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Archive for May, 2013

We’ve gotten to the point where you need a guide-book to keep track of all the scandals in Washington.

As a fiscal policy wonk, I focus mostly on the sleaze at the IRS, but I also recognize that the other scandals are equally troubling.

So I’m amused by Lisa Benson’s portrayal of the…um…plumbing problems at the White House.

DC Septic Cartoon

But there’s a theme to all the scandals, regardless of whether they’re happening now under Obama or whether they happened under Bush or during the reign of previous Presidents: Many of them take place solely because government is large, bloated, and involved in areas where it doesn’t belong.

Here’s my video explaining why corruption is much more common when government is bigger.

P.S. You can see some of my favorite Benson cartoons herehere, here, here, here, here, here, here, here, here, here, here, here, herehereherehereherehere, hereherehere, and here.

And here’s my favorite one, which criticized Obama’s class warfare policy and became part of my political cartoon contest.

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What’s the most absurd “health” expenditure by government?

Your tax dollars at work

There are lots of potential responses, including $240 million for penis pumps. Or how about the fact that Obamacare allows taxpayer-subsidized viagra for sex offenders?

But another potential answer is cosmetic surgery for “droopy eyelids.” Here are some of the details from a Miami Herald report.

Aging Americans worried about their droopy upper eyelids often rely on the plastic surgeon’s scalpel to turn back the hands of time. Increasingly, Medicare is footing the bill. Yes, Medicare. The public health insurance program for people over 65 typically does not cover cosmetic surgery… In recent years, though, a rapid rise in the number of so-called functional eyelid lifts, or blepharoplasty, has led some to question whether Medicare is letting procedures that are really cosmetic slip through the cracks — at a cost of millions of dollars. …From 2001 to 2011, eyelid lifts charged to Medicare more than tripled to 136,000 annually, according to a review of physician billing data by the Center for Public Integrity. In 2001, physicians billed taxpayers a total of $20 million for the procedure. By 2011, the price tag had quadrupled to $80 million. The number of physicians billing the surgery more than doubled. …surgeons also acknowledge an increased awareness of the surgery fueled by reality television, word-of-mouth referrals, and advertising that promises a more youthful appearance. And doctors concede they face increased pressure from patients to perform eyelid lifts, even when they do not meet Medicare’s requirement that peripheral vision actually be impaired.

Yet even though the Medicare requirements aren’t being met, these surgeries are still taking place. Why? Well, because the doctors and old people both realize that Uncle Sam will pay the bill so long as you make a nebulous claim that peripheral vision is affected.

Just like doctors and scammers will agree on a diagnosis of “bad back” or “mental illness” in order to get somebody on the taxpayer-financed disability gravy train.

In other words, once politicians create a pile of free money, people will figure out ways of getting their hands on that money.

That’s true for all programs.

But because of the amounts of money involved, Medicare is a far bigger problem than other programs, as explained in this video.

Which is why we desperately need the right kind of entitlement reform.

P.S. You won’t be surprised to know that other nations also have crazy government-financed health systems. In the United Kingdom, for instance, you can get a boob job at taxpayer expense. The government in the United Kingdom also provides taxpayer-financed sex trips to Amsterdam. And the bureaucrats at the European Commission get penile implants at public expense.

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I’ve shared some bizarre horror stories about adults being victimized by anti-gun fanaticism, including the Washington, DC, man who got fined $1,000 for saving a child’s life and a British man who got arrested for finding a gun and turning it over to the police.

But I get more worried about the future of the country when I read reports of children being subjected to this kind of politically correct nonsense.

Consider, for instance, these absurd details from a local news report.

Lego gunA Massachusetts kindergartener has been given detention and could be suspended from the bus after bringing a Lego-sized gun to school last week. …the incident happened on an Old Mill Pond Elementary School bus in Palmer last week. A 6-year-old had the toy gun, which is slightly larger than a quarter, on the bus and it was seen by another student, who alerted the bus driver. The boy’s mother, Mieke Crane, said her son had to write a letter of apology to the driver, was given detention and could be temporarily suspended from the bus.

Reading that passage, I don’t know whether to be more angry with the bratty tattle-tale kid who told the bus driver, or with the bus driver who obviously must have informed the school.

Both of them could use some serious counseling.

But that’s just part of the story.

The school sent home a letter to parents explaining what happened, stressing no gun was on the bus and there was never any danger. “(The driver) said he caused quite a disturbance on the bus and that the children were traumatized,” Crane told WGGB.

A letter to parents about a tiny plastic toy gun?!? Are the bureaucrats in this school so under-worked that they have time to waste on such nonsense? If I was a parent in this school district, I would put my kids in a private school.

Especially if it’s true that “children were traumatized” by a piece of Lego. I wouldn’t want to take the risk that wimpiness and poor cognitive skills could be transmitted by proximity to my kids (perhaps causing them to need “emotional support” animals in college).

By the way, this is not an isolated example. To get depressed about the future of the country, read these posts about children being exposed to foolish thinking.

Stories like this make me wonder whether I should emigrate, though the rest of the world tends to be in worse shape so the moral of the story is that we need to save the United States from the brainless (and overpaid) bureaucrats who are trying to ruin our children.

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As a long-time advocate of tax reform, I’m not a fan of distortionary loopholes in the tax code. Ideally, we would junk the 74,000-page internal revenue code and replace it with a simple and fair flat tax – meaning one low rate, no double taxation, and no favoritism.*

The right kind of tax reform would generate more growth and also reduce corruption in Washington. Politicians no longer would have the ability to create special tax breaks for well-connected contributors.

But we won’t get to the right destination if we have the wrong map, and this is why a new report about “tax expenditures” from the Congressional Budget Office is so disappointing.

As you can see from this excerpted table, CBO makes the same mistake as the Tax Policy Center and assumes that there should be double taxation of income that is saved and invested. As such, they list IRAs and 401(k)s as tax expenditures, even though those provisions merely enable people to avoid being double-taxed.

Likewise, the CBO report assumes that there should be double taxation of dividends and capital gains, so provisions to guard against such destructive policies also are listed as tax expenditures.

CBO Tax Expenditure List

The CBO report says that tax expenditures will total about $12 trillion over the next 10 years, but about one-third of that amount (which I’ve marked with a red X) don’t belong on the list.

By the way, at least the Tax Policy Center has an excuse for putting its thumb on the scale and issuing a flawed estimate of tax expenditures. It’s a project of the Brookings Institution and Urban Institute, both of which are on the left side of the political spectrum. So it’s hardly a surprise that they use a benchmark designed to promote punitive tax policy.

But what’s CBO’s excuse?

To be fair, at least CBO admitted in the report that there’s a different way of seeing the world.

…tax expenditures are measured relative to a comprehensive income tax system. If tax expenditures were evaluated relative to an alternative tax system—for instance, a comprehensive consumption tax, such as a national retail sales tax or a value-added tax—some of the 10 major tax expenditures analyzed here would not be considered tax expenditures. For example, because a consumption tax would exclude all savings and investment income from taxation, the exclusion of net pension contributions and earnings would be considered part of the normal tax system and not a tax expenditure.

