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Archive for April, 2013

I’ve made the point before that the United States foolishly imposes the highest corporate tax rate of all developed nations.

But that obviously means it is theoretically possible for there to be a nation in the developing world that has a higher corporate tax rates.

Well, according to this map produced by the Financial Times, there is one nation with a worse corporate tax regime.

Corporate Tax FT Map

It’s not China, which is nominally still a communist nation (though apparently with more of a pro-business mentality than the United States).

It’s not Venezuela or Argentina, corrupt and thuggish Latin American nations. And it’s not Zimbabwe, a statist kleptocracy in Africa.

The one nation in the world which is worse than the United States is the United Arab Emirates, with a corporate rate of 55 percent.

There’s no data on revenues collected by this onerous levy, but I’m going to make a sight-unseen prediction – based on Laffer Curve insights – that the UAE’s corporate income tax raises almost no money from the non-petroleum sector of the economy.

P.S. If the OECD succeeds in undermining corporate tax competition with its “BEPS” initiative, I expect we’ll see many nations raising corporate tax rates.

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I’ve shared two personal fantasies on this site, but I must be a policy wonk because they involved a vision of a  politician telling a voter to grow up and an imagined interaction between the Governor of Texas and the United Nations.

Not exactly steamy stuff, I realize.

And even when I posted a video about libertarian porn, it involved zero nudity.

So I think I’m being very bold in sharing this libertarian fantasy.

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This morning my friend lucked out and was able to buy several cases of ammo.

"Libertarians are hot"

“Libertarians are hot”

On the way home he stopped at the gas station where a drop-dead gorgeous blonde was filling up her car at the next pump.

She looked at the ammo in the back of my pickup truck and said in a very sexy voice, “I’m a big believer in barter. Would you be interested in trading sex for ammo?”

He thought a few seconds and asked, “What kinda ammo ya got?”

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Too bad this has never happened to me.

Unfortunately, libertarians usually are the target of jokes, though I admit some of them are very amusing.

For instance, a video portraying Somalia as a libertarian paradise.

Then we have two cartoons, one on libertarian ice fishing and the other showing libertarian lifeguards.

And this image showing 24 types of libertarians.

Last but not least, this montage of how the world views libertarians.

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You don’t enjoy many victories when you fight for liberty, so I’m not averse to spiking the football on those rare occasions when we win.

That’s why I shared this very funny cartoon last week to celebrate Obama’s belly flop on gun control.

Now we have another cartoon, this one by Henry Payne, mocking the Administration’s shameful effort to force a tax increase by deliberately making air travel less convenient.

Sequester Tax FAA

No wonder the President is behaving in such a petulant fashion. The sequester is an embarrassing defeat for Obama and other proponents of bigger government.

He thought he could bully Republicans into a class-warfare tax hike. Now he’s resorting to pathetic gimmicks.

And he lost on that issue now that Congress has made explicit that the FAA has authority to reallocate funds.

Let’s not just spike the football. Let’s do a dance in the end zone.

 

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Here’s a new edition of my “you be the judge” series.

These are posts designed to explore some of the more challenging aspects of a pro-libertarian philosophy.

Today’s example comes from Colorado, which had displayed a libertarian streak on issues ranging from school choice to drug legalization.

But the latter issue is the source of today’s quandary. Should marijuana be legal if it means more tax revenue that will be used by the political elite to expand the burden of government spending?

Here are the details from the Denver CBS station.

A draft bill floating around the Capitol late this week suggests that a new ballot question on pot taxes should repeal recreational pot in the state constitution if voters don’t approve 15 percent excise taxes on retail pot and a new 15 percent marijuana sales tax. Those would be in addition to regular state and local sales taxes. …Marijuana activists immediately blasted the proposal as a backhanded effort to repeal the pot vote, in which 55 percent of Coloradans chose to flout federal drug law and declare pot legal in small amounts for adults over 21.

If my math is correct, the politicians want a 30 percent special tax on marijuana, which is on top of the regular taxes that would be imposed.

That would be fine with me – if the proposal specified that the additional tax revenue was offset by a tax cut of equal size.

But as I explained in my “starve-the-beast” post, higher taxes usually finance bigger government.

Indeed, some politicians openly admit that they want the new revenue to expand the budget.

Sen. Larry Crowder, R-Alamosa, said the whole purpose of legalizing recreational marijuana was to raise money for education and other programs. “So if there’s no money, we shouldn’t have marijuana,” Crowder said. …In Washington state, the only other place where voters last year approved recreational pot, the ballot measure set taxes at 75 percent, settling the question. Both states are still waiting to find out whether the federal government plans to sue to block retail sales of the drug, set to begin next year.

Though I didn’t realize that the state of Washington imposes a 75 percent tax on marijuana. How…um…French!

More Money for Government? The Ultimate Buzz Kill

So what’s the bottom line? If I lived in Colorado, would I vote to keep pot legal even if it meant more money from the buffoons in the state capital?

Since drug legalization is about 990 out of 1000 in my list of priorities, I’m tempted to say no.

On the other hand, it would be nice to reduce the onerous burden of the War on Drugs, which has been used an excuse to expand the size and scope of government.

What do you think?

P.S. If you want more examples of “you be the judge,” previous editions are listed below.

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The bad news is that there are despicable and evil people seeking to kill innocents.

The worse news is that some of these pathetic excuses for protoplasm are subsidized by taxpayers.

It’s happened in France, Australia, and the United Kingdom.

And we now know that the Tsarnaev family was on he dole as well.

Which makes this cartoon funny, but at the same time not funny at all.

Welfare Terrorism

I used to think it was outrageous that the welfare state funded bad behavior (as illustrated by this humorous poster), as well as general laziness and moral depravity.

But there should be a special wing of the Moocher Hall of Fame for taxpayer-subsidized terrorists.

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A recurring feature on this blog is the US vs UK government stupidity contest, which features examples of idiotic behavior by politicians and bureaucrats on both sides of the Atlantic.

Recent winners of this dubious honor include a rather amazing example of British road painting and a horrid incident of anti-gun political correctness by American school bureaucrats.

Our neighbors to the north must be envious that they’re not part of this contest. Based on what just happened in Quebec, Canada probably deserves to be in the conversation.

Mon Dieu!

First some background, courtesy of a story from the Guardian. It seems that the provincial government actually has language police.

They are known as the language police, a unit within the regional Quebec government that seeks to protect French from the rising tide of English. It deploys inspectors to rein in recidivist anglophones, take on big corporate transgressors such as Guess, the Gap and Costco and conduct spot checks to follow up thousands of public complaints.

But sometimes, these tax-funded Keystone Cops go too far.

Le Crime

Now, however, zealots in the Office québécois de la langue française (Quebec Board of the French Language) may have gone a step too far in picking a fight with an Italian restaurant… After a five-month investigation into an anonymous complaint, Massimo Lecas received a letter from the board telling him that his establishment, Buonanotte, had broken the law by including the words “pasta” on the menu and “bottiglia“, the Italian word for bottle, instead of the French word bouteille. Outraged, Lecas posted the letter for 2,500 of his Facebook friends to see. In doing so, he unleashed a political tempest over one of the most sensitive topics up for debate in the province. The outcry has forced the Quebec government to rein in its language inspectors, ensure exceptions to the rules are made for ethnic food and restaurant menus and order a review of how it handles public complaints.

Job security

By the way, this is not an isolated incident.

Lecas’s decision to go public with the letter from the language inspector has prompted other restaurateurs to come forward. One told how he was ordered to cover his microwave’s on/off switch and the redial button on a telephone with tape because they were in English. The chef’s grocery list, which was written on a kitchen chalkboard, was also found to have broken the law: steak frites may be a staple of Parisian bistros but, according to Quebec law, biftek is the only acceptable term. …Quebec’s recent budget included one notable increase: the yearly allotment for the language police.

So Canada definitely can make a claim that it belongs in the government stupidity contest. Though, to be fair, I should acknowledge that other governments also merit consideration.

  1. In Germany, the government misplaced the sensitive blueprints of its new $2.3 billion spy headquarters.
  2. In Italy, the government of supposed technocratic experts managed to appoint the wrong person to a job that shouldn’t exist.
  3. In the European Union, watching free soccer broadcasts is now a human right.
  4. In Greece, bureaucrats actually demand stool samples from entrepreneurs applying to set up online companies.

The moral of the story is that government – in all nations – is a festering black hole of waste. And if you ever feel that these incompetent and foolish people deserve more of our money, then I suggest you move to France, where the nation’s President generously has promised that nobody will have to surrender more than 80 percent of their income to the government.

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I’ve received several requests to comment on the controversy surrounding the famous Rogoff-Reinhart study on government debt and economic performance.

For those who haven’t followed this issue, Kenneth Rogoff and Carmen Reinhart wrote an influential paper in 2010 arguing that government debt above 90 percent of GDP was associated with weaker economic performance.

It turns out that the Rogoff and Reinhart made a mistake in their excel spreadsheet and this error was publicized in a recently unveiled article by three other economists.

This has led to a renewed debate about “austerity,” with R&R cast in the role of fiscal hawks and various critics saying that the mistake in their paper discredits that approach and that it’s time for Keynesian policies.

If you’re interested in the broader debate, here’s what Rogoff and Reinhart wrote in the New York Times to defend themselves, and here’s Paul Krugman’s criticism.

But if you want to know my opinion, I’m not a fan of either side. Unlike the Keynesians, I don’t think debt is good for growth. But I also think it doesn’t make sense to myopically focus on red ink.

