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Archive for March 6th, 2010

After looking at the “humor” section of the archives and finding this post, a reader emailed to reminisce about a very funny Dave Barry column from the 1990s that made fun of bureaucratic stupidity. After a bit of digging, I found a link. Here’s my favorite part of the column, but I encourge you to read the whole thing:

On May 11, two employees of DeBest Inc., a plumbing company, were working at a construction site in Garden City, Idaho, when they heard a backhoe operator yell for help. They ran over, and found that the wall of a trench – which was NOT dug by DeBest – had collapsed on a worker, pinning him under dirt and covering his head. “We could hear muffled screams,” said one of the DeBest employees. So the men jumped into the trench and dug the victim out, quite possibly saving his life. What do you think OSHA did about this? Do you think it gave the rescuers a medal? If so, I can see why you are a mere lowlife taxpayer, as opposed to an OSHA executive. What OSHA did – remember, I am not making this up – was FINE DEBEST INC. $7,875. Yes. OSHA said that the two men should not have gone into the trench without (1) putting on approved hard hats, and (2) taking steps to insure that other trench walls did not collapse, and water did not seep in. Of course this might have resulted in some discomfort for the suffocating victim (“Hang in there! We should have the OSHA trench-seepage-prevention guidelines here within hours!”). But that is the price you pay for occupational health and safety.

P.S. This Dave Barry column has nothing to do with politics or government, but it is very funny and quite accurate.

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Only the government could fire someone for “serious abuses” and yet allow that person to collect an extra $550,000 of taxpayer money for “unused vacation” – even though he had six times as many carryover days as the rules allow. This is a nauseating example of why California is facing a fiscal crisis:

Amid a crippling fiscal crisis, managers throughout California’s government have routinely allowed their employees to amass unused vacation time, enabling hundreds of workers to end their public service careers with payouts topping $100,000, a California Watch investigation has found. One worker combined vacation and compensatory time to walk away with more than $800,000, records show. In the past four years, nearly 500 government workers earned six-figure paychecks mostly for unused vacation. …The problem is growing, state payroll officials said. Personnel documents estimate that as of December 2008, more than 14,000 active state employees already exceeded their vacation caps. In one case, James C. Tudor Jr., the former president of the State Compensation Insurance Fund, cashed out six times more vacation time than regulations allow, taking home more than $550,000 after he was fired in 2007 in the wake of an internal probe that “uncovered serious abuses at the highest levels,” according to state Senate documents. Another state employee was allowed to accumulate large amounts of comp time in addition to unused vacation days, taking home $815,000 when he left state service.

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President Obama is proposing a series of major tax increases. His budget envisions higher tax rates on personal income, increased double taxation of dividends and capital gains, and a big increase in the death tax. And his health care plan includes significant tax hikes, including perhaps the imposition of the Medicare payroll tax on capital income – thus exacerbating the tax code’s bias against saving and investment. It is unclear why the White House is pursuing these punitive policies. The President said during the 2008 campaign that he favored soak-the-rich taxes even if they did not raise revenue, but his budget predicts the proposals will raise lots of money.

Because of the Laffer Curve, it is highly unlikely that all of this additional revenue will materialize if the President’s budget is approved. The core insight of the Laffer Curve is not that all tax increases lose money and that all tax cuts raise revenues. That only happens in rare circumstances. Instead, the Laffer Curve simply reveals that higher tax rates will lead to less taxable income (or that lower tax rates will lead to more taxable income) and that it is an empirical matter to figure out the degree to which the change in tax revenue resulting from the shift in the tax rate is offset by the change in tax revenue caused by the shift in the other direction for taxable income. This should be an uncontroversial proposition, and these three videos explain Laffer Curve theory, evidence, and revenue-estimating issues. Richard Rahn also gives a good explanation in a recent Washington Times column.

Interestingly, the DC government (which certainly is not a bastion of free-market thinking) has just acknowledged the Laffer Curve. As the excerpt below illustrates, an increase in the cigarette tax did not raise the amount of revenue that local politicians expected. The evidence is so strong that the city’s budget experts warn that a further increase will reduce revenue:

One of the gap-closing measures for the FY 2010 budget was an increase in the excise tax on cigarettes from $2.00 to $2.50 per pack. The 50 cent increase in the cigarette tax rate was projected to increase revenue but also reduce volume. Collections year-to-date point to a more severe drop in volumes than projected. Anecdotal evidence suggests that Maryland smokers who were purchasing in DC in FY 2008, because the tax rate in the District was less than the tax rate in Maryland, have shifted purchases back to Maryland now that the tax rate in the District is higher. Virginia analyzed the impact of demand when the federal rate went up by $0.61 in April and has been surprised that demand is much stronger than they had projected–raising the possibility that purchasing in DC has moved across the river.  Whatever the actual cause, because of the lower than anticipated collections, the estimate for cigarette tax revenue is revised downwards by $15.4 million in FY 2010 and $15.2 million in FY 2011. Given that cigarette tax rates in neighboring jurisdictions are now lower than that of the District, future increases in the tax rate will likely generate less revenue rather than more.

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