But admitting the existence of another approach doesn’t let CBO off the hook. At the very least, the bureaucracy should have produced a a parallel set of estimates for tax expenditures assuming no double taxation. That basic competence and fairness.

By the way, the Government Accountability Office is worse than CBO. When GAO did a report on corporate tax expenditures, that bureaucracy didn’t even acknowledge that there was an alternate way of looking at the data.

*Actually, the ideal approach would be to dramatically reduce the burden of government spending, shrinking the size and scope of the federal government back to what the Founding Fathers had in mind. Under that system, there presumably wouldn’t be a need for any broad-based tax.

P.S. This new report is not even close to being the worst thing produced by CBO. The bureaucrats on several occasions have asserted that higher taxes are good for growth, even to the point of implying that the growth-maximizing tax rate is 100 percent! And CBO is slavishly devoted to Keynesian economics, notwithstanding several decades of evidence that you can’t make an economy richer by taking money out of one pocket and putting it in another pocket.

Yet for inexplicable reasons, Republicans failed to deal with CBO bias back when they were in charge.

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John Geary is not a good person.

He’s been a bureaucrat for about a decade, which almost surely means he’s over-paid and under-worked.

IRS welfareNot only is he a bureaucrat, but his job is to distribute welfare, which means he’s been screwing taxpayers and trapping poor people into government dependency.

But apparently he wasn’t satisfied with screwing taxpayers and poor people, at least in the figurative sense of the word. Here’s some of a report from a local CBS station.

Welfare Bureaucrat CriminalA state welfare worker is facing charges after allegedly offering benefits in exchange for sex. …According to the police criminal complaint, Geary also repeatedly asked the woman to smoke crack with him on the weekends when his wife was working and his children were asleep in their North Versailles home. …Police think there may be more victims as Geary allegedly told the woman that he had done the same thing with women in the past.

Gee, he sounds like a really swell guy and a model husband and father, wouldn’t you agree?

P.S. Perhaps Mr. Geary should be the first non-recipient member of the Moocher Hall of Fame?

P.P.S. Furthermore, we could include this in the Great-Moments-in-Local-Government series. Previous versions can be seen here, here, here, here, here, here, here, here, here, here, here, here, and here.

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Earlier this month, I explained four reasons why the Apple “tax avoidance” issue is empty political demagoguery.

And Rand Paul gave some great remarks at a Senate hearing, excoriating some of his colleagues for trying to pillage the company.

But this Robert Ariail cartoon may be the best summary of the issue.

Arial Apple Cartoon

What makes this cartoon so effective is that it properly and cleverly identifies what’s really driving the political class on this issue. They want more revenue to finance a bigger burden of government spending.

When I did my contest for best political cartoonist, I picked a cartoon about Greece and euro for Robert Ariail’s entry. While I still think that was a very good cartoon, this Apple cartoon would probably take its place if I did a new contest.

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The establishment media is very biased, largely in that they decide to cover stories that will help the left.

But that’s such a dog-bites-man observation and it hardly merits any discussion.

I’d much rather make fun of the lapdog press, which is why I’ve shared some funny cartoons here and here.

But whoever put this poster together deserves an award for cleverness. It not only nails the press for bias, but also mocks them for being treated like dirt by the establishment.

Media Chumps

Though I still think this cartoon is funniest thing I’ve ever seen about media bias.

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I’ve frequently argued that “third-party payer” is the main problem with the healthcare system. In simpler terms, this is the notion that a market won’t function very well if consumers think they’re spending someone else’s money.

Why be a careful consumer, after all, if someone else is picking up the tab?

This is a pervasive problem in the United States, thanks to government programs such as Medicaid and Medicare that account for nearly 50 percent of total healthcare spending.

But our supposedly private insurance system also contributes to the problem. Under our convoluted internal revenue code, there’s no tax on worker compensation in the form of employer-provided fringe benefits such as health insurance. This allows workers to avoid a significant amount of both income tax and payroll tax by getting more and more of their compensation in the form of fringe benefits.

And since the average employer-provided family policy now costs about $15,000, the tax savings are significant. I like it when the government is deprived of revenue, of course, but this policy also contributes to the third-party payer problem by encouraging over-insurance.

Indeed, we’ve reached the point where only 12 percent of healthcare costs are paid for directly by the consumer. No wonder the healthcare market doesn’t function very well!

With this bit of background, let me explain why I’m about to say something quasi-nice about Obamacare.

Since I’ve already said the law is a fiscal nightmare and explained how it further cripples market forces in healthcare, this may be a bit of a surprise.

But even ogres and trolls occasionally have good points, and the same is true of Obamacare.

There’s a provision in the law that will cap the tax break for employer-provided health insurance. Here are parts of a New York Times report.

Say goodbye to that $500 deductible insurance plan and the $20 co-payment for a doctor’s office visit. They are likely to become luxuries of the past. …Expect to have your blood pressure checked or a prescription filled at a clinic at your office, rather than by your private doctor. Then blame — or credit — the so-called Cadillac tax, which penalizes companies that offer high-end health care plans to their employees. …Companies hoping to avoid the tax are beginning to scale back the more generous health benefits they have traditionally offered and to look harder for ways to bring down the overall cost of care. In a way, the changes are right in line with the administration’s plan: To encourage employers to move away from plans that insulate workers from the cost of care and often lead to excessive procedures and tests, and galvanize employers to try to control ever-increasing medical costs. …as many as 75 percent of plans could be affected by the tax over the next decade — unless employers manage to significantly rein in their costs.

The key passage in the above excerpt is that this change will “encourage employers to move away from plans that insulate workers from the cost of care.”

That’s just another way of describing how to deal with the third-party payer problem.

But I’m not an unqualified fan of this provision of Obamacare. I like getting rid of tax breaks, but not if it means more money for government. I want to use the money to lower tax rates, not to fatten government coffers. Needless to say, that’s not what happened with Obamacare.

Moreover, I don’t want employers figuring out how to reduce costs. Consumers need to be in charge, But if you read more of the story, it’s clear that many supporters of Obamacare don’t understand this critical distinction.

Proponents of the law say the Cadillac tax is helping bring down costs by making employers pay attention to what their health care costs are likely to be in the long run. “It’s really one of the most significant provisions” in the Affordable Care Act, said Jonathan Gruber, the M.I.T. economist who played an influential role in shaping the law.

Since Prof. Gruber played an “influential role” in the law, I guess we shouldn’t be surprised that he’s misguided even on this provision. But let’s set that aside.

I just wanted to point out that the “Cadillac Tax” would be my choice if I was forced to identify a silver lining to the dark cloud of Obamacare.

P.S. I’m not trying to rationalize a bad law. I want Obamacare repealed and I actually am reasonably optimistic that this can happen.

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I shared some fascinating details the other day about how federal taxes inhibited the development of America’s beer industry.

And I’ve used a story about buddies sharing beer to illustrate the dangers of redistribution and class warfare.

But this blog hasn’t paid much attention to wine. Well, thanks to this new map from the Tax Foundation, that oversight has been addressed.

I reckon the politicians in Kentucky don’t have much use for those effete, wine-sipping bi-coastal elites?

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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Did President Obama and his team of Chicago cronies deliberately target the Tea Party in hopes of thwarting free speech and political participation?

Was this part of a campaign to win the 2012 election by suppressing Republican votes?

Perhaps, but I’ve warned that it’s never a good idea to assume top-down conspiracies when corruption, incompetence, politics, ideology, greed, and self-interest are better explanations for what happens in Washington.

Writing for the Washington Examiner, Tim Carney has a much more sober and realistic explanation of what happened at the IRS.

If you take a group of Democrats who are also unionized government employees, and put them in charge of policing political speech, it doesn’t matter how professional and well-intentioned they are. The result will be much like the debacle in the Cincinnati office of the IRS. …there’s no reason to even posit evil intent by the IRS officials who formulated, approved or executed the inappropriate guidelines for picking groups to scrutinize most closely. …The public servants figuring out which groups qualified for 501(c)4 “social welfare” non-profit status were mostly Democrats surrounded by mostly Democrats. …In the 2012 election, every donation traceable to this office went to President Obama or liberal Sen. Sherrod Brown. This is an environment where even those trying to be fair could develop a disproportionate distrust of the Tea Party. One IRS worker — a member of NTEU and contributor to its PAC, which gives 96 percent of its money to Democratic candidates — explained it this way: “The reason NTEU mostly supports Democratic candidates for office is because Democratic candidates are mostly more supportive of civil servants/government employees.”

Tim concludes with a wise observation.

As long as we have a civil service workforce that leans Left, and as long as we have an income tax system that requires the IRS to police political speech, conservative groups can always expect special IRS scrutiny.

And my colleague Doug Bandow, in an article for the American Spectator, adds his sage analysis.

The real issue is the expansive, expensive bureaucratic state and its inherent threat to any system of limited government, rule of law, and individual liberty. …the broader the government’s authority, the greater its need for revenue, the wider its enforcement power, the more expansive the bureaucracy’s discretion, the increasingly important the battle for political control, and the more bitter the partisan fight, the more likely government officials will abuse their positions, violate rules, laws, and Constitution, and sacrifice people’s liberties. The blame falls squarely on Congress, not the IRS.

I actually think he is letting the IRS off the hook too easily.

But Doug’s overall point obviously is true.

…the denizens of Capitol Hill also have created a tax code marked by outrageous complexity, special interest electioneering, and systematic social engineering. Legislators have intentionally created avenues for tax avoidance to win votes, and then complained about widespread tax avoidance to win votes.

So what’s the answer?

The most obvious response to the scandal — beyond punishing anyone who violated the law — is tax reform. Implement a flat tax and you’d still have an IRS, but the income tax would be less complex, there would be fewer “preferences” for the agency to police, and rates would be lower, leaving taxpayers with less incentive for aggressive tax avoidance. …Failing to address the broader underlying factors also would merely set the stage for a repeat performance in some form a few years hence. …More fundamentally, government, and especially the national government, should do less. Efficient social engineering may be slightly better than inefficient social engineering, but no social engineering would be far better.

Amen. Let’s rip out the internal revenue code and replace it with a simple and fair flat tax.

But here’s the challenge. We know the solution, but it will be almost impossible to implement good policy unless we figure out some way to restrain the spending side of the fiscal ledger.

At the risk of over-simplifying, we will never get tax reform unless we figure out how to implement entitlement reform.

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Whether it’s American politicians trying to extort more taxes from Apple or international bureaucrats trying to boost the tax burden on firms with a global corporate tax return, the left is aggressively seeking to impose harsher fiscal burdens on the business community.

A good (or “bad” would a more appropriate word) example of this thinking can be found in the New York Times, where Steven Rattner just wrote a column complaining that companies are using mergers to redomicile in jurisdictions with better tax law.*

He thinks the right response is higher taxes on multinationals.

While a Senate report detailing Apple’s aggressive tax sheltering of billions of dollars of overseas income grabbed headlines this week, …the American drug maker Actavis announced that it would spend $5 billion to acquire Warner Chilcott, an Irish pharmaceuticals company less than half its size. Buried in the fifth paragraph of the release was the curious tidbit that the new company would be incorporated in Ireland, even though the far larger acquirer was based in Parsippany, N.J. The reason? By escaping American shores, Actavis expects to reduce its effective tax rate from about 28 percent to 17 percent, a potential savings of tens of millions of dollars per year for the company and a still larger hit to the United States Treasury. …Eaton Corporation, a diversified power management company based for nearly a century in Cleveland, also became an “Irish company” when it acquired Cooper Industries last year. …That’s just not fair at a time of soaring corporate profits and stagnant family incomes. …President Obama has made constructive proposals to reduce the incentive to move jobs overseas by imposing a minimum tax on foreign earnings and delaying certain tax deductions related to overseas investment.

But Mr. Rattner apparently is unaware that American firms that compete in other nations also pay taxes in other nations.

Too bad he didn’t bother with some basic research. He would have discovered some new Tax Foundation research by Kyle Pomerleau, which explains that these firms already are heavily taxed on their foreign-source income.

Tax Foundation - Overseas Corporate Tax Burden…the amount U.S. multinational firms pay in taxes on their foreign income has become a common topic for the press and among politicians. Some of the more sensational press stories and claims by politicians lead people to believe that U.S. companies pay little or nothing in taxes on their foreign earnings. Last year, even the president suggested the U.S. needs a “minimum tax” on corporate foreign earnings to prevent tax avoidance. Unfortunately, such claims are either based upon a misunderstanding of how U.S. international tax rules work or are simply careless portrayals of the way in which U.S. companies pay taxes on their foreign profits. …According to the most recent IRS data for 2009, U.S. companies paid more than $104 billion in income taxes to foreign governments on foreign taxable income of $416 billion. As Table 1 indicates, companies paid an average effective tax rate of 25 percent on that income.

Unfortunately, the New York Times either is short of fact checkers or has very sloppy editors. Here are some other egregious errors.

And none of this counts Paul Krugman’s mistakes, which are in a special category (see here, here, here, here, and here for a few examples).

*There is an important lesson to be learned when American companies redomicile overseas. Unfortunately, the New York Times wants to make a bad system even worse.

P.S. Rand Paul has a must-watch video on the issue of anti-Apple demagoguery.

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Notwithstanding the title of this post, this is not a story about a taxpayer fighting against the IRS. If you want that kind of story (and if you have a strong stomach), you can read about how an IRS thug named Robert Norlander tried to ruin the life of a guy named Charlie Engle.

Or, on a lighter note, you can read about Evan Mathis and his “encounter” with the IRS. But that’s not today’s topic either.

Instead, we’re introducing a new political cartoonist named Jim McKee, who came to my attention when a reader recommended his work in the comment section of a post featuring about 10 other cartoons about the IRS scandal.

As you can see from these cartoons, I’m very happy to be introduced to Jim McKee, particularly since he’s generating some great material about the IRS scandal. Let’s start with a cartoon he produced that calls attention to the fact that an IRS hack pleaded the fifth even though taxpayers don’t have similar rights when confronted by tax collectors.

McKee Cartoon 1

And here’s another good one, which reminds me of the Glenn Foden cartoon in this post.

McKee Cartoon 2

By the way, the IRS actually is concerned about its image. This is the bureaucracy, after all, that decided to squander $15 million of our money on a PR campaign.

Anyhow, McKee has given us some very amusing cartoons. But let’s not lose sight of the fact that we have a terrible tax code, which is enforced by some terrible people.

The politicians deserve most of the blame, but you can see from these examples that the IRS bureaucracy deserves scorn.

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Last month, Amity Shlaes came to Cato to discuss her superb new book about Calvin Coolidge.

I heard her discuss the book back in January while participating in Hillsdale College’s conference on the 100th anniversary of the income tax, but the book is so rich with information that I was glad for the opportunity to listen to her provide additional insights on a great President.

I also got to provide some commentary on the book and the lessons that we can learn from the Coolidge era.

I managed to talk for more than 15 minutes, but I could have boiled my remarks down to these two points.

  1. Small government is the best way to achieve competent and effective government. Coolidge and his team were able to monitor government and run it efficiently because the federal budget consumed only about 5 percent of GDP. But when the federal budget is 23 percent of GDP, by contrast, it’s much more difficult to keep tabs on what’s happening – particularly when the federal government operates more than 1,000 programs. Even well-intentioned bureaucrats and politicians are unlikely to do a good job, as illustrated by this Eric Allie cartoon.
  2. Higher tax rates don’t automatically lead to more tax revenue. Coolidge and his Treasury Secretary practiced something called “scientific taxation,” but it’s easier just to call it common sense. Since Amity’s book covered the data from the 1920s, I shared with the audience some amazing data from the 1980s showing that lower tax rates on the “rich” led to big revenue increases.

But if you don’t believe me, listen to these powerful remarks from “Silent Cal.”

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I’ve been sharing one-liners from the late-night talk shows for a long time, mostly because I enjoy mocking politicians (and also because the folks at News-max are very good at compiling them).

So I think I have at least a vague sense of where they are coming from. Well, ever since Jay Leno announced that he’s retiring, it sure seems like his jokes have veered in an anti-Obama direction.

Enjoy his latest, as well as contributions from others.

Jay Leno

  • Time magazine found a picture of President Obama at his high school prom back in 1979. Let me tell you how long ago that was. Back then, Obama had to ask a girl for her phone number. He couldn’t illegally obtain it through the Justice Department.
  • It is not looking good for President Obama. Today, his teleprompter took the Fifth. In fact, the White House has changed its slogan from “Yes, we can” to “No, I can’t remember.”
  • The latest scandal in Washington, of course, is raising questions about the IRS. You know, I have a question. Why is it called the Internal Revenue Service? How is having your money confiscated a service?
  • A Democratic congressman said that he worries that the IRS scandal might have a chilling effect on the IRS and that they might be afraid to audit people. So finally some good is coming out of all of this.
  • White House officials continue to insist that President Obama knew nothing about the IRS scandal until we all heard about it in the news last week. They said because there was an investigation under way, it would have been inappropriate to tell him. And besides, Obama was too busy not knowing anything about Benghazi.
  • Anthony Weiner has formally announced he is running for mayor of New York City. He posted a video announcing it just after midnight — and traditionally, being online in the middle of the night has always worked so well for Mr. Weiner.
  • President Obama gave the commencement address at Morehouse College over the weekend. Great speech, very inspiring. He told the young graduates their future is bright — unless, of course, they want jobs.
  • The White House admitted President Obama’s chief of staff had advance warning that the IRS was targeting conservative groups. President Obama says the first time he heard about the IRS and AP scandals was from the media. See, that’s why President Obama holds press conferences. It’s not to explain what’s going on. It’s to find out what’s going on.
  • These White House scandals are not going away any time soon. I’ll tell you how bad it’s looking for President Obama: People in Kenya are now saying he’s 100 percent American.
  • This week will mark the 37th time House Republicans have tried to repeal Obamacare. If Republicans really wanted to do away with Obamacare they should just endorse it as a conservative non-profit and let the IRS take it down.
  • President Obama announced the appointment of a new acting commissioner of the IRS — the other guy was fired. See, they’re called “acting commissioner” because you have to act like the scandal doesn’t involve the White House.
  • A lot of critics are now comparing President Obama to President Nixon. The good news for Obama? At least he’s no longer being compared to President Carter.
  • This week marks the 40th anniversary of the Watergate hearings. For those of you too young to remember, back then the administration had an enemies list. They were spying on reporters, and they used the IRS to harass groups they didn’t like. Thank God those days are gone forever.
  • A lot of critics are comparing President Obama to President Richard Nixon, which is unfair. Nixon’s unemployment rate was only 5 percent.
  • Today the White House unveiled its latest high-tech weapon: the IRS audit.
  • I love what IRS commissioner Steve Miller said today about this whole targeting conservative groups thing. He said, “Mistakes were made, but they were in no way made with a political or partisan motivation.” Yeah, “Mistakes were made” — try saying THAT during your next IRS audit.

David Letterman

  • I feel bad for Barack Obama. He’s got the Benghazi scandal, the IRS scandal, and the FBI wiretapping phones. The president is in so much trouble politically, he’s thinking about killing bin Laden again.
  • Have you folks been paying attention to what’s going on in Washington? In a matter of six weeks we have three big scandals, and it looks like President Obama and all his buddies in the White House may go to prison. Finally, some good news for the Romney campaign.
  • People always say this to me: “Hey, Letterman,” they say. “Why don’t you make jokes about Obama?” All right, I’ll tell you why. I don’t make jokes about him. Because I don’t want the FBI tapping my phone, that’s why.

Conan

  • A new international poll finds that the least popular country in the world is Iran. After hearing this, North Korea said, “What do we have to do?”
  • During a Senate hearing yesterday, Senator John McCain said it was too hard to always have to update apps on his iPhone. No one has the heart to tell him the device he was holding was a garage door opener.
  • President Obama is in a lot of hot water lately. Despite the scandals, 53 percent of Americans say they approve of the job he’s doing. The other 47 percent are being audited.
  • A new report just came out. It says someone close to the president knew about the IRS scandal and kept his mouth shut. In other words, we can rule out Joe Biden.
  • In a new interview, Joe Biden says he spends four or five hours every day with President Obama. In response, Obama said hiring that Obama impersonator was the best decision he’s ever made.
  • Since President Obama took office, the Democratic Party has lost nine governorships, 56 members of Congress, and two Senate seats. In his defense, Obama said, “Well, I did promise change.”

Jimmy Fallon

  • Time magazine just released a picture of a 17-year-old President Obama with his prom date. They would’ve published a picture of Joe Biden with his prom date, but his mom didn’t want to be photographed.
  • A woman in New Jersey just found her missing dog after she grilled pork in her backyard and he came home because of the smell. Unfortunately, he was immediately shoved out of the way by Governor Chris Christie.
  • Vice President Joe Biden met with two undocumented immigrants this week to promote the new immigration bill. When they learned they had to sit down with Biden, they went ahead and deported themselves.
  • These scandals at the White House are just getting worse. It turns out that President Obama’s chief of staff knew about the scandal at the IRS three weeks before the president found out. Obama was like, “Anything else you guys aren’t telling me?” And Joe Biden was like, “Uh . . . I broke the copier.”
  • Eagles’ offensive lineman Evan Mathis posted a picture on Instagram that shows him relieving himself on an IRS building with a caption that says, “Audit this!” Or as the IRS said, “OK, see you tomorrow at noon.”
  • President Obama is not having a good week. With three scandals shaking the White House, they’re saying this is one of the worst weeks of Obama’s presidency. Obama was like, “How could things get worse?” And Joe Biden was like, “You rang?”
  • It was just revealed that the Department of Justice secretly recorded the phone calls of AP journalists for two months. Obama promised reporters that the incident will be immediately investigated — by the Department of Justice.

Craig Feruson

  • The IRS has a new boss after it came out they unfairly targeted tea party groups. The president says the new IRS chief is not only good with numbers, but he has more integrity than the last guy. The new guy is Bernie Madoff.

For previous version of these one-liners, click here, herehereherehereherehereherehere,hereherehereherehereherehere, and here.

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Several European nations are suffering from a fiscal crisis.

But that’s just part of the story.

They also have significantly lower incomes than the United States, with living standards about 30 percent-40 percent below American levels.

And while many people are upset about the 7.5 percent joblessness rate in the United States, we’re doing much better than our cousins across the ocean. The unemployment rate averages about 11 percent in the European Union.

Given all this news, you would think that most people would understand that European policy makers would be trying to copy the United States, and not the other way around.

But that would be a rash assumption. There are interventionists in America who want to impose European-style mandates for paid-vacation time.

Here’s some of what USA Today wrote about a new report on the issue.

Nearly one in four Americans (23%) has no paid vacation days, according to a report released today by the Center for Economic and Policy Research, a non-profit based in Washington, D.C. “Relying on businesses to voluntarily provide paid leave just hasn’t worked,” says report co-author John Schmitt… The USA is the only advanced economy that does not require employers to provide paid vacation days, the report says. Many U.S. employers offer paid vacation days and holidays, but no law sets a minimum. The 27-member European Union requires employers to grant at least 20 paid vacation days a year.

The authors want people to conclude that America should be more like Europe.

You won’t be surprised to see that I offered a different opinion.

The center first analyzed vacation and holiday data six years ago. “It is striking that six years after we first looked at this topic, absolutely nothing has changed,” Schmitt says. “U.S law and U.S. employer behavior still lags far behind the rest of the rich countries in the world.” …Daniel Mitchell, a senior fellow at the Cato Institute, a Washington-based think tank, [said]. “When you make it more expensive to hire workers, fewer workers get hired.”

This is a classic example of good intentions leading to bad results.

Would it be nice if we could wave a magic wand and give all workers paid-vacation time? Of course.

Just like it would be nice if we could pass a law that raised everyone’s pay.

Or required employers to provide health insurance.

In the real world, however, these policies all have a cost. Some workers will lose jobs. Others will receive lower pay to offset the cost of paid vacation.

Sometimes the cost will be passed along to consumer. Simply stated, there’s no free lunch.

The moral of the story is that it’s not very advisable to copy Europe, particularly when we see Europe melting down before our eyes.

But as this Michael Ramirez cartoon illustrates, there are some people who want to follow the lemmings over the cliff.

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I’ve shared a bit of Anthony Weiner humor (see here and here), but this dream ticket poster wins the prize.

Weiner-Holder

And it’s not even as risque as this Romney humor, this Schwarzenegger humor, this environmental humor, this t-shirt, or this debt limit video.

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I don’t like giving international bureaucrats tax-free salaries. And it really galls me when they use their privileged positions to promote statism.

So you can understand why I’m not a big fan of the International Monetary Fund.

Dr. Kevorkian: “My assisted suicide campaign would have been much more efficient if I worked at the IMF”

Whether we’re talking more spending, more taxes, more bailouts, or more centralization and harmonization, it seems that the IMF is the Dr. Kevorkian of the global economy.

Or, since Doctor Kevorkian faded from the headlines more than 10 years ago, perhaps it would be better to say that the International Monetary Fund is the Doctor Gosnell of global economic policy.

But I don’t want to get into issues of assisted suicide or post-birth abortions, so let’s just say that the IMF has a very disturbing habit of recommending bad policy. Here are just a few of the items I’ve flagged over the past couple of years.

But you need to give the bureaucrats credit for sticking to their guns.

We have more and more evidence with each passing day that Keynesian economics doesn’t work. President Bush imposed a so-called stimulus plan in 2008 and President Obama imposed an even  bigger “stimulus” in 2009. Based upon the economy’s performance over the past five-plus years, those plans didn’t work.

Japan has spent the past 20-plus years imposing one Keynesian scheme after another, and the net effect is economic stagnation and record debt. Going back further in time, Presidents Hoover and Roosevelt dramatically increased the burden of government spending, mostly financed with borrowing, and a recession became a Great Depression.

That’s not exactly a successful track record

Yet the IMF is undaunted. The bureaucrats are pushing Keynesian snake oil and bigger government all across Europe.

Here are some details from a Wall Street Journal report. about the IMF’s promotion of assisted suicide in Central Europe.

The International Monetary Fund is recommending short-term stimulus for much of Central Europe, where economies are going through their roughest patch in years and the recession in the euro zone has dampened hopes for a quick recovery. …Increased government spending to stimulate economic activity and create jobs is therefore warranted, he said. “Short-term economic policies should be geared toward supporting the economy and not creating an additional drag.” …Amid spending cuts, the countries’ fortunes reversed recently.  …the Czech Republic should ease up on fiscal austerity and embark on pro-growth spending, the leader of the IMF’s Czech mission said. …The IMF also has been encouraging looser monetary policy in both Poland and the Czech Republic.

Gee, not just more Keynesianism, but easy money as well!

The IMF also is pushing bad policy on the Brits (though I’m not sure why they’re bothering since the statist government of David Cameron hardly needs any help in that regard).

Here are some details from the EU Observer.

The UK should delay plans to push through further austerity measures worth £10 billion (€12 billion), the International Monetary Fund (IMF) warned on Wednesday. …The extra cuts would “pose headwinds to growth…..at a time when resources in the economy are under-utilised,” said the Washington-based institution. Instead, the IMF urged London to bring forward plans to invest in infrastructure projects… The government “could undertake a reform of property taxes and consider broadening the VAT base” to pay for the measures.

What’s remarkable is that the IMF isn’t even intellectually honest about its Keynesian proclivities. They’re happy to advocate for more spending, but honest Keynesians also should be against tax hikes. Yet the bureaucrats proposed a couple of tax hikes to “pay for the measures.”

In other words, the IMF agenda is bigger government – with more taxes and more spending.

Which raises the question of why all of us are paying for a bloated bureaucracy that simply tells politicians to implement bad policies? Particularly since politicians have demonstrated over and over again that they’re immensely qualified at concocting their own bad policies?

P.S. To be fair, I should admit that there are rare bits of sanity from the economists at the IMF. They’ve acknowledged, for instance, that the Laffer Curve is real and warned that it makes no sense to push taxes too high. And some of the bureaucrats have even admitted that it sometimes makes sense to reduce the burden of government spending. And even though it wasn’t their intention, IMF bureaucrats provided very strong evidence showing why the value-added tax is a destructive money machine for big government.

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Call me perverse, but I’m enjoying this IRS scandal. It’s good to see them suffer a tiny fraction of the agony they impose on the American people.

I’ve already shared a couple of cartoons on the topic, and I also posted a photo from my newest sports hero that captures how most of us feel about the least-favorite part of the federal behemoth.

Now let’s enjoy some additional cartoons. Let’s start with one from Michael Ramirez, which appropriately mocks Obama for saying we shouldn’t fear the government.

IRS Cartoon 10

Here’s Henry Payne’s contribution, which reminds me that the IRS actually expects us to believe they didn’t engage in political bias.

IRS Cartoon 9

And Ken Catalino suggests that the federal government treats Americans with the same suspicion and hostility accorded to terrorists.

IRS Cartoon 8

Though we should be happy that we’re not being targeted for drone attack. At least not yet.

Speaking of targeting, here’s another Catalino cartoon that recreates a meeting at the IRS.

IRS Cartoon 7

I like this Glenn Foden cartoon, if for no other reason that it would be nice to see taxpayers march on Washington to slay the IRS monster.

IRS Cartoon 6

Here’s another Foden cartoon, which I like because it has the same theme as this Jerry Holbert cartoon, showing big government as a destructive and malicious force.

IRS Cartoon 5

These two Eric Allie cartoons (here and here) have a more charitable interpretation, implying that the damage is unintentional.

Here’s another gem from Ramirez, winner of my cartoonist contest.

IRS Cartoon 4

Lisa Benson weighs in with a cartoon on the army of drones. Sort of like this very good Glenn McCoy cartoon.

IRS Cartoon 3

Here’s another cartoon from Henry Payne, showing Obama’s faux scolding of the IRS.

IRS Cartoon 2

Last but not least, this Chuck Asay cartoon may be the best of the bunch. When we get in trouble with the IRS (even if we’ve done nothing wrong), we’re guilty ’til we prove ourselves innocent.

Too bad we can’t exercise our rights, just like the IRS hack who just pleaded the fifth and refused to answer questions about her role in the scandal.

IRS Cartoon 1

Now that I’ve shared all these cartoons, let’s remember that we should assign some of the blame to politicians.

And I’m not referring to the President and the culture of corruption and Chicago-style sleaze that seems to be engulfing the Obama Administration.

I’m talking about the constant legislative tinkering and the 74,000 pages of Byzantine complexity that has been created in the 100 years since the income tax was created.

However, there are many reasons why the IRS bureaucracy deserves scorn.

So let’s pass the flat tax, but never forget that a disproportionate share of bad people seem drawn to government.

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I woke up this morning in Albania, after a string of speeches for the Free Market Road Show. One of my topics was the terrible jobs outlook for young people.

I sought to give audiences some basic understanding of economics, most notably telling them that businesses won’t create jobs unless the total revenue generated by workers is greater than the total cost of employing those workers.

But I also explained that people don’t have much incentive to find jobs unless they can enjoy better lives while working than they can enjoy while not working. In other words, they may not bother accepting jobs if there’s no significant increase in their living standards.

In other words, you can’t give people lots of handouts and then expect them to be aggressive job seekers.

I should have shared this Robert Gorrell cartoon. It makes the point in a much simpler fashion.

Work for food

This cartoon is quite similar to this Chuck Asay gem, and also has the same theme as this excellent Wizard of Id parody (which tied for 5th-place in the political cartoonist contest).

I did share these two amazing charts (here and here), so the audiences did get some powerful data showing that the welfare state is dramatically undermining incentives to provide labor to the market.

P.S. At least one honest liberal has recognized the danger of government-created dependency.

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Senator Rand Paul is perhaps even better than I thought he would be.

The Founding Fathers would be proud

He already is playing a very substantive role on policy, ranging from his actions of big-picture issues, such as his proposed budget that would significantly shrink the burden of government spending, to his willingness to take on lower-profile but important issues such as repealing the Obama Administration’s wretched FATCA law.

But he also plays a very valuable role by articulating the message of liberty and refusing to allow leftist politicians to claim the moral high ground and use false morality to cloak their greed for other people’s money.

And there’s no better example than what he just did at the Senate hearing about Apple’s tax burden.

Wow. I thought I hit on the key issues in my post on the anti-Apple demagoguery, but Senator Paul hit the ball out of the park.

If you want other video examples of Senator Paul in action, click here to see him grill a TSA bureaucrat and click here to see him rip an Obama appointee on whether Americans should be free to choose the light bulb they prefer.

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This story belongs in my “Great Moments in Local Government” series, which features examples of bureaucratic and political stupidity (see here, here, here, here, here, here, here, here, here, here, here, and here) that will make you laugh, cry, yell, or all of the above.

Not surprisingly, the deeply dysfunctional local government in Washington, DC, wants to be part of this collection.

We have what at first seems like a feel-good story. A little boy is attacked by some vicious pit bulls. Other people in the neighborhood flee to protect themselves. But one man acts quickly and saves the child’s life.

Here are some details from the Washington Times report.

…11-year-old Jayeon Simon and his friend rode bicycles near Eighth and Sheridan streets Northwest in the Brightwood neighborhood. According to court records filed in D.C. Superior Court, three unleashed pit bulls pounced on Jayeon and attacked him. Seeing the attack, Mr. Srigley went inside his home to get his Ruger 9 mm pistol while several other men hopped over fences to get away from the dogs, court records state. From behind the wooden fence of his front lawn, Mr. Srigley began firing at the dogs. His shots attracted the attention of a Metropolitan Police Department officer on bicycle patrol nearby, and he also opened fire on the dogs, killing the other two. The boy survived the attack but now bears scars on his elbow, torso and leg as a reminder.

Mr. Srigley seems like a great guy. Or at least a guy who did something great. Surely he was rewarded, right?

Did he get a commendation from the police department? A ceremonial key to the city from the Mayor?

Mr. Srigley should have been a good liberal, called 911, and relied on the cops to arrive after the child was dead

Don’t be silly. We’re talking about Washington, DC.

…Benjamin Srigley, 39, was required to pay a $1,000 fine…for the three unregistered firearms and the ammunition that investigators found in his possession, said Ted Gest, a spokesman for the office of the attorney general.

But showing great mercy, they decided not to try to send him to prison.

“We took it into account that he saved this boy’s life,” Mr. Gest said.

Gee, what a bunch of swell guys in the DC government. Mr. Srigley is “only” hit with a $1,000 fine.

One hopes that this won’t cause a potential Good Samaritan to let some kid get killed or some woman get raped in the future.

P.S. At least the pit bulls weren’t in a dorm room providing federally-mandated “emotional support.”

P.P.S. One of the comments below reminds me that Mr. Srigley should have been a housebroken journalist since that entitles you to a get-out-of-jail-free card for gun offenses in Washington, DC>

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The Senate is holding a Kangaroo Court designed to smear Apple for not voluntarily coughing up more tax revenue than the company actually owes.

Here are four things you need to know.

Apple is fully complying with the tax law. There is no suggestion that Apple has done anything illegal. The company is being berated by politicians for simply obeying the law that politicians have enacted. What’s really happening, of course, is that the politicians are conducting a show trial in hopes of creating an environment more conducive to tax increases on multinational companies (this is in addition to the OECD effort to impose higher tax burdens on multinational firms).

Left-wing whining

It is better for Apple to retain its profits than it is for politicians to grab the money. If Harry Reid, Barack Obama, and the rest of the crowd in Washington are able to use this fake issue as an excuse to raise taxes, the only things that changes is that the tax system becomes more onerous and politicians have more money to spend. Neither of those results are good for growth, particularly compared to the potential benefits of leaving the money in the productive sector of the economy.

Apple shouldn’t pay any tax to the IRS on any of its foreign-source income. A few years ago, Google was criticized for paying “only” 2.4 percent tax on its foreign-source income, but I explained that was 2.4 percentage points too high. Likewise, when Apple earns money overseas, that should not trigger any tax liability to the IRS since the income already is subject to all applicable foreign taxes (much as, say, Toyota pays tax to the IRS on its US-source income). Good tax policy is based on the common-sense notion of “territorial taxation,” which means governments only tax income and activity within their national borders. Unfortunately, the American tax system is partially based on the anti-competitive policy of “worldwide taxation,” which means the IRS gets to tax income that is earned – and already subject to tax – in other nations. Fortunately, we have a policy called “deferral,” which allows companies to postpone this second layer of tax.

If Apple is trying to characterize US-source income into foreign-source income, that’s because the US corporate tax system is anti-competitive. Multinational companies often are accused of “abusing” transfer-pricing rules on intra-company transactions to inappropriately turn US-source income into foreign-source income. To the extent this happens (and always with IRS approval), it is because the American corporate tax rate is now the highest in the developed world (and the second highest in the entire world), so companies naturally would prefer to reduce their tax burdens by declaring income elsewhere. So the only pro-growth solution is lowering the corporate tax rate.

It’s worth noting, by the way, that the Tax Foundation recently estimated that the revenue-maximizing corporate tax rate is 14 percent.

So if the anti-Apple lynch mob actually wants more revenue, they should learn a Laffer Curve lesson and slash the corporate tax rate.*

*I want to maximize growth, not maximize revenue.

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I’ve shared some nightmare stories of excessive and mindless government regulation.

  1. The Food and Drug Administration raiding a dairy for the terrible crime of selling unpasteurized milk to people who prefer unpasteurized milk.
  2. New York City imposing a $30,000 fine on a small shop because it sold a toy gun.
  3. The pinheads at the Equal Employment Opportunity Commission going after Hooters for not having any male waiters in hot pants and tight t-shirts.
  4. Indiana’s Department of Natural Resources is legally attacking a family for rescuing a baby deer.
  5. An unlucky guy who is in legal hot water for releasing some heart-shaped balloons to impress his sweetheart.

But the regulatory burden goes way beyond these odd anecdotes. We’re talking about a huge cost to the economy, and it’s been getting worse for the past 12 years.

Here are some comments on the President’s inauspicious record from the Wall Street Journal.

Team Obama is now the red tape record holder. …pages in the Code of Federal Regulations hit an all-time high of 174,545 in 2012, an increase of more than 21% during the last decade. …the cost of federal rules exceeded $1.8 trillion, roughly equal to the GDP of Canada. These costs are embedded in nearly everything Americans buy…at $14,768 per household, meaning that red tape is now the second largest item in the typical family budget after housing. Last year 4,062 regulations were at various stages of implementation inside the Beltway. The government completed work on 1,172, an increase of 16% over the 1,010 that the feds imposed in 2011, which was a 40% increase over 722 in 2010. …the Obama Administration did not break the all-time record of 81,405 pages it set in 2010. But the 78,961 pages it churned out in 2012 mean that the President has posted three of the four greatest paperwork years on record. And to be fair, if Mr. Obama were ever to acknowledge that this is a problem, he could reasonably blame George W. Bush for setting a lousy example. Despite the Obama myth that the Bush years were an era of deregulation, the Bush Administration routinely generated more than 70,000 pages a year in the Federal Register.

If those numbers don’t make you sit up and take notice, how about these ones?

My personal “favorite,” as you can imagine, is the regulatory burden of the income tax.

  1. The number of pages in the tax code.
  2. The number of special tax breaks.
  3. The number of pages in the 1040 instruction booklet.

Today’s Byzantine system is good for tax lawyers, accountants, and bureaucrats, but it’s bad news for America. We need to wipe the slate clean and get rid of this corrupt mess. And you know how to make that happen.

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I joked back in 2010 that Barack Obama had a very simple flat tax proposal.

But as you can see, sometimes simple isn’t the same as good.

Well, satire too often becomes reality in a world of greedy and corrupt politicians who think class-warfare is an acceptable guide to tax policy.

I say this because thousands of French taxpayers now are being subject to this satirical Obama flat tax.

Here are some of the grotesque details from a Reuters report.

More than 8,000 French households’ tax bills topped 100 percent of their income last year, the business newspaper Les Echos reported on Saturday, citing Finance Ministry data. …President Francois Hollande’s Socialist government imposed the tax surcharge last year, shortly after taking office… The government has been forced to redraft a proposed bill to levy a temporary 75 percent tax on earnings over 1 million euros, which had been one of Hollande’s campaign pledges. …Since then, a top administrative court has determined that a marginal tax rate higher than 66.66 percent on a single household risked being considered as confiscatory by the council.

Ironically, President Hollande already made a commitment that no taxpayers should have to surrender more than 80 percent of their incomes, but I guess that promise didn’t mean much.

After all, this is the guy who equates higher taxes with patriotism.

No wonder successful people are fleeing the country.

If you want to understand real tax reform, click here.

And here’s my video describing why the right kind of flat tax is a good idea.

This topic is particularly meaningful to me since I’m in the middle of the Free Market Road Show and I’ve been five flat tax nations – Bulgaria, Romania, Kosovo, Macedonia, and Albania – in the past 36 hours.

Too bad there’s little reason to hope that America will ever be part of the flat tax club.

P.S. I guess it’s good that the French court thinks that a 66.66 percent tax is “confiscatory.” But isn’t that true of any tax – at any rate – that is used to fund illegitimate activities?

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I’ve shared this bit of political incorrect terrorism humor from England, as well as this somewhat un-PC bit of tax humor.

But perhaps motivated by the scandal of giving welfare to terrorists, this new video is the most amusing thing I’ve seen from across the ocean.

I almost didn’t post this because it singles out immigrants from the developing world, but since I’ve shared horror stories from home-grown moochers in the U.K., as well as examples of scroungers from Europe who are robbing British taxpayers, I think I’ve covered all the bases.

But in the spirit of inclusiveness, here are other satirical videos worth sharing.

My all-time favorite video satire is from Iowahawk, featuring the Pelosimobile.

And I’ve always thought this left-wing attack against libertarianism is very funny.

And this Tim Hawkins video on the government Candyman is great, as is another version of the song.

Speaking of Tim Hawkins, his home-schooling video is superb.

This spoof of the Chevy Volt also is extremely well done.

Last but not least, here are two brutal Obama teleprompter videos.

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I feel like I’m on the witness stand and I’m being badgered by a hostile lawyers. Readers keep asking me to identify the revenue-maximizing point on the Laffer Curve.

But I don’t like that question. In the past, I’ve explained that the growth-maximizing point on the Laffer Curve is where enough revenue is raised to finance the legitimate – and limited – functions of government.

And one of the earliest posts on this blog explained that we don’t want to maximize tax revenue.

But I still get versions of this question, including a few that accuse me of dodging the issue.

So what the heck, I may as well give an answer to the question. But I won’t give my answer. Instead, I’ll provide the analysis of a Nobel Prize winner.

James Mirrlees won the Nobel Prize in Economics in 1996 and he’s researched this issue, starting with a left-of-center perspective.

Many economists, including Mirrlees, want to use the tax system to achieve a higher degree of equality than would otherwise obtain. This means taking a substantial amount of the additional income of high-income people, which would imply high marginal tax rates on them. But when the government imposes such high marginal tax rates on the highest-income people, it reduces the incentive of the most productive people to be productive. …Economists have long wanted to figure out the optimum, but until Mirrlees’s work no one had been able to solve it.

And what did Mirrlees find? Well, notwithstanding his own preferences, he calculated that the tax rate should be no higher than 20 percent.

Mirrlees started with no presumption against high marginal tax rates. Indeed, he has been an adviser to Britain’s Labour Party, which for decades imposed marginal tax rates in excess of 80 percent. But Mirrlees found that the top marginal tax rate should be only about 20 percent; and moreover, it should be about the same 20 percent for everyone. In short, Mirrlees’s work justified what is now known as a “flat tax,” more appropriately called a “flat tax rate.” Mirrlees wrote, “I must confess that I had expected the rigourous analysis of income taxation in the utilitarian manner to provide arguments for high tax rates. It has not done so.”

Not only a rate of 20 percent, but a flat tax!

Too bad the Labour Party politicians don’t listen to his advice. Heck, the Conservative Party politicians don’t follow his advice either.

But at least we have a rigorous estimate of the revenue-maximizing point on the Laffer Curve.

Though I hasten to add that it’s not the ideal tax rate. As the risk of being repetitive, the tax system should only fund the legitimate functions of government. For much of our history, the government only consumed about 10 percent of economic output and we didn’t need any broad-based tax. So you know where I stand.

That being said, it’s clearly destructive to have tax rates that are above both the growth-maximizing level and the revenue-maximizing level. And that’s where we stand now.

For more information, here’s my video on the Laffer Curve.

And if you want to learn specifically why Obama’s class-warfare agenda is misguided, here’s my Laffer-Curve-lesson-for-Obama post.

P.S. The Tax Foundation has estimated that the revenue-maximizing corporate tax rate is 14 percent.

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I was very pleased to report the other day that the people of France overwhelmingly favor spending cuts, even when they were asked a biased question that presupposed that Keynesian-style spending increases would “stimulate” the economy.

Now I have some polling data about British voters, though I confess I’m not sure whether to be pleased or worried.

You’ll see below two slides that were presented earlier today at the Bucharest stop on the Free Market Road Show. They’re not from my presentation, but rather from the speech by Matthew Sinclair of the UK-based Taxpayers Alliance.

As you can see from this first slide, the good news is that only 12 percent of British people think government taxes and spends too little.

Sinclair 1

On the other hand, it’s a bit worrisome that nearly 1-in-5 Brits believe in UFOs.

What a bunch of idiots.

Then again, nearly 1-in-3 Americans believe that higher taxes would be used for deficit reduction instead of more spending, and that’s an even more preposterous conclusion.

So I shouldn’t make fun of our English cousins.

Here’s some more good-news/bad-news polling data.

The good news is that only 12 percent of Brits think that the government can pay promised benefits (and I bet that number would fall even lower if they saw this shocking data on the U.K.’s long-run fiscal outlook).

Sinclair 2

The bad news is that 13 percent of Brits think the moon landings were faked.

But since 17 percent of Americans actually admit to having positive feelings about the federal government, I’m reluctant to throw stones since my country is a glass house.

Let me close on a positive note. I’ve expressed considerable pessimism about the future of the United Kingdom, and I think the current leadership of the supposed Conservative Party is terrible.

But maybe there’s reason to hope. It wasn’t that long ago that I shared a very encouraging story from England about civil disobedience against a revenue-hungry government.

And now we know from Matthew’s data that the British people have appropriately jaundiced views of their government.

So perhaps if they ever find another Margaret Thatcher, there’s a 5-percent chance that they can pull themselves back from the fiscal abyss.

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I was a bit of a juvenile delinquent.

  • I semi-confessed that I may have set off fireworks in a stairwell at my high school.
  • And I’ve already confessed my role in an “attack” on a float during a homecoming parade.
  • So I may as well admit that I got in trouble during college for having a pet snake in my dorm room.

Given that last bullet point, you would think I would sympathize with people who want to bring pets to school.

And I do, but I don’t sympathize with the notion that the federal government should compel colleges to allow pets – even if they’re for “emotional support.”

Yet that’s exactly what’s happening, thanks to some bureaucrats at a Department that shouldn’t exist. Here are some blurbs from the Wall Street Journal about a new breakthrough in human rights.

College freshman suffering from separation anxiety, take heart: The federal government says universities have an obligation to admit “emotional support” animals into school housing. …emotional support animals (dogs, mostly) provide therapy through companionship and affection.

The pinheads at the Department of Housing and Urban Development say this is required by the Fair Housing Act.

Housing providers must offer people with disabilities a “reasonable accommodation” for emotional support animals under both the Fair Housing Act and Section 504 of the Rehabilitation Act of 1974, the U.S. Department of Housing and Urban Development said in a notice to its regional offices late last month. …The April 25 notice was sent about a week after a federal judge ruled that student housing is covered by the Fair Housing Act, in a lawsuit filed by HUD against the University of Nebraska, on behalf of a student there.

Meet Fido, your new dorm neighbor

Best of all, you can bring any animal you want so long as it doesn’t have a track record of bad conduct.

Housing providers can’t exclude animals based on breed, size or weight. They can, however, refuse an animal that poses a direct threat to the health and safety of others or would wreck havoc on the property, but such refusals must be based on “objective evidence about the specific animal’s actual conduct – not on mere speculation or fear,” the notice says.

So that doberman pinscher is innocent until proven guilty!

Another great development in “human rights” around the world. Indeed, it belongs with these momentous breakthