have falsely painted him as “anti-Jewish.”

Chavez has been a close ally of Iran and a strong critic of Israel. He severed ties with Israel in January 2009 to protest its actions in the Gaza Strip. A series of recent incidents have ignited concerns about anti-Semitic violence in Venezuela.

The Chavez remarks came one day after Jeff wrote on this blog about his recent reporting trip to Havana and his conversations with Fidel Castro. Castro excoriated anti-Semitism and criticized Iranian President Mahmoud Ahmadinejad for denying the Holocaust. The former Cuban president called upon Ahmadinejad to “stop slandering the Jews.” (Castro also expressed misgivings about his handling of the Cuban Missile Crisis, but that’s another story.)

Meanwhile, with 28,000 dead as a result of the country’s drug wars, Mexican President Felipe Calderon said that he is willing to reconsider Mexican drug laws:

The government of Mexico, tired of drug war violence, is considering the legalization of marijuana and possibly other drugs.

With Mexicans everywhere, exhausted by the deadly drug wars, asking for answers, the debate has grown more urgent.

Discussion about legalization has already been put on the public agenda by President Felipe Calderon, who has held a series of open forums with politicians and civic leaders.

The president is also known to be watching the neighbouring US state of California, to see if the state approves an initiative on November 2nd to legalize marijuana for recreational use.

Calderon has said that Mexico will not be able to act alone in legalizing drugs, saying if the cost of drugs is not levelled, at least in the United States, the black-market price will still be determined by US consumers.

Change is not one-sided. Hopefully the American populace and lawmakers are as willing to reconsider their drug laws as well, so that we can enter a new period in which marijuana is legal, controlled and commoditized. Californians have the chance to make change happen this November by passing Proposition 19.

The New Prison Ray of Death

Some things you just cannot make up:

A device designed to control unruly inmates by blasting them with a beam of intense energy that causes a burning sensation is drawing heat from civil rights groups who fear it could cause serious injury and is “tantamount to torture.”

The mechanism, known as an “Assault Intervention Device,” is a stripped-down version of a military gadget that sends highly focused beams of energy at people and makes them feel as though they are burning. The Los Angeles County sheriff’s department plans to install the device by Labor Day, making it the first time in the world the technology has been deployed in such a capacity.

Maybe this is the sort of thing that Ray Bradbury had in mind when he assessed that government was too big. I’d certainly rather have tax dollars going toward exploring space than coming up with new way to control inmates likely in jail for violating drug laws.

Quote Of The Day

Karl Smith on taxes vs. regulation:

On the other hand barrels of ink and the fates of political parties are determined over debates about the taxation of labor. Its a generally accepted principle of Public Economics that taxes are less damaging than regulation and in either case the broader and more uniform the restriction the less damage it does.

As such its not immediately obvious that whether we tax labor at a high marginal rate of 35% or 39.6% has larger supply side effect than whether a young entrepreneur faces a gauntlet of unnecessary classes and fees. In fact I am being too coy. I would be shocked if the taxes mattered more.

The rest is worth reading as well (discussion of health care freedom).

But the point is too often neglected. The combination of nanny-statism and corporatism leads to a government dominated by meddlesome bureaucrats, too often captured by the industries they regulate. Their actions are as harmful as those of the taxman, but far less visible.

Hat Tip: Ryan Avent @ Economist Free Exchange blog

We’re On The Left Side Of The Laffer Curve…

…but on the right side of the supply-side argument growth curve.

I’ve posted about this several times, but I think the Laffer Curve is presented in such a way that it becomes highly misunderstood. Today that was made perfectly clear by Ezra Klein, who asked economists, political leftists and political rightists what tax rates would maximize revenue on the Laffer Curve.

The “neutral” economists all pointed to tax raters higher than we have today. Unsurprisingly, the political leftists agreed. Surprisingly, though, a number of the political rightists suggested a tax rate higher than we have today, but brought up an argument completely unrelated to the Laffer Curve in their response.

Here is one response that nails my criticism of “Laffer Curve Analysis” to a T:

Stephen Moore, senior economic writer and editorial board member, Wall Street Journal:

“The revenue maximizing rate is probably around 40 or 50 percent. But the growth maximizing rate, even given the current deficits, is probaby about 20 percent. So the goal is to get the rate down to 20 to 25 percent. For cap gains the revenue maximizing rate is between 15 and 20 percent.”

Interesting. The problem is the second sentence, describing maximizing the growth rate, has nothing to do with the Laffer Curve. The Laffer Curve ONLY describes the revenue-raising rate. It has nothing to do with long-term economic growth. In fact, any presentation of the Laffer Curve plots as related to economic growth are entirely the wrong shape, as economic growth doesn’t fall to zero at 0% taxation!