Which explains why I’m very frustrated by the debate in Europe. On one side, you have the Keynesians advocating higher spending and on the other side you have “austerians” advocating higher taxes.*

No wonder I want both sides to lose!

As I’ve repeated over and over again, the real fiscal problem in most nations is the size of government. Excessive government spending is bad for prosperity, regardless of whether it is financed by taxes or borrowing.

To be sure, governments can accumulate so much debt that investors will get suspicious and demand very high interest rates before lending more money (sometimes referred to as an attack by “bond vigilantes”).

But it’s important to realize that debt is the symptom. The underlying disease is a bloated public sector. That’s true in Greece, Spain, Italy, and other nations that have had trouble borrowing money.

By the way, it’s also true in nations such as France and Belgium. Those countries also have governments that are far too big. They haven’t been hit (at least not yet) by the bond vigilantes, but they’re suffering from economic stagnation as well.

In other words, deficits are bad, but the real problem is spending. I elaborate in this Center for Freedom and Prosperity video.

The wise fiscal policy, needless to say, is to follow Mitchell’s Golden Rule. If the burden of government spending grows slower than the private economy, any nation can climb out of a fiscal ditch. Especially if they lower tax rates and avoid class-warfare tax policy.

*In theory, the “austerians” ” also advocate less spending, but you won’t be surprised to learn which option politicians select when given a choice between higher taxes and less spending.

P.S. You also won’t be surprised that Paul Krugman doesn’t do his homework when he writes about “austerity” in Estonia and the United Kingdom.

P.P.S. Please do not confuse “austerian” economics with “Austrian economics.” The former is a political rationale for tax hikes. The latter is a sensible school of economic thought.

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I last shared political jokes from the late-night talk shows in late February, so let’s rectify that oversight.

Here are my favorites, courtesy of the folks at News-Max.

Jay Leno

  • All five living presidents will gather for the opening of the George W. Bush Presidential Library. President Obama says he hopes he can pick up some ideas for when he builds his. It’s going to be called the “Blame George W. Bush Presidential Library.”
  • Last night President Obama hosted Republican senators for dinner at the White House. The president said he had to do without salt, pepper, and butter — because as you know, the Republicans refuse to pass anything.
  • North Korean officials reportedly are planning a cyberattack on the U.S. in an effort to bring our economy to a halt. Nice try, guys. You’re five years too late.
  • According to The Wall Street Journal’s website, Anthony Weiner may run for mayor of New York City. Their website said that Mr. Weiner didn’t respond to an email seeking comment. Hey, Anthony Weiner didn’t email or text you back? Consider yourself lucky!
  • The acting president of Venezuela has put a curse on voters who don’t vote for him in next week’s election. Today Mitt Romney said, “You can do that?”
  • That shows you the difference between our two countries. See, over here in America we’re cursed no matter who we vote for.
  • Former President George Bush has invited President Obama to the opening of his presidential library later this month. President Obama said he’s looking forward to going through the library to see if there was anything else he could blame Bush for.
  • The Associated Press, the largest newsgathering outlet in the world, will no longer use the term “illegal immigrant.” That is out. They will now use the phrase “undocumented Democrat.”
  • Legendary singer Dionne Warwick filed for bankruptcy, claiming she has only $25,000 in assets but owes more than $10 million in unpaid taxes. She owes 400 times what she has. She could end up serving three years — as the White House budget director.
  • A 28-year-old woman from Serbia has a rare brain condition where she sees everything upside down. The good news? She’s now been given a job at the White House as President Obama’s economic adviser.
  • The U.S. Senate is now fighting to keep open the Senate barber shop. It loses $350,000 a year. Do you know what that makes it? The most successful government program ever. It’s losing only $350,000 a year.
  • The island nation of Cyprus is now considering a 10 percent tax on every individual savings account in that country. They’ll take 10 percent of your money right out of the bank. To which President Obama said: “You can do that?”
  • We’re learning more about the dead Venezuelan dictator Hugo Chavez. It seems he amassed about $2 billion in a personal fortune while president — and he was a socialist. Imagine how rich he could have been if he didn’t believe in redistribution of wealth.
  • Former Senator Pete Domenici of New Mexico revealed that while in office he fathered a child with the daughter of another senator, who was a friend of his. He cheated on his wife with the daughter of another senator and they had a baby. When did the Senate become “The Jerry Springer Show”?
  • Domenici is defending himself by saying that he is no better or worse than the next guy. And he’s right, because you know who the next guy was? John Edwards.
  • Over the weekend, President Obama played golf with Tiger Woods. Tiger said the president was a very good golfer for a guy who plays only five days a week.
  • Actually, you know what the president’s handicap is? He doesn’t understand economics.

Speaking of golf, the President has decided to change the rules of the game.

David Letterman

  • Former Congressman Anthony Weiner is back on Twitter. That’s like giving Lindsay Lohan the keys to the minibar.
  • The White House has now put together a website for kids. It’s a website to teach kids how to manage a budget responsibly. The website is called Irony.gov.
  • Last year there was some trouble at the White House’s Easter egg hunt. One kid looking for eggs turned up Obama’s birth certificate.
  • The average American works six months a year for the government. Think about that. Government employees don’t even work six months a year for the government.

By the way, it’s good to see Anthony Weiner back in the news.  I shared some good jokes about him way back in 2011. And Dave Barry also had some amusing references to the weasel in one of his year-end reviews.

Conan

  • A new poll shows that 64 percent of New Jersey residents don’t care about New Jersey Governor Chris Christie’s weight. That’s mostly because Chris Christie IS 64 percent of New Jersey.
  • The former mayor of Detroit has been convicted of racketeering and extortion charges. The sentence is pretty hard. He has to serve another term as mayor of Detroit.

Craig Ferguson

  • Today France legalized same-sex marriage. The next step is legalizing same-sex mistresses.

Jimmy Fallon

  • This week on the “Today” show, Chelsea Clinton said she’s open to running for political office one day. When she heard that, Sasha Obama was like, “Cool. How does secretary of state sound?”
  • There’s this trend now of politicians cutting their salaries by 5 percent because of budget cuts — except for Vice President Joe Biden. He won’t do it. Though in fairness, it’ll take Biden at least a month to figure out what 5 percent of his salary is.
  • This week, President Obama announced a $100 million initiative to map the human brain. Joe Biden said, “You can map mine for a lot less.”
  • Yesterday President Obama shot baskets at the White House and made only two shots out of 22. Even Dick Cheney was like, “That guy needs to learn how to shoot.”
  • President Obama went only two for 22. It’s tough times for Obama — one minute, he’s asking Congress to raise the debt ceiling; the next, he’s asking them to lower the hoop.
  • Yesterday former CIA director David Petraeus apologized for having an affair with his biographer. He said he hopes this begins a new chapter in his life. It got awkward when he said, “Any of you ladies want to write it?”
  • The guy who plays Satan on the History Channel’s “The Bible” looks like President Obama. Even Rush Limbaugh was outraged. He was like, “How can you do that to Satan?”
  • There are reports that Joe Biden will handle more foreign policy matters during President Obama’s second term. Though you know it’s bad when world leaders are like, “Can you just send Dennis Rodman instead?”
  • In an effort to reduce its debt, the U.S. Postal Service is launching its own line of clothing and accessories. They come in “one size embarrasses all.”

Jimmy Kimmel

  • Public Policy Polling asked a group of 1,200 registered voters, and 13 percent said they believe Obama is the Antichrist and another 13 percent were not sure. I feel if he were the Antichrist, he would be getting more legislation passed.

If you want to peruse previous editions of these one-liners, click here, herehereherehereherehereherehere,hereherehereherehereherehere, and here.

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I’m a big fan of Chuck Asay’s political cartoons. My favorite is his nothing-left-to-steal masterpiece.

And his tractor cartoon and his regime-uncertainty cartoon are brilliant indictments of Obamanomics.

Here’s another classic. It shows the impact of the welfare state on incentives for work, self reliance, and independence.

Asay Welfare CartoonIn six cartoon frames, he cleverly explains the economics of labor supply in a welfare state. Heck, there are many economists who could learn something from Asay’s work.

With gems like this, no wonder he came in second place in my political cartoonist contest.

This unsigned Wizard-of-Id parody has the same basic message about labor supply and handouts, and here’s a chart with some staggering real-world evidence of how the welfare state discourages people from productive behavior.

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Since I just left Monaco and am now in Geneva, this is an appropriate time to extol the virtues of so-called tax havens.

Monaco Casino

The name’s Bond….James Bond

But I don’t merely say nice things about low-tax jurisdictions when I’m in friendly environments.

I believe in swinging my sword in the belly of the beast.

That’s why I recently defended tax havens and tax competition for the fiscal heathens who read the New York Times.

In an even bigger display of futile optimism, I also just explained the benefits of tax competition, fiscal sovereignty, and financial privacy for the kleptocrats in Congress.

Here’s some of what I wrote for The Hill, starting with the obvious point that it is preposterous to blame tax havens for the financial crisis.

When the financial crisis hit, politicians from high-tax nations didn’t let the crisis go to waste. Acting through the G-20, they launched an attack on so-called tax havens, asserting that “hot money” from the offshore world somehow had caused the banking system to become unstable.  This campaign against low-tax jurisdictions made no sense. Nobody in the Cayman Islands or Monaco was responsible for the Federal Reserve’s easy money. Nobody in Panama or Singapore had anything to do with the corrupt system of Fannie Mae/Freddie Mac subsidies.

I then explained that tax havens once again are being attacked, though in this case multinational corporations are the main victims of a new scheme by the parasitical bureaucrats at the OECD.

So-called tax havens will suffer collateral damage, though, since big firms use them as very desirable platforms for a significant chunk of cross-border economic activity.

Tax havens are being attacked again… Funded with American tax dollars, the Organization for Economic Cooperation and Development (OECD) published a report on “Addressing Base Erosion and Profit Shifting,” (BEPS) and will follow up in a few months with specific recommendations.  This new OECD scheme is targeting multinational companies for a big tax hike, probably by requiring global tax returns, but that means tax havens are in the cross hairs because their pro-growth tax policies make them attractive locations for cross-border economic activity. Indeed, the OECD specifically has complained that “small jurisdictions act as conduits, receiving disproportionately large amounts of Foreign Direct Investment compared to large industrialised countries and investing disproportionately large amounts in major developed and emerging economies.” …its new campaign isn’t just targeting small tax havens, but will also undermine the relatively attractive fiscal systems in nations such as Ireland, Hong Kong, Switzerland, Slovakia, Singapore, Estonia, and the Netherlands. The burden of this will fall not on companies, but on workers, consumers, and shareholders.

I close with a warning that tax havens and tax competition are one of the few restraints on the greed of the political class. We need to preserve these liberalizing forces if we want to protect ourselves from even worse fiscal policy.

Tax Haven Article - The Hill…anti-tax haven demagoguery is perfectly acceptable in political circles since it is seen as expanding the power of government over taxpayers.  The real issue we should be addressing is whether we need some sort of external constraint to protect us from fiscal crises that are triggered by the overspending and overtaxing of the political class.  For a couple of decades following the Reagan and Thatcher tax cuts, governments around the world have been forced by tax competition to lower tax rates, reduce double taxation of saving and investment and reform their tax system.  Defenders of the welfare state and proponents of class-warfare tax policy have resented this liberalizing process and grab any opportunity to demonize tax havens, particularly since these jurisdictions have strong human rights laws that protect the financial privacy of investors.

For further information, I highly recommend the writings of Allister Heath and Pierre Bessard.

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I get upset by a lot of what happens in the corridors of power, but two things really irk me.

First, I hate it when the rich and powerful use the coercive power of government to screw ordinary people. That’s one of the reasons I hated the TARP bailout.

Second, I hate the utter hypocrisy of the political elite exempting themselves from the bad policies that get imposed on everyone else. That’s why, for instance, it galls me that the pro-tax bureaucrats at the OECD get tax-free salaries.

Well, now we have a new example of political hypocrisy. Behind closed doors, the crooks in Washington are seeking to exempt themselves from Obamacare.

Here are some of the sordid details reported by Politico.

Congressional leaders in both parties are engaged in high-level, confidential talks about exempting lawmakers and Capitol Hill aides from the insurance exchanges they are mandated to join as part of President Barack Obama’s health care overhaul, sources in both parties said. The talks — which involve Senate Majority Leader Harry Reid (D-Nev.), House Speaker John Boehner (R-Ohio), the Obama administration and other top lawmakers — are extraordinarily sensitive, with both sides acutely aware of the potential for political fallout from giving carve-outs from the hugely controversial law to 535 lawmakers and thousands of their aides. Discussions have stretched out for months, sources said. …if Capitol Hill leaders move forward with the plan, they risk being dubbed hypocrites by their political rivals and the American public. By removing themselves from a key Obamacare component, lawmakers and aides would be held to a different standard than the people who put them in office. …There is concern in some quarters that the provision requiring lawmakers and staffers to join the exchanges, if it isn’t revised, could lead to a “brain drain” on Capitol Hill, as several sources close to the talks put it.

Well, to be thoughtful and analytical, my reaction is boo hoo and cry me a friggin’ river.

Obamacare is a fiscal disaster and a healthcare disaster. Our best bet to get the law repealed is to make sure the politicians and their underlings are subject to all of the law’s bad provisions. Period.

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The fiscal policy debate often drives me crazy because far too many people focus on deficits.

The Keynesians argue that deficits are good for growth and this leads them to support more government spending.

The “austerity” crowd at places such as the International Monetary Fund, by contrast, argues that deficits are bad for growth and this leads them to support higher taxes.

Then you have institutions such as the Congressional Budget Office that want the worst of all worlds, supporting Keynesian spending in the short run while advocating higher taxes in the long run.

But since I don’t like higher spending or higher taxes, you can see why I want to pull my hair out.

With this in mind, I’m pleased that economists at the European Central Bank have released some new research on “Fiscal Composition and Long-Term Growth” which doesn’t reflexively assume that red ink is the key variable. Instead, they dispassionately look at how several fiscal policy variables impact economic performance.

Here is the general conclusion.

In this study we use a large panel of developed and developing countries for the period 1970-2008. …Specifically, we examine the following issues: the influence of which budgetary components have a stronger influence in affecting (positively or negatively) per capita GDP growth rates… Our evidence suggests that for the full sample…government expenditures appear with significant negative signs.

This makes sense. Whether financed by taxes or borrowing, excessive government expenditures hurt an economy by diverting resources from productive uses.

But not all government spending is created equal. Here are some of the specific findings.

In a nutshell, our results comprise notably: i) for the full sample revenues have no significant impact on growth whereas government expenditures have significant negative effects; ii) the same is true for the OECD sub-sample with the addition that total government revenues have a negative impact on growth; iii) taxes on income are less welcome for growth; iv) public wages, interest payments, subsidies and government consumption have a negative effect on output growth; v) expenditures on social security and welfare are less growth enhancing.

It’s noteworthy that government spending is negatively correlated with economic performance for both developing and advanced nations.

It’s also interesting that taxes on income are bad for growth everywhere, and overall revenue is bad for growth in advanced nations (both of these findings, incidentally, suggest that Obama’s class-warfare tax agenda is quite misguided).

The authors of the study also find that some forms of government spending are particularly harmful for growth. That also makes a lot of sense since I’ve explained in my video on the Rahn Curve that core public goods can be good for growth while other types of government spending undermine prosperity.

So what does all this mean? Simply stated, the fiscal problem in virtually all nations is not red ink. It’s big government. Large deficits aren’t desirable, to be sure, but they’re best understood as side effects of too much spending.

In other words, entitlements need to be reformed and discretionary spending needs to be reduced. Solve these underlying problems and you fix the symptoms of red ink and sluggish growth.

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In an interview with Neil Cavuto earlier this month, I mocked proponents of big government for their hysterical predictions of bad things happening under sequestration. And cartoonists had a field day making the same point (see here and here).

The White House obviously wasn’t happy about the sequester, in part because they like bigger government and also because sequestration was a big defeat for the President.

Well, now the Obama Administration sees a chance for revenge and redemption. The President’s appointees, by choosing to furlough air traffic controllers, are seeking to turn air travel into something akin to a visit to the Post Office or DMV. It’s clear that the White House hopes to recreate momentum for a tax hike as an alternative to sequestration.

But they’re not exactly being subtle.

The Wall Street Journal exposes the White House’s political motivated chicanery, starting with the very important point that the FAA’s budget – even after sequestration – is as large as it was in 2010. Yet the White House is manipulating the sequester to cause the maximum amount of inconvenience for taxpayers.

The sequester cuts about $637 million from the FAA, which is less than 4% of its $15.9 billion 2012 budget, and it limits the agency to what it spent in 2010. The White House decided to translate this 4% cut that it has the legal discretion to avoid into a 10% cut for air traffic controllers. Though controllers will be furloughed for one of every 10 working days, four of every 10 flights won’t arrive on time.

The Obama Administration is pretending that it’s merely following the law, but the WSJ editorial debunks that notion.

This is a political pose to make the sequester more disruptive. Legally speaking, the sequester applies at a more general level known as “accounts.” The air traffic account includes 15,000 controllers out of 31,000 employees. The White House could keep the controllers on duty simply by allocating more furlough days to these other non-essential workers. Instead, the FAA is even imposing the controller furlough on every airport equally, not prioritizing among the largest and busiest airports. …ever since Al Gore launched a training initiative to increase the productivity of air traffic controllers in 1998, productivity has continued to fall. A larger workforce is now in charge of a smaller workload as the number of flights has dropped by 23%.

I didn’t realize that controllers were doing less work over time, but I’m not surprised to learn that superfluous bureaucrats at the FAA are being protected.

But the WSJ doesn’t go far enough. My Cato colleague Chris Edwards has a column in the Daily Caller that outlines the inefficiency of the FAA.

The federal budget sequester is interfering with the air traffic control (ATC) system and snarling up air traffic. As usual, politicians are pointing fingers of blame at everybody but themselves. But politicians are the ones who have strapped the ATC system to the chaotic federal budget. And they’re the ones who have insisted on running ATC as a bureaucracy, rather than freeing it to become the high-tech private business that it should be. …Last year Bloomberg reported: “More than one-third of the 30 contracts critical to building a new U.S. air-traffic system are over budget and half are delayed, a government audit concluded.

Chris then takes the logical next step and says the system should be privatized. Which is exactly what happened in his home country of Canada.

To run smoothly and efficiently, our ATC system should be given independence from the government. We should privatize the system, as Canada has done very successfully. …Canada provides an excellent model for U.S. reforms. Canada’s ATC system is run by the nonprofit corporation Nav Canada, which is separate from the government. Like any private business, it raises revenues from its customers to cover its operational costs and capital investments. The company’s financial statements for 2012 show revenues and expenses of $1.2 billion, with $125 million allocated to capital expenditures. Unlike the U.S. system, Nav Canada is self-supporting and not subsidized.

I’ve already written on this topic, citing some good analysis from Canada’s Financial Post, and the evidence is overwhelming that the private system in Canada works much better than the inefficient bureaucracy we have in the United States.

Let’s close with a Michael Ramirez cartoon. The “politics” and “waste” markings are very appropriate.

FAA Sequester

Lost in this controversy, by the way, is any recognition that sequestration barely makes a dent in the federal budget. There are some small first-year cuts in a few programs, but the wasteful behemoth known as the federal government is barely nicked.

To be more specific, the net effect of the sequester is that the burden of government spending grows by $2.4 trillion over the next 10 years rather than $2.5 trillion.

So don’t pay any attention to the hyperbole and hysteria from the special interest groups in Washington. The sequester is a tiny – and desirable – step in the direction of fiscal responsibility.

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So we’ve now learned that the Boston Marathon terrorists were welfare bums. Why am I not surprised?

“Thanks for the handouts, suckers!”

Heck, it was only a couple of days ago that I announced the Moocher Hall of Fame and included terrorists from the United Kingdom and Australia (and I could have included a taxpayer-subsidized terrorist from France as well).

I’m tempted to joke about al Qaeda including welfare applications in their training manuals, but I’m worried that might give them new ideas.

Anyhow, here are some of the predictable details from a story in the Boston Herald.

Marathon bombings mastermind Tamerlan Tsarnaev was living on taxpayer-funded state welfare benefits even as he was delving deep into the world of radical anti-American Islamism, the Herald has learned. State officials confirmed last night that Tsarnaev, slain in a raging gun battle with police last Friday, was receiving benefits along with his wife, Katherine Russell Tsarnaev, and their 3-year-old daughter. The state’s Executive Office of Health and Human Services said those benefits ended in 2012… In addition, both of Tsarnaev’s parents received benefits, and accused brother bombers Dzhokhar and Tamerlan were recipients through their parents when they were younger, according to the state.

All this raises a broader point about why the United States has a policy of letting people in the country who are not self supporting?

This is the point I made in my Fox Business News debate about immigration. Like most other libertarians, I’m very sympathetic to immigration, but I want people with initiative and ambition, not welfare tourists.

Speaking of welfare tourism, even Europeans realize it’s a problem when people come for handouts rather than opportunity. Here’s a blurb from a Daily Telegraph report.

Theresa May, the Home Secretary, has convinced her counterparts in Germany, Austria and the Netherlands to campaign for tighter restrictions to migrants’ access to welfare handouts and other state-funded services. In a joint letter, the countries have warned that migrants from EU members states are putting “considerable strain” on schools, healthcare and the welfare state…David Cameron has said he wants to restrict migrants’ access to housing benefit, legal aid and the NHS. The letter sent by the four countries warns that the EU free movement directive must not be “unconditional” and that major towns and cities “are under a considerable strain by certain immigrants from other member states”.

Of course, it’s hard to have much sympathy for the politicians in the UK, Germany, Austria, and the Netherlands. After all, they certainly have the power to reduce their overly generous welfare systems.

But instead of taking that sensible step, they want to restrict immigration.

Which brings us back to Milton Friedman’s warning about the incompatibility of opens borders and the welfare state.

But the real reason to pare back the welfare state is that dependency is bad for poor people, regardless of whether they’re native born or immigrants. Even some honest liberals have acknowledged this problem.

If we want to help the less fortunate, economic growth is the best approach. That means free markets and small government.

And the combination of more growth and less welfare will ease concerns about immigration, so it’s a win-win-win situation. What’s not to love?

P.S. Better economic policy is desirable for many reasons, but I’m not under any illusion it will stop terrorism. As I wrote recently, there’s no way to create a risk-free society, particularly when there are people motivated by anti-modernity.

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It’s a challenge to be a libertarian in Washington because you have to swim against the tide.

The vast majority of people in town are looking for excuses to spend money and amass power, and a small band of us are trying to convince them that the federal government should be limited in size and scope.

It may seem like a hopeless task.

*Libertarians argue against big expensive entitlement programs like Medicaid, explaining that it’s not a proper function of the federal government.

*Libertarians argue against stupid little publicity stunts like steroid hearings, explaining that it’s not a proper function of the federal government.

*Libertarians argue against emotional gestures such as disaster relief, explaining that it’s not a proper function of the federal government.

*Libertarians argue against the entire Department of Transportation, explaining that it’s not a proper function of the federal government.

I could provide more examples, but you get the idea. It seems as if libertarians are stuck with a Sisyphean task, urging “no” in a town filled with people who want to say “yes.”

But I don’t think our work is hopeless. I’ve already shared many reasons to be hopeful, and we now have some new polling data that should make us more optimistic. According to the folks at Pew, Americans have very low opinions of the federal government.

Here are the key details from a Washington Post story about the poll.

…28 percent of the public views the federal government favorably, down five points from a year ago and also the lowest percentage ever in a Pew survey on the topic. The lowly rating for Washington compares to 63 percent of people holding a favorable opinion of their local governments and 57 percent expressing a favorable view of their state governments. Even among Democrats, who tend to show more support for government, the numbers have dipped on the federal side. Fewer than half of Democrats– 41 percent– said they hold a favorable opinion of the federal government, representing a 10-point drop from the previous year.

These numbers should be very good news for anyone who wants to push a “federalism” agenda. And Gallup also has found considerable – and growing – hostility to the federal government.

In other words, the American people are on our side. Or, to be more precise, they broadly realize that Washington has too much power and money.

Our job is to translate that sentiment into public policy.

By the way, Switzerland has the strongest system of federalism, and it is doing very well by world standards. Canada also has a decentralized system that has produced some very good policy in recent years.

P.S. For those who care about the Constitution, it’s worth noting that America’s Founding fathers explicitly limited the powers of the central government.

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I’ve shared serious articles on gun control, featuring scholars such as John Lott and David Kopel.

I also posted testimonials from gun experts and an honest liberal.

But I haven’t specifically criticized Obama’s agenda.

And I’ve shared lots of gun control humor, such as this IQ test that I posted for liberals and criminals, this very effective neighborhood watch group, and several amusing videos linked at the end of this post. I’ve also shared clever pro-Second Amendment posters hereherehere, here, here, and here, and some amusing images of t-shirts and bumper stickers on gun control herehere, here, and here.

But with the possible exception of this poster, none of this humor has focused on Obama.

So let’s rectify this oversight, starting with the VFW sign that appeared in my inbox yesterday. Looks real, though I make no guarantees about its provenance.

Background Check VFW Sign

Then we have a very good Lisa Benson cartoon celebrating President Obama’s legislative acumen on gun control.

Gun Control Dud

By the way, my all-time favorite gun joke is the one explaining the difference between liberals, conservatives, and Texans.

Though the Alabama tan definitely gets honorable mention for obvious reasons.

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I expressed pessimism a few days ago about the possibility of replacing the corrupt internal revenue code with a flat tax. Either now or in the future.

But that’s an exception to my general feeling that we’re moving in the right direction on public policy. I’ve shared a list of reasons to be optimistic, even on issues such as  Obamacare and the Laffer Curve.

Education is another area where we should be hopeful. Simply stated, it’s increasingly difficult for defenders of the status quo to rationalize pouring more money into the failed government education monopoly. To paraphrase Winston Churchill, never has so much been spent so recklessly with such meager results.

That’s true regardless of whether Democrats are throwing good money after bad or whether Republicans are throwing good money after bad.

Fortunately, a growing number of people are realizing that the answer is markets and competition. School Choice CartoonThat’s one of the reasons why we’re seeing progress all over the country. Policy makers have implemented varying degrees of school choice in states such as Indiana, Louisiana, Wisconsin, Colorado, Florida, Arizona, and even California.

Is this having a positive impact on educational outcomes and other key variables? The answer, not surprisingly, is yes.

Here are some of the details from a new study published by the Friedman Foundation for Educational Choice.

This report surveys the empirical research on school choice. …the empirical evidence consistently shows that choice improves academic outcomes for participants and public schools, saves taxpayer money, moves students into more integrated classrooms, and strengthens the shared civic values and practices essential to American democracy.

The data on academic outcomes surely is the most important bit of information, so let’s specifically review those findings.

Twelve empirical studies have examined academic outcomes for school choice participants using random assignment, the “gold standard” of social science. Of these, 11 find that choice improves student outcomes—six that all students benefit and five that some benefit and some are not affected. One study finds no visible impact. No empirical study has found a negative impact.

And since I want to reduce the burden of government spending, let’s see whether school choice is good news for taxpayers.

Six empirical studies have examined school choice’s fiscal impact on taxpayers. All six find that school choice saves money for taxpayers. No empirical study has found a negative fiscal impact.

Here’s the breakdown of the studies for all the variables.

School Choice Studies

As you can see, it’s a slam dunk, much as a survey of tax research found that nearly 90 percent of academic studies concluded that class-warfare tax policy is destructive.

Some of the tax research was inconclusive, but not a single study supported the notion that higher tax rates are good for growth, much as this new research from the Friedman Foundation didn’t uncover a single study that found negative results from school choice.

So with lots of positive research and no negative research, why would anybody oppose school choice? Unfortunately, politicians like Barack Obama and groups such as the NAACP side with teacher unions, putting political power ahead of progress and opportunity for kids.

P.S. Here’s a video explaining why school choice is better than a government-run monopoly.

P.P.S. There’s also strong evidence for school choice from nations such as Sweden, Chile, and the Netherlands.

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Back in 2010, I posted a “Moocher Index” showing the states with the most dependency. But that was based on numbers and lacked any human-interest angle.

So let’s create a Moocher Hall of Fame for the individuals who best exemplify the culture of loafing, laziness, and dependency that is being subsidized by our vote-buying political class.

But you don’t receive this honor simply by accepting other people’s money. Membership in the Moocher Hall of Fame is reserved for deadbeats who demonstrate some special characteristic that warrants their induction.

* Let’s start with Olga, a Greek woman who earned membership in the Hall of Fame because she protested against the notion that she should be responsible for her own life since she might have to – gasp! – work more than one job and live at home.

* Another proud member of the Hall of Fame is Stanley, who was a shoo-in for the honor after it was learned that this 30-year old man has been scamming disability checks from the government so he can fulfill his fetish of wearing diapers and being an “adult baby.”

* Leroy entered the Hall of Fame after it was reported that he won $2 million from the lottery, but somehow is still collecting food stamps.

* A welfare mother with 11 kids in the United Kingdom was invited into the Hall of Fame after one of her sons was arrested for looting and she said “the riots are because the government does “f*** all” for children.”

* If the Hall of Fame had an award for going above and beyond the call of loafing, then Hans from Austria would be an obvious choice. He cut off his own foot to ensure continued handouts.

* We also have a husband-wife team in the Hall of Fame. Alicia and Matthew were unanimous inductees after it was revealed that they tried to impregnate a 12-year old girl to increase their welfare payments.

* Speaking of husband-wife duos, let’s not forget Danny and Gina, who bragged that it didn’t make sense for them to work when the government was providing them with enough loot to enjoy an apartment, a big flat-screen TV, and 40 daily cigarettes.

* Abdul from Australia is an esteemed member of the Hall of Fame’s terror wing, having received 19 years of welfare while plotting to kill the people who were paying for his life of leisure.

* Keeping with that theme, let’s also recognize Anjem, who got elected to the Hall of Fame for collecting about $40,000-per year in handouts while spewing hate and recruiting other “fanatics to copy him by going on benefits.”

* Last but not least, we have Natalijia, a Lithuanian woman who in now enjoying foreign holidays and designer clothes thanks to the generosity of British taxpayers, but nonetheless complained that she wasn’t getting a taxpayer-financed nanny.

Quite a collection of scroungers.

But I don’t think they’re very bright. They wanted to invite Julia to be the speaker at this year’s induction ceremony, apparently not realizing that she was a make-believe cartoon character created by the Obama campaign to celebrate dependency.

Perhaps they should ask Obama to speak. After all, more people have latched on to the disability system during his presidency than have gotten jobs. Quite an achievement…of sorts.

But I’m digressing. The purpose of this post is to announce the newest member of the Moocher Hall of Fame.

Our proud new bum comes from Denmark. Lazy RobertKnown as “Lazy Robert,” he’s been mooching off the taxpayers for 12 years and he’s very proud of his lifestyle. Here are some inspirational details from a New York Times report.

Robert Nielsen, 45, made headlines last September when he was interviewed on television, admitting that he had basically been on welfare since 2001. Mr. Nielsen said he was able-bodied but had no intention of taking a demeaning job, like working at a fast-food restaurant. He made do quite well on welfare, he said. He even owns his own co-op apartment. …Mr. Nielsen, called “Lazy Robert” by the news media, seems to be enjoying the attention. He says that he is greeted warmly on the street all the time. “Luckily, I am born and live in Denmark, where the government is willing to support my life,” he said.

The story also mentions another Danish moocher. Her story is worth sharing because it shows how the folks riding in the wagon enjoy higher living standards than many of those pulling the wagon.

Visit a single mother of two on welfare, a liberal member of Parliament goaded a skeptical political opponent, see for yourself how hard it is. It turned out, however, that life on welfare was not so hard. The 36-year-old single mother, given the pseudonym “Carina” in the news media, had more money to spend than many of the country’s full-time workers. All told, she was getting about $2,700 a month, and she had been on welfare since she was 16.

This probably doesn’t bode well for Denmark’s future. As illustrated by this famous set of cartoons, this kind of system creates very perverse incentives.

By the way, I decided that Carina didn’t deserve membership in the Hall of Fame because at least she has the decency to be ashamed. Or at least that’s one I’m assuming since the story says she “will no longer give interviews.”

But there are some people who genuinely deserve something, and those folks are the taxpayers of Denmark. They deserve our sympathy. They have one of the world’s most oppressive tax systems, thanks in part to a welfare system that provides a comfortable hammock for Robert and Carina.

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I’ve received several variations of this question since starting my “Question of the Week” series. Having never studied the terrorism issue, I’ve been ignoring those queries.

But I got several new emails on the topic after what happened in Boston, so I’m answering simply to make one point. There’s no way to create a perfectly safe, risk-free society.

That being said – and with the caveat that I have no expertise in this field, here are some random thoughts on the topic.

Libertarians want less interventionism around the world, and perhaps that will reduce hostility against the United States, but some of these nutjobs hate us because of our freedoms. So even a perfect foreign policy (whatever that even is) provides no guarantee we won’t get attacked. That being said, I think Ron Paul has screwed up big time in some of his criticisms of U.S. actions. Being against nation building does not mean you have to be against killing terrorists.

If you want to cause trouble, find a bunch of young men with no purpose in their lives and lots of time on their hands. Combine that with religious extremists who tell those men that they will get a bunch of virgins* in paradise if they die while killing Westerners, and you have a nontrivial supply of future terrorists. I suspect part of the answer will have to come from within the Islamic community, though I confess that I’m puzzled by the inaction on that front even though one imagines that 99 percent of Muslims don’t support terrorism.

Terrorists and would-be terrorists get information from the Internet that fuels their hate and provides knowledge on how to conduct attacks. I’m rather sympathetic to drone attacks on the scum in the Middle East who are directly seeking to instigate/plan terrorism, but I don’t see any feasible or desirable way to control and/or regulate the Internet (just like I don’t see a feasible or desirable way to regulate video games, even if it was shown that violent games somehow inspired Newtown-type killers).

Close monitoring of pro-terrorist websites and chat rooms is a very legitimate and proper function of law enforcement and the intelligence community. Being a Muslim shouldn’t be a cause for investigation and harassment by the government. Being a Muslim who uses the Internet to visit such sites is a cause for investigation and harassment (and the same is true for members of any other group with a history of violence).

Monitoring of Mosques also is a proper function of government, just as I also have no objection of law enforcement monitoring militia groups, environmental groups, etc, etc. Obviously, the monitoring of any group should be selectively focused on those strains that are believed to espouse violence. I don’t know where you draw the line between freedom of religion and incitement of violence, but I have zero sympathy for radical Imams preaching hate inside the United States and would like to see them shut down/imprisoned/deported if they cross that line.

Yes, I’m disgusted by the leftists in the press who obviously hope for a “right wing” link any time there’s an attack. These are the same journalists, by the way, who weren’t even slightly bothered by Barack Obama’s association with Bill Ayers, a real-life terrorist who bombed the NYC police department, the U.S. Capitol, and the Pentagon.

I favor immigration, but I want people who believe in tolerance and hard work. There should be some sort of test, however imperfect, designed to weed out those who do not believe in assimilation. I’m still flabbergasted that the U.S. government is so bloody incompetent that it gave a green card to the so-called Blind Sheik. Such people should never be let in the country and there should be mechanisms for quick deportation (perhaps halfway across the Atlantic) if they do slip through the net.

*I hope these are the virgins they meet.

P.S. Like anybody with common sense, I want’ our anti-terrorism policies to be based on cost-benefit analysis, which is why I’m generally critical of the Transportation Security Administration.

Addendum: I’m getting lots of comments and emails about this post. In retrospect, I can’t claim to be speaking for libertarians, so perhaps I should have used a title such as “What Are Your Thoughts about How to Deal with Terrorism?” Though I don’t think there’s anything in my views that is inconsistent with libertarianism. Assuming, of course, you’re not an anarcho-capitalist. But even if I was in that camp, I would want to voluntarily contract with a private firm that would hunt down terrorists and kill them. Sort of like the group in the new Tom Clancy novels. By the way, I also like the Vince Flynn novels, so I probably am more bloodthirsty than the average libertarian.

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As part of my “Question of the Week” series, I said that Australia probably would be the best option if the United States suffered some sort of Greek-style fiscal meltdown that led to a societal collapse.*

One reason I’m so bullish on Australia is that the nation has a privatized Social Security system called “Superannuation,” with workers setting aside 9 percent of their income in personal retirement accounts (rising to 12 percent by 2020).

Established almost 30 years ago, and made virtually universal about 20 years ago, this system is far superior to the actuarially bankrupt Social Security system in the United States.

Probably the most sobering comparison is to look at a chart of how much private wealth has been created in Superannuation accounts and then look at a chart of the debt that we face for Social Security.

To be blunt, the Aussies are kicking our butts. Their system gets stronger every day and our system generates more red ink every day.

And their system is earning praise from unexpected places. The Center for Retirement Research at Boston College, led by a former Clinton Administration official, is not a right-wing bastion. So it’s noteworthy when it publishes a study praising Superannuation.

Australia’s retirement income system is regarded by some as among the best in the world. It has achieved high individual saving rates and broad coverage at reasonably low cost to the government.

Since I wrote my dissertation on Australia’s system, I can say with confidence that the author is not exaggerating. It’s a very good role model, for reasons I’ve previously discussed.

Here’s more from the Boston College study.

The program requires employers to contribute 9 percent of earnings, rising to 12 percent by 2020, to a tax-advantaged retirement plan for each employee age 18 to 70 who earns more than a specified minimum amount. …Over 90 percent of employed Australians have savings in a Superannuation account, and the total assets in these accounts now exceed Australia’s Gross Domestic Product. …Australia has been extremely effective in achieving key goals of any retirement income system. …Its Superannuation Guarantee program has generated high and rising levels of saving by essentially the entire active workforce.

The study does include some criticisms, some of which are warranted. The system can be gamed by those who want to take advantage of the safety net retirement system maintained by the government.

Australia’s means-tested Age Pension creates incentives to reduce one’s “means” in order to collect a higher means-tested benefit. This can be done by spending down one’s savings and/or investing these savings in assets excluded from the Age Pension means test. What makes this situation especially problematic is that workers can currently access their Superannuation savings at age 55, ten years before becoming eligible for Age Pension benefits at 65. This ability creates an incentive to retire early, live on these savings until eligible for an Age Pension, and collect a higher benefit, sometimes referred to as “double dipping.”

Though I admit dealing with this issue may require a bit of paternalism. Should individuals be forced to turn their retirement accounts into an income stream (called annuitization) once they reach retirement age?

I’m torn on this issue. Paternalists sometimes do have good ideas, but shouldn’t people have the freedom to make their own decisions, even if they make mistakes? But does the answer to that question change when mistakes mean that those people will be taking money from taxpayers?

Fortunately, I don’t need to be wishy-washy on the other criticism in the study.

Australia’s system does have shortcomings. It is heavily dependent on defined contribution plans and is vulnerable to weaknesses in such programs.

I strongly disagree. A “defined contribution” account is something to applaud, not a shortcoming.

The author presumably is worried that a “DC” account leaves a worker vulnerable to the ups and downs of the market, whereas a “defined benefit” account promises a specific payment and removes that uncertainty. Sounds great, but the problem with “DB” accounts is that they almost inevitably seem to promise more than they can deliver. And that seems to be the case whether they’re supposedly based on real savings (like company retirement plans or pension funds for state and local bureaucrats) or based on pay-as-you-go taxation (like Social Security).

*Since I’m somewhat optimistic that America can be saved, I’m not recommending you head Down Under just yet.

P.S. I’m also a huge fan of Chile’s system of private accounts. At the risk of oversimplifying, Chile’s system is sort of like universal IRAs and Australia’s system is sort of like universal 401(k)s.

P.P.S. There’s much to admire about Australia, but its government is plenty capable of boneheaded policy. Heck, the government even provides workers’ compensation payments to people who get injured while having sex after work hours, simply because they were on a business-related trip. Talk about double dipping!

P.P.P.S. Here’s my video explaining why we should implement personal retirement accounts in the United States.

P.P.P.S. The death tax has been abolished in Australia, so there’s more to admire than just personal retirement accounts.

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I’m not a very exciting guy. It’s Saturday afternoon and I’m perusing the Budget and Economic Outlook from the Congressional Budget Office.

But sometimes it pays to be a nerd because I just found an interesting tidbit of information. Here’s what CBO says about the anemic economic output we’re experiencing compared to the growth we should be enjoying.

…output is likely to remain below its potential (or maximum sustainable) level until 2017—almost a decade after the recession started in December 2007. CBO estimates that real GDP in the fourth quarter of 2012 was below its potential level by about 5½ percent; that gap is only modestly smaller than the gap (of about 7½ percent) that existed at the end of the recession in mid-2009 because growth in output since then has been only slightly faster, on average, than growth in potential output.

Let’s translate this bit of jargon into English.

What CBO actually is saying is that the economy hasn’t enjoyed the bounce of above-average growth that normally follows a recession (and we have more than 130 years of data showing this is the normal pattern). As a result, instead of recovering all the lost output associated with the downturn, we’re still suffering from sub-par levels of output.

CBO specifically says that we were “about 5½ percent” below potential at the end of last year. That’s about $880 billion of lost output. Not exactly a ringing endorsement of Obamanomics.

But that’s just part of the story. CBO also looks at the cumulative output gap.

With such a large gap between actual and potential output persisting for so long, the cumulative loss of output relative to the economy’s potential between 2007 and 2017 will be equivalent to nearly half of the output produced last year.

Since output last year was $16 trillion, the cumulative output gap is $8 trillion. That’s a ton of money, even by Washington standards.

Here’s a chart from CBO showing this output gap.

CBO Obama Growth Gap

By the way, I’m not sure I believe CBO’s estimate that we’ll get back to the trend line by 2017. Why expect good things when the economy is saddled by excessive taxation, wasteful spending, and burdensome regulation?

CBO Obama Growth Gap 2All that we know for sure is that the economy has been lagging, which is starkly evident if we simply look at actual data.

By the way, if you think I’m cherry picking numbers to make Obama look bad, my first reaction is to laugh since CBO leans way to the left and has zero reason to make Obama look bad. Remember, these are the clowns that tried to justify Obama’s Keynesian stimulus scheme.

But if you don’t want to believe the CBO data for inexplicable reasons, how about the Washington Post, which certainly is on the left side of the political spectrum? Surely they’re not part of the vast right-wing conspiracy, right?

Check out this chart they posted comparing the current recovery to a normal recovery, though you won’t be surprised to learn that they conveniently waited until after the election before sharing this vital bit of information.

Or what about the Minneapolis Federal Reserve, which has an interactive website enabling a reader to compare all the business cycles since the end of World War II.

These charts show both employment and output for every one of those business cycles. You can click to see larger versions, but all you need to know is that the current business cycle is the red line – and it happens to show that Obamanomics has generated the worst results whether we’re looking at jobs of GDP.

Minn Fed Data

None of this is to suggest, by the way, that Obama’s policies caused the recession. That happened on Bush’s watch.

But I am stating that Obama’s big-government policies have played a role in keeping the economy from enjoying a strong recovery. That’s been no post-recession bounce.

Ronald Reagan also inherited a dismal economy. He had to deal with high interest rates and inflation rather than a banking crisis, so I don’t know which President was dealt a worse hand of cards. But I know that Reagan’s policies of free markets and smaller government helped trigger an economic boom.

Obama, by contrast, basically has continued Bush’s policies of intervention and bigger government. No wonder we’re suffering a multi-trillion dollar output gap.

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I wrote last September that the budget plan put forward by Erskine Bowles and Alan Simpson was fatally flawed.

There were some positive features in the plan, to be sure, such as lower marginal tax rates. And I suppose it’s worth noting that the burden of government spending didn’t climb as fast under their proposal as it did in Obama’s budget, though that’s hardly an accomplishment.

Cartoon Fiscal Cliff 7But there were lots of fatal flaws in the Bowles-Simpson plan. It included a big tax increase, even though America’s fiscal problem is entirely the result of too much spending.

Moreover, the so-called entitlement reform in Bowles-Simpson wasn’t reform. It was basically a random package of means testing and price controls, and we have lots of experience showing that this approach doesn’t yield sustainable savings.

Well, Bowles and Simpson now have a new plan. Have they learned from their past mistakes? Have they responded to earlier criticisms? Have they made a more serious effort to restrain spending? To genuinely reform entitlements? To shut down useless agencies, programs, and department?

Not that you’ll be surprised, but the answer to all those questions is a big fat NO. Ryan Ellis of Americans for Tax Reform has a short analysis of the plan’s shortcomings and here are some of the highlights (though lowlights might be a better word).

The Simpson-Bowles plan headline report says it only raises taxes by $585 billion over a decade by eliminating or limiting tax deductions and credits (beyond what is needed to lower rates). …However, the plan also calls for “Chained CPI,” which the President’s FY 2014 budget says raises taxes by another $100 billion over the decade, and this plan’s Figure 21 (buried deep in the appendix) says will raise taxes by $124 billion. …There’s a third hidden tax increase, again only to be found buried in Figure 21.  This is “program integrity,” which is a polite euphemism for creating a fishing expedition audit slush fund for the IRS.  This is expected to raise another $30 billion by 2023. Put it all together, and the plan raises taxes by $739 billion over the next decade. …All of the tax hikes described above are just the first stage of new tax hikes in the Simpson-Bowles plan.  There’s also a shadowy “Step Four” which calls for even deeper tax increases to “fix” the entitlement crisis.

In other words, the plan is taxes, then more taxes, followed by additional taxes, topped off by a promise of even more taxes.

Ryan also notes that the plan doesn’t do anything about the fiscal disaster of Obamacare and that it also exacerbates the tax code’s punitive bias by increasing double taxation of income that is saved and invested.

Gee, what’s not to love about such a proposal?

Nonetheless, a lot of people feel compelled to say nice things about Bowles-Simpson. I don’t know whether it’s because they blindly assume a “bipartisan” plan must be good.

Or perhaps they think that a plan needs to be “balanced” between tax increases and spending cuts.

I don’t have any objection to bipartisanship, assuming politicians are proposing good ideas, but let’s take a closer look at this notion of “balance.”

  1. Why should we raise taxes when the current fiscal mess is the result of the excessive spending of the Bush-Obama years?
  2. Why should we raise taxes when the long-run fiscal mess is the result of rising spending caused by poorly designed entitlement programs?
  3. Why should we raise taxes when the “spending cuts” we get in exchange are based on dishonest Washington budget math?
  4. Why should we raise taxes when bitter experience teaches us that politicians will simply raise spending?

Let’s close by elaborating on this final question. A couple of years ago, a columnist at the New York Times complained that Republicans used to be much more susceptible to getting seduced by these “balanced” budget deals.

But the reporter inadvertently showed that tax-hike deals are a mistake. It turns out that the only budget deal which actually worked was the one in 1997 that lowered taxes instead!

I’m not making an argument for the Laffer Curve, by the way. The fiscal success of the late 1990s was a result of genuine spending restraint, as explained in this video. The lower taxes were simply a bit of icing on the cake.

My main point is that genuine fiscal restraint is far less likely to happen if tax hikes are on the table. After all, why would politicians have any incentive to do the right thing if there’s a possibility of simply siphoning more money from the economy’s productive sector?

We see the same pattern in other nations. When governments such as Canada and New Zealand actually imposed genuine limits on the growth of government spending, good things happened.

But when governments supposedly try to deal with fiscal problems by raising taxes, you get dismal results. Just look at mess in Europe, where tax increases have been nine times larger than spending cuts.

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I just saw a headline that made me think that libertarian fantasies somehow had turned into reality.

As you can see, 24 IRS employees were just arrested for stealing. But what about the other 105,976 bureaucrats at the Internal Revenue Service who seize our money under the implied threat of violence?

Shouldn’t they be arrested for stealing from us as well?

IRS Employees arrested

But then my bubble burst. The story has nothing to do with the injustice of the internal revenue code and the shakedown of American taxpayers.

It turns out that these IRS bureaucrats were busted for getting unauthorized government handouts.

…authorities say Internal Revenue Service employees in Tennessee were stealing unemployment and other benefits while fully employed. On Thursday, 13 of those employees were indicted on federal charges that they lied to get unemployment, food stamps, welfare and housing vouchers. An additional 11 have been indicted on state charges of theft greater than $1,000.

In other words, these “public servants” were guilty of a form of triple dipping.

  1. They took money from taxpayers as part of their excessive compensation packages.
  2. Their day job was to then enforce a coercive and reprehensible tax system that took money from taxpayers
  3. And they then bilked taxpayers yet again by mooching from various handout programs.

I’m actually surprised that they got arrested. Based on Keynesian economics, they should get medals for “stimulating” the economy.

P.S. All humor aside, non-anarchist libertarians face an interesting mental challenge. Many of them view the tax system as a form of theft. And there’s no question that it is enforced – ultimately – at the point of a gun. But with the exception of anarcho-capitalists, libertarians support the kind of limited government envisioned by the Founding Fathers. So how do you justify the taxes needed to finance that limited public sector? Most people would justify tax systems if they’re the result of a democratic process, but libertarians believe in rights rather than untrammeled majoritarianism. So how can they rationalize taxation? I freely confess that I don’t have the right answer. As I’ve noted before, I’m a practical libertarian, not the theoretical type. My job is to somehow figure out how we can shrink the federal government back to 3 percent of economic output. After that, the theoretical libertarians can figure out the thorny issues.

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I’ve shared some great videos on the Second Amendment and the individual right to keep and bear arms.

Here’s another video for the collection. If I was in high school, I’d ask this young lady to be my girlfriend.*

And since I’m sharing videos against gun control, let’s close with some humorous examples.

Joe Biden, needless to say, was unintentionally funny.

*Full disclaimer: Given my lack of success in high school, I would have asked any young lady to be my girlfriend.

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It’s time to celebrate.

That’s because we have reached Tax Freedom Day, meaning that – in the aggregate – we have finally earned enough money to pay for all the federal, state, and local taxes that will be imposed on us this year by our political masters.

But we’re not collectivists, so aggregate measures don’t really matter. Our individual tax burdens can vary considerably depending on the level and composition of our income, as well as the state in which we live.

Speaking of that, the good folks of North Dakota are the only ones actually celebrating Tax Freedom Day on this exact date. If you look at the map, Tax Freedom Day is as early as late March for residents of Louisiana and Mississippi, and as late as May for the unfortunate residents of New York, Connecticut, and New Jersey.

Tax Freedom Day Map

You’ll notice, by the way, that Tax Freedom Day is correlated with average state income. That’s one of the reasons why low-income states tend to get better scores. Simply stated, it’s hard to collect a lot of revenue from people who don’t have much money.

And a state that historically has been wealthy, like Connecticut, will probably collect a lot of revenue even if it has a good tax system (though, for the record, Connecticut has veered dramatically in the wrong direction in the past couple of decades).

So if you want to measure whether a state has a good or bad tax system, I recommend the “fiscal” and “tax burden” categories in the “Freedom Index” from the Mercatus Center. Using that measure, South Dakota gets the best score (compared to the 6th-best score using Tax Freedom Day).

P.S. If you like maps, here are some interesting ones, starting with some international comparisons.

Here are some good state maps with useful information.

There’s even a local map.

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Art Laffer has a guaranteed spot in the liberty hall of fame because he popularized the common-sense notion that you can’t make any assumptions about tax rates and tax revenue without also figuring out what happens to taxable income.

Lot’s of people on the left try to denigrate the “Laffer Curve,” but it’s worth noting that even left-wing economists now admit that you don’t maximize revenue with a 100 percent tax rate.*

Indeed, I think the only people who now cling to that absurd view are the bureaucrats at the Joint Committee on Taxation.

But this post isn’t about the Laffer Curve. It’s about a disappointing column that Art Laffer wrote for today’s Wall Street Journal.

The issue is whether states should have the power to impose taxes on sales that take place outside their borders. Art starts the column with a very good point about the link between growth and living standards.

After enjoying an average growth rate above 3.5% per year between 1960 and 1999, Americans have had to make do with less than one-half that pace since 2000. The consequences are already dramatic and will become even more so over time. Overall we are 20% poorer today than we would be had the pre-2000 growth rate persisted.

That’s a great point. I’ve also tried to get people to focus on the importance of long-run growth.

Heck, just look at what’s happened in Hong Kong and Singapore and you’ll agree.

In his column, Art also correctly defines good tax policy.

The principle of levying the lowest possible tax rate on the broadest possible tax base is the way to improve the incentives to work, save and produce—which are necessary to reinvigorate the American economy and cope with the nation’s fiscal problems.

But he then asserts that an Internet sales tax cartel somehow will result in better policy.

…there are reforms that can alleviate the problems associated with declining sales-tax bases and, at the same time, allow the states to move closer to a pro-growth tax system. One such reform would be to have Internet sellers collect the sales taxes that are owed by in-state consumers when they purchase goods over the Web. So-called e-fairness legislation addresses the inequitable treatment of retailers based on whether they are located in-state (either a traditional brick-and-mortar store or an Internet retailer with a physical presence in the state) or out of state (again as a brick-and-mortar establishment or on the Internet). …The exemption of Internet and out-of-state retailers from collecting state sales taxes reduced state revenues by $23.3 billion in 2012 alone, according to an estimate by the National Conference of State Legislatures. The absence of these revenues has not served to put a lid on state-government spending. Instead, it has led to higher marginal rates in the 43 states that levy income taxes.

This is a very disappointing collection of sentences. Let’s review.

1. States have declining sales-tax bases because state lawmakers treat that levy the same way that politicians in Washington treat the income tax – they put in loopholes in exchange for campaign cash and political support. For them to complain about declining sales-tax bases is sort of like the old joke about the guy who murders  his parents and then asks the court for mercy because he’s an orphan.

2. Art offers zero evidence that state governments would use the additional revenue from a state sales tax cartel to reduce income tax rates. What’s next, a column saying we should have a value-added tax because the politicians may use the revenue to get rid of the income tax? Yeah, good luck with that approach.

3. Why is it “inequitable” for there to be different tax policies in different states? That’s another way of describing federalism, and it’s something we should be celebrating and promoting. Particularly since it promotes tax competition, which is one of the most effective ways of restraining the greed of the political class.

4. The Internet sales tax cartel being promoted by Art and various politicians requires that governments have the ability to tax sales that tax place outside their borders. That’s an assault of sovereignty, particularly since out-of-state merchants will be coerced into being tax collectors for a distant government. This is the same dangerous ideology that is used by high-tax governments to promote global anti-tax competition policies.

5. Art offers zero evidence that the absences of a state sales tax cartel has led to higher income tax rates. Yes, some states have raised tax rates in recent years, but others have lowered tax rates.

For more information on why a sales tax cartel among the states would be a bad idea, here’s my short speech to an audience on Capitol Hill.

*This should be an obvious point, but I can’t resist emphasizing that maximizing revenue should not be the goal of fiscal policy.

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In recent months, I’ve displayed uncharacteristic levels of optimism on issues ranging from Obamacare to the Laffer Curve.

But this doesn’t mean I’m now a blind Pollyanna. We almost always face an uphill battle in our efforts to restrain the power and greed of the political class.

I don't see a simple system in America's future

I don’t see this simple system in America’s future

And in some areas, such as the fight for pro-growth and humane tax reform, I see very little reason for hope.

In honor of tax day, I explained my pessimism in an article for The Daily Caller.

I outlined four reasons to be glum, starting with the fact that tax reform yields big benefits in the long run, but that isn’t a very compelling argument for politicians that rarely think past the next election.

Our tax code is now a 74,000-page monstrosity, and it seems that politicians make the system more convoluted every year with new credits, deductions, exemptions, preferences, exclusions, and other special provisions. …In theory, it makes sense to scrape off these barnacles and restore the ship… Our political system, though, is dominated by lawmakers who tend not to think past the next election cycle.

I then mention that too many people now see the tax code as a tool for directly taking money from others.

…a growing number of Americans now see tax returns as a vehicle for getting money from the government. I’m not talking about the fiscal illusion that results when some people over-pay their taxes and then are happy to get a refund. …I’m talking about a different crowd. There are now millions of Americans who benefit from redistribution programs that are laundered through the tax code. …“refundable” credits allow people to get checks from the government even if they didn’t pay any tax. …Needless to say, those people don’t have much incentive to oppose the current system.

My third concern deals with the under-appreciated fact that the Washington establishment gets rich from the current system.

The metropolitan DC area is now the wealthiest region of the nation; it includes 10 of America’s 15 richest counties. …One of the main sources of that unearned — and undeserved — prosperity is the tax code… many people make big bucks manipulating the tax code. Lobbyists obviously would hate a simple and fair flat tax… Many of these insiders are former politicians and former Capitol Hill staffers — particularly those that worked on the tax-writing committees. They make big bucks, and the current staffers look forward to the day when they can cash in on their “government service” and start “earning” huge salaries. Needless to say, these people are not exactly advocates of reform.

Last but not least, I explain that high-tax governments are undermining tax competition with financial protectionism, thus giving them more leeway to impose bad policy.

Beginning with the Reagan and Thatcher tax cuts, the world experienced a virtuous period of tax competition that lasted for about 30 years. Even politicians in statist nations such as France and Germany felt compelled to lower tax rates… In recent years, however, high-tax nations and left-wing international bureaucracies such as the Paris-based Organization for Economic Cooperation and Development have worked to undermine tax competition and make it easier for politicians to impose class-warfare tax policy. They first went after so-called tax havens… Now the OECD has a new plan to go after multinational companies and significantly boost their tax burdens, presumably through the creation of a global tax return and a policy called “formula apportionment.” …every time they make progress, politicians feel less pressure to lower tax rates and reform tax systems. Why bother improving the tax code, after all, if you think that taxpayers have no choice but to submit?

I also should have added another big challenge. In the absence of good entitlement reform, the burden of government spending will dramatically increase in coming decades and create pressure for additional tax hikes. That’s not an environment conducive to tax reform.

Unless, of course, you’re a politician and you somehow think adding a value-added tax on top of the current income tax can be considered reform.

P.S. I’ve referenced the flat tax in this post, but all of these obstacles also explain why there’s even less chance of a national sales tax.

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I periodically compare the actions of brainless politicians and bureaucrats in both the United States and the United Kingdom.

One of the most bizarre examples I cited was from England. It showed how a local government decided to install the most pointless sign in the history of the world.

Our British friends are famous for their sense of humor (as illustrated by this glossary of financial terms and this guide to terror alerts in selected nations), so perhaps the sign was meant to be a joke.

Nonetheless, taxpayers picked up the tab.

And now we have another example of incomprehensible government stupidity. Taxpayers in one community just paid to have road markings painted in an alleyway.

I’m not kidding. Check out the photo and this excerpt from a BBC report.

Lines have been painted on both sides of the passageway, off Newhall Street in Swindon, leaving a gap of just 13in (33cm). Nathalie Fisher, a local resident, said it was a “bit of a mystery” as “you couldn’t even fit a motorbike down it.” …The council said local residents had asked the authority to “deal with illegal parking in alleyways”.

Gee, I hope the guy in the picture is being careful. He may get a traffic ticket since his left foot is almost on the double yellow line.

To be sure, I’m not sure this story means that U.K. government official are worse than U.S. government officials. Just look at some of these examples of PC-run-amok and you’ll have plenty of evidence of foolishness on this side of the Atlantic.

The moral of the story is that bureaucrats and politicians want to run our lives, but they’re some of the world’s least competent people.

P.S. While it’s amusing to highlight examples of government stupidity, let’s not forget there are real-life victims of bad government policy in the United Kingdom, particularly if you look at the healthcare system and welfare system.

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For the past 30 or so years, I’ve done my own taxes by hand. I thought this was a good approach because it would help me better understand the practical challenges of the tax code.

Bravest man IRS

Dan Mitchell has dropped out of this contest

But it’s time to confess that I broke down and used Turbotax for yesterday’s tax return.

It’s not that my financial affairs are complicated. I basically get my Cato salary and a bit of income from speeches and articles. But even that became too much of a challenge. The tipping point was the form for Health Savings Accounts. The IRS is yelling at me for how I filled out this form in past years, and I fear that I will be perpetually in their cross hairs without relying on a computer program to avoid mistakes.

To help me deal with yesterday’s traumatic experience, I’m sharing some very good cartoons.

We’ll start with one from Gary Varvel.

IRS Cartoon 1

Sort of the visual version of this letter-to-the-editor.

Our next cartoon, which may be my favorite of the group, is from Glenn McCoy.

IRS Cartoon 2

By the way, if you don’t think the IRS is capable of thuggery, read this horrifying story.

I don’t know Paul Fell’s work, but this next cartoon is a very good introduction.

IRS Cartoon 3

This is the second time the grim reaper has appeared in a cartoon. The first time involved the death tax.

Last but not least, we have a Chip Bok cartoon about tax code complexity.

IRS Cartoon 4

As a bonus, it also features the complexity of Obamacare. If you like cartoons that mix the IRS and Obamacare, check out this classic from Glenn McCoy and this gem by Gary Varvel.

If you still need to be cheered up, here’s some more IRS humor to brighten your day, including the IRS version of the quadratic formula, a new Obama 1040 form, a list of tax day tips from David Letterman, a cartoon ofhow GPS would work if operated by the IRS, an IRS-designed pencil sharpener, a sale on 1040-form toilet paper (a real product), and two songs about the tax agency (here and here),  and a PG-13 joke about a Rabbi and an IRS agent.

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I’m very leery of corporate tax reform, largely because I don’t think there are enough genuine loopholes on the business side of the tax code to finance a meaningful reduction in the corporate tax rate.

That leads me to worry that politicians might try to “pay for” lower rates by forcing companies to overstate their income.

Based on a new study about so-called corporate tax expenditures from the Government Accountability Office, my concerns are quite warranted.

The vast majority of the $181 billion in annual “tax expenditures” listed by the GAO are not loopholes. Instead, they are provisions designed to mitigate mistakes in the tax code that force firms to exaggerate their income.

Here are the key findings.

In 2011, the Department of the Treasury estimated 80 tax expenditures resulted in the government forgoing corporate tax revenue totaling more than $181 billion. …approximately the same size as the amount of corporate income tax revenue the federal government collected that year. …According to Treasury’s 2011 estimates, 80 tax expenditures had corporate revenue losses. Of those, two expenditures accounted for 65 percent of all estimated corporate revenues losses in 2011 while another five tax expenditures—each with at least $5 billion or more in estimated revenue loss for 2011—accounted for an additional 21 percent of corporate revenue loss estimates.

Sounds innocuous, but take a look at this table from the report, which identifies the “seven largest corporate tax expenditures.”

GAO Tax Expenditure Table

To be blunt, there’s a huge problem in the GAO analysis. Neither depreciation nor deferral are loopholes.

I wrote a detailed post explaining depreciation earlier this month, citing three different experts on the issue. But if you want a short-and-sweet description, here’s how I described depreciation in my post on corporate jets.

If a company purchases a jet for $20 million, they should be able to deduct – or expense – that $20 million when calculating that year’s taxable income… A sensible tax system defines profit as total revenue minus total costs – including purchases of private jets. But today’s screwy tax code forces them to wait five years before fully deducting the cost of the jet (a process known as depreciation). Given that money today has more value than money in the future, this is a penalty that creates a tax bias against investment (the tax code also requires depreciation for purchases of machines, structures, and other forms of investment).

In other words, businesses should be allowed to immediately “expense” investment expenditures. What the GAO refers to as “accelerated depreciation” is simply the partial mitigation of a penalty, not a loophole.

The same is true about “deferral.” Here’s what I wrote about that issue in February 2010.

Under current law, the “foreign-source” income of multinationals is subject to tax by the IRS even though it already is subject to all applicable tax where it is earned (just as the IRS taxes foreign companies on income they earn in America). But at least companies have the ability to sometimes delay when this double taxation occurs, thanks to a policy known as deferral.

I added to those remarks later in the year.

From a tax policy perspective, the right approach is “territorial” taxation, which is the common-sense notion of only taxing activity inside national borders. It’s no coincidence that all pro-growth tax reform plans, such as the flat tax and national sales tax, use this approach. Unfortunately, America is one of the world’s few nations to utilize the opposite approach of “worldwide” taxation, which means that U.S. companies face the competitive disadvantage of having two nations tax the same income. Fortunately, the damaging impact of worldwide taxation is mitigated by a policy known as deferral, which allows multinationals to postpone the second layer of tax.

Simply stated, the U.S. government should not be trying to tax income earned in other countries. “Deferral” is the mitigation of a penalty, not a loophole.

So why would the GAO make these mistakes? Well, to be fair to the bureaucrats, they simply relied on the analysis of the Treasury Department.

But why does Treasury (and the Joint Committee on Taxation) make these mistakes? The answer is that they use the “Haig-Simons” tax base as a benchmark, and that approach assumes bad policies such as the double taxation of income that is saved and invested. If you want to get deep in the weeds of tax policy, I shared late last year some good analysis on Haig-Simons produced by my colleague Chris Edwards.

By the way, properly defining loopholes also is an issue for reform on the individual portions of the tax code. I’ve previously pointed out the flawed analysis of the Tax Policy Center, which put together a list of the 12 largest “tax expenditure” and included six items that don’t belong.

To conclude, the right tax base is what’s called “consumed income.” But that’s simply another way of saying that the system should only tax income one time, and it’s how income is defined for both the flat tax and national sales tax.

One final comment about GAO. It’s understandable that they used the Treasury Department’s methodology, but they also should have produced a list of tax expenditures based on a consumed-income tax base. That’s basic competence and fairness.

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