Category Archives: Taxation

Milton Friedman on Libertarianism and Humility

Economics, Education, Fiscal Policy, Free Trade, Freedom, History, Libertarians, Liberty, Monetary Issues, Multimedia, Strategies For Advancing Liberty, Taxation, The Welfare State, Theory and Ideas, War on Terror

On August 14, 1990, Milton Friedman gave a speech at the International Society for Individual Liberty’s 5th World Libertarian Conference on the subject of libertarianism and humility. There are many adjectives which can be ascribed to libertarians but “humble” usually isn’t one of them. Among the quotable parts of the speech, Friedman said the following:

On the one hand, I regard the basic human value that underlies my own beliefs as tolerance based on humility. I have no right to coerce someone else because I cannot be sure that I am right and he is wrong. On the other hand, some of our heros…people who have, in fact, done the most to promote libertarian ideas, who have been enormously influential, have been highly intolerant as human beings and have justified their views, with which I largely agree, in ways that I regard as promoting intolerance.

In searching for the above transcription of what I thought was very profound and wise, I found a couple of bloggers who thought this particular quotation as “an inadequate defense of liberty” or one of the “failures” of Milton Friedman.

I happen to disagree with these notions.

Maybe because I have been humbled in realizing that I had been wrong on some issues of great importance. By far the most difficult (yet ultimately liberating) post I have ever written was the post in which I declared that I was wrong about my support for the war in Iraq. I was so certain that regime change in Iraq would bring about peace in the Middle East and freedom would take hold. I thought the Ron Paul and big “L” Libertarian position on preemptive war was naïve and dangerous but now I believe the opposite to be true (for reasons I stated in the aforementioned post).

Having experiencing this, I can’t help but think that Friedman was right to say that each of us should be open to the possibility we may be wrong. If we aren’t open to this possibility, what is the point of debating an issue? Obviously, if I argue that X is correct and my opponent says Y is correct, I’m going to do my best to convince my opponent that I am right and s/he is wrong (meanwhile, my opponent is doing the same).

But what if I realize in the course of the debate that my opponent is at least partially right about Y being correct and/or that my reasoning is flawed or the facts do not support X? As a normal human being, I might not concede right away but if I am being intellectually honest, I’ll revise my thinking based on new information or new reasoning I hadn’t considered.

If Milton Friedman was willing to be open to the possibility of being wrong, how could I, someone whose mind will never in the same league as his, be so stubborn?

One thing I notice in watching Friedman debate people who are diametrically opposed to his positions was how patient he was with them. Something that many of us libertarians seem to forget is that much of what we believe to be true is counterintuitive to at least half of the people we encounter on a daily basis because many of these people have not been exposed to our philosophy. Friedman understood this. He knew that much of what he was saying was new territory for many who would hear his lectures or read his books.

Before he could make the case about any of his ideas to others, he had to be satisfied that the facts backed up his theory. These two sentences from the NPR obituary for Friedman summed up his approach beautifully:

Friedman was an empiricist, whose theories emerged from his study of the evidence, not the other way around. He also was a champion of the free market and small government.

We are supposed to believe this to be a weakness? I find this to be so refreshing!

Stephen Littau
http://fpffressminds.blogspot.com/

California Has Problems, And They’re All Kim Kardashian’s Fault

Activism, Taxation

There are plenty of folks saying today that while California might be — on its own — in the top 10 largest economies in the world, our political system far more closely resembles that of Greece. High spending and an inability to live within our means despite some of the highest taxes in the nation.

Thankfully, the fine folks at the “Restoring California Coalition” have decided to throw their weight behind the solution: the Millionaires Tax! And additional tax of 3% of income on taxable income over $1M, and of 5% on taxable income over $2M. (I’d point out that this would raise STATE tax brackets in those cases to 13.55% and 15.55%, respectively, well beyond any other state).

And of course, they’ve chosen as their poster child for the tax a representative sample of the average California high earner:

Now, I’ve got little love for Kim Kardashian. I fail to understand how someone has parlayed — as Joel McHale of The Soup is so fond of saying — a big ass and a sex tape into a fashion/fame empire. In fact, it’s not even a big ass and a sex tape that were the key; a lot of women probably have those. It’s more that she’s the offspring of a famous lawyer… A lawyer who was only famous because a major athlete/actor allegedly brutally murdered his wife and her boyfriend.

Any world where Kim Kardashian can be said to “deserve” her fame is a bit sketchy to me. In fact, my thoughts on her are oddly similar to those of Wil Wheaton:

That said, though, I don’t hate Kim Kardashian. I don’t know Kim Kardashian. While her onscreen persona is a bit vapid and useless, she’s obviously smart enough to have parlayed her fame into more fame and more money. She at least figured out the cardinal rule of fame: strike hard while the iron is hot. I don’t believe that we, as a society, should punish her because bored housewives find some escapist fantasy following the Kardashian family’s latest doings. And further, I don’t believe that we should, as a society, use her as the public scapegoat as a representative sample of “the rich” when she’s nothing of the sort.

The real “rich” that will be hurt by this tax are businessmen, and as much as the left scoffs at the idea of “job creators”, anyone in this state who has worked for a startup sees the reality: most of those businesses wouldn’t exist without the blood and sweat of the guys at the top — who often forego income, sleep, time with family and stability for years to build a company that eventually rewards them quite handsomely.

But even worse in this analysis is the fact that California has tried a Millionaires Tax rather recently, and the results weren’t exactly as planned:

In 2004, voters narrowly approved Proposition 63, the Mental Heath Services Act (MHSA), which imposed an additional 1% tax on personal income above $1 million. The funds generated from this “millionaire’s tax” were intended to expand county mental health programs. Taxpayer and business groups opposed the measure for a couple of obvious reasons. First, California is already a high tax, high spending state that didn’t need any more revenue. Second, as we predicted, Prop 63 would exacerbate California’s income tax volatility.

Although the final vote for Proposition 63 was tallied more than four years ago, evidence suggests that California’s most wealthy have continued to vote on this measure — with their feet. A recent survey from TNS Research, an international business research firm, found the California counties of Los Angeles, Orange and San Diego had the 1st, 4th and 6th highest number of millionaires in the country. However, even as the national population of millionaire households grew by 5.9% in 2007, Los Angeles County lost about 7000 of these households. Orange and San Diego Counties lost millionaire households as well.

So the net result was that the millionaires left. Further, this tax intended to improve county mental health programs largely had trouble spending the money. The above article (a tad outdated from 2008, to be sure) pointed out that the calls at the time were to pull the unspent $2B+ and allow it to be reallocated to general revenues.

This is bad policy, and it will only work to damage the California economy at a time when we’re already reeling from the housing bust. Following that by making Kim Kardashian the poster child for your movement is cheap and opportunistic, which might not be so objectionable if she represented the “average” California millionaire — but she doesn’t. Of course, I can’t claim it’s a bad tactic — given the moron voters in this state, it might actually work.

California has problems. Those problems require hard solutions, but instead we have people here who think we can simply paper over it by soaking the rich. After all, they just need to pay their “fair share”*.
» Read more

Brad Warbiany
https://thelibertypapers.org/

Reducing OWS Economic Equality Demands to Their Absurd Conclusions

Culture, Economics, Look About, Occupy Wall Street, Political Correctness, Socialism, Taxation, The Welfare State, Theory and Ideas

While I’m sympathetic and agree with some of Occupy Wall Street’s grievances, too many of their solutions are fatally flawed. Louis DeBroux over at United Liberty has written some grade A quality snark concerning OWS’s demands for economic equality. DeBroux says he had an epiphany while watching some of the ESPN coverage concerning the NBA lockout: what if the NBA adopted the OWS model?

The most obvious reform he mentioned would be to pay all the players equally regardless of talent and contribution to his team. But why stop with pay? Why not change the rules of the game itself in the name of fairness:

This new equality should not be limited to just to salaries though; it should extend to the basketball court. While winning is fun, losing just stinks. It makes the losers feel like, well, losers. Sometimes players even cry when they lose. It hurts their self esteem and makes them feel inferior to the winners. To solve this horrible injustice, I propose that at halftime of each game, the total points scored by that time be redistributed equally among the players of both teams. Then, with one second left on the clock, just before the game ends, the head referee will call time out and the official scorekeeper will once again redistribute the points evenly among the players of both teams.

Think how great this would be! Everyone that plays will be the high scorer. Never again will an NBA player experience the sadness of losing! Every team will be the L.A. Lakers or Boston Celtics, and no team will have to feel like the Washington Wizards or Toronto Raptors. Every team will go 82-0, and every player will be an MVP! It’s perfect! Just like PC-kiddie-soccer leagues, everyone is a winner and everyone gets a trophy. Isn’t this awesome?

Obviously, this would be the death of sports if such changes were implemented. As awful as that would be, DeBroux points out life and death consequences if the notion of competition was taken out of our culture completely:

There might be the occasional sacrifice that hits closer to home when little Sally, who always wanted to be a surgeon but could never quite remember the names and anatomical characteristics of the various human organs, accidentally mistakes the aorta for the appendix and snips that sucker right out of there. Oops! That’s gonna make a mess! Alas, poor mom, we loved you and will miss you, but the loss of your life was the acceptable price for keeping Sally’s self-esteem intact by letting her become the surgeon she always wanted to be, even if she never quite mastered the minutiae of performing surgery.

We would be all worse off to be sure, but hey, at least we would all be equal!

Stephen Littau
http://fpffressminds.blogspot.com/

The Challenge of Creating an Economically Sound, Simpler, and More Just Tax Code (Part 3 of 3)

Credit Crisis, Currency and Monetary Policy, Democrats, Economics, Election '12, Federal Reserve, Fiscal Policy, Foreign Affairs, Independents, Libertarians, Military, Politics, Republicans, Security, Strategies For Advancing Liberty, Taxation, The Welfare State, Theory and Ideas, War on Terror

Part 1
Part 2

The challenge of creating an economically sound, simpler, and more just tax code, be it the existing code, 9-9-9, a flat tax, or a sales tax will remain an impossibility if tax revenues is the only focus of any reform. The problem that dwarfs any notion of how tax policy is implemented is how the money is spent by the government.

As I write this, the national debt is approaching $15 trillion. That’s $47,810 per citizen or $132,927 per tax payer.

Even more staggering, the sum total unfunded liabilities for Social Security and Medicare is just over $116 trillion. The prescription drug part of Medicare is over $20 trillion by itself!

Other than the Federal Reserve creating money out of thin air, what tax policy can possibly begin to support this kind of spending? It seems stupid to even pose the question.

Yet the only answer the Obama administration seems to have to pay down the debt or turn the economy around is to raise taxes on the wealthy and continue the reckless spending. The Republicans for their part offer modest tax cuts and modest spending cuts that will have no noticeable impact on the debt.

It’s high time that we as citizens tell our public servants that the out of control spending has to stop. We must demand serious structural reforms to entitlement programs or phase them out over time.

We must also recognize the difference between military spending and true national defense spending. We can no longer afford to police the world. It’s time to tell Iraq, Afghanistan, South Korea, Japan, and others that they are now responsible for their own national defense and domestic security.

That’s just a start; there’s a great deal more spending that should be cut. But before any significant cuts can be made, we need to decide just how much government we want in our lives and what we are each willing to pay. For those who believe that individuals who make under a certain income level should be spared from paying any taxes at all (i.e. too small to tax) maybe it is you who should be out front in demanding a whole lot less government.

Stephen Littau
http://fpffressminds.blogspot.com/

The Challenge of Creating an Economically Sound, Simpler, and More Just Tax Code (Part 2 of 3)

Credit Crisis, Currency and Monetary Policy, Democrats, Economics, Election '12, Federal Reserve, Fiscal Policy, Independents, Libertarians, Occupy Wall Street, Politics, Republicans, Strategies For Advancing Liberty, Taxation, The Welfare State, Theory and Ideas

Part 1

Is an economically sound, simpler, and more just tax code even possible?

The truth of the matter is that there are too many people on the Left and the Right who do not want a simpler tax code that treats everyone equally.
It’s probably not because the defenders of the existing system necessarily think the existing code is good economic policy nor does a better job funding the federal government. The most likely reasons why there is so much resistance have to do with political pandering, vote buying/special interests, and social engineering.

It’s not too difficult to figure out why the Left panders to the working poor because the poor always outnumber the wealthy regardless of how well the economy is doing overall. What would happen if there was such a tax code where everyone paid the same rate without any tax credits or loopholes and without any hidden or embedded taxes? I’m guessing it would be more difficult to raise taxes on the evil rich if it meant that everyone received the same percentage tax hike. When it comes to the tax code, equality is the very last thing the Left wants.

If there is anything I agree with the Occupy Wall Street crowd or the Left more generally it’s the special treatment politically connected individuals and businesses receive via the tax code and/or subsidies. So you say you want to get money out of politics or do something about the role of corporate lobbyists in Washington?

I do too.

The simple answer IMO is to eliminate all taxes on business and all subsidies that benefit business. If there are no taxes or subsidies, there is no reason for businesses to lobby for special tax treatment or subsidies; the main reason most industries send lobbyists to Washington in the first place. If we would like to go any further in limiting influence of special business interests, maybe just maybe we should get the government out of regulating just about every aspect of business* and restrict the government to its limited constitutional powers. What a novel concept!

Finally there’s the social engineering aspect of the tax code. Frankly, I’m not sure if those on the Left or the Right are worse when it comes to using the tax code as a tool to encourage the American people to engage in particular activities. Even with Perry’s flat tax plans, there are a handful of deductions that are sacred cows. The home interest, charitable giving, and state and local taxes are preserved for those who earn up to $500K. Those who earn under $50K can choose not to file under the 20% rate with a $12,500 per family member deduction (which would eliminate all if not most tax liability under the existing rate for those in this tax bracket). With these deductions as part of the plan, the Perry plan can hardly be called a flat tax.

While I’m critical of keeping these deductions in place (he probably could get by with a smaller rate without the deductions), it’s not difficult to figure out why Gov. Perry keeps them in place. Voters would raise all sorts of hell at the thought these deductions would go away. Maybe there’s a good argument to make that charitable giving should be deducted since these funds help people who might otherwise be on government assistance.

But the home interest deduction? Why is that held sacred? Is there some sort of right for homeowners to get a break because they choose to buy a home rather than rent? I suspect that the realtor and home building lobbies and those in government who truly believe that every person should buy a home perpetuate this notion to a point to where now home owners think they are entitled to this special treatment.

Perhaps the most sacred cow of all of the deductions is the child tax credit. This deduction is a feature of every tax reform I mentioned in part 1 (even the Fair Tax prebate is based on family size). In the last presidential debate, Rick Santorum said in so many words that the federal government should promote families via the tax code.

Is this really the sort of thing the government should be concerned with? Should the amount of taxes an individual pays have anything to do with marital status or number of dependents s/he is supporting? Is it fair to make a single person pay more taxes because s/he doesn’t have dependents?

I don’t think there is an answer that will satisfy everyone.

Part 3
» Read more

Stephen Littau
http://fpffressminds.blogspot.com/
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