I think the below is a lot more representative:

laffer

Now, we can quibble over specifics (i.e. growth probably falls below 0% at high tax levels). But I think the shape is more representative of what you would expect from economic growth plotted vs. tax rates.

Economic growth and short-term revenue maximization are a trade-off, and that trade-off is NEVER represented in the Laffer Curve. Many suggest that revenue maximization is a lot closer to European tax levels than our own, but I’d state that the anemic economic growth seen in Europe suggests that they’re sacrificing economic growth for today’s tax receipts. America doesn’t really follow this, which is why our economic growth (and over time, now, our per capita GDP) are much higher than Europe.

But I think it’s clear that we’re below the maximizing revenue rate, but that we have a VERY GOOD REASON for remaining below that rate — we want to make a better world for our children and grandchildren through the possibilities that high GDP growth will open up to them.

Quote Of The Day

On taxes in Boston:

The business of the Town is still decaying, the taxes are not at all lessened, but continue very high — A great many of our industrious inhabitants are gone into the country, the burden now falls on a small number; and they less able to bear it than ever — This number is still decreasing; the rich complain of their rates, and some have moved and others are about moving into the country towns, where they are greatly eased. For my own part, I have a love for my native Town, but as my taxes are so large, I am resolved to move my family into the country.

That, of course, was June 1755, on a front-page letter to the Boston Gazette.

Today’s equivalent would be moving production of goods to low-cost business climates (Nevada, Tennessee, or offshore) rather than just a few towns away, but the economic laws are no different today than they were 255 years ago.

Quote from Samuel Adams: A Life by Ira Stoll [p.27].

Quote Of The Day

Ezra Klein:

For those of you who don’t click on the link, the conclusions, based off a raft of numbers that the Committee for a Responsible Federal Budget worked up for me, are that you’ll never get deficits under control if you don’t get growth back on track; you’ll never get deficits under control if you refuse to consider tax increases;

And yet he just doesn’t seem to see that if you raise taxes, you’ll kill growth.

Who Defends 40% Taxation?

Saw this (original comic by Wuerker of Politico) at The Big Picture:

My question… In what world is it fair that any entity stakes a forcible claim to 40% of your income? It doesn’t matter that the number was higher in the past, the number is simply too high.

Again, that number is 40%!

You go to work, you work your ass off for a 10 hour day (as most people in this income group do), and at the end of the day 4 of the 10 hours you worked were for the government? For every $100 you earn, the feds take $40 (not counting social security, medicare, state income and/or sales taxes, fees, etc).

40%?!?!?! The recommended portions of your income to put towards HOUSING EXPENSES is 28%. You’re expected to spend far more of your income on your government than on your own house? Absurd!

We can debate the use of the word “socialism” all we want. But I think if every payday someone had to cut a check for 40% of their income just to feed the gaping mouths in Washington, the very idea of 40% tax rates would start a revolution. But instead, we have people explaining it away and waving us off because the rates used to be higher.

Pennsylvania Department of Revenue Ad: “Find Us Before We Find You”

The Pennsylvania Department of Revenue is currently running an ad – a friendly reminder to encourage PA residents who owe back taxes to pay up because the PDR knows where you live.

Creepy huh?

But don’t be alarmed PA residents who owe back taxes, go to the website (PAtaxPayup.com) and you will find that the PDR is actually doing you a favor: tax “amnesty” for those who pay by June 18, 2010. (The site even features a countdown clock that lets you know how much time you have left. How thoughtful!)

Here are the terms of the amnesty:

Pennsylvania authorized (under Act 48, signed into law on Oct. 9, 2009) a Tax Amnesty period from April 26 to June 18, 2010.

During this limited, 54-day timeframe, the Pennsylvania Department of Revenue will waive 100 percent of penalties and half of the interest for anyone who pays his/her delinquent state taxes.

Individuals, businesses and other entities with Pennsylvania tax delinquencies as of June 30, 2009, are generally eligible to participate in the Tax Amnesty Program.

What a bargain! If you “voluntarily” pay your taxes by June 18th, not only do you get to avoid the whole armed government agents forcibly removing you from your home and taking you to jail thing but they will also take a little less of your money.

In some ways, this is one of the most honest PSAs ever produced by a government agency but still fails to directly address the question of what happens if PA residents allow the PDR to “find them” first. What the ad implies but does not directly say is “If we do find you first, we will make your life very miserable because, we, the government have the legal ability to use deadly force to get our way and you do not.”

Let’s put aside the whole debate about whether or not taxation is legitimate or if it is theft and consider the bigger message. Perhaps George Washington, the father of our country himself said it best:

“Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action.”

Government = Force. Keep this in mind next time you want to ask the government to “do something” on your behalf.

Hat Tip: Reason Hit and Run (also take a look at the June 2004 Reason cover that is eerily similar to the above ad)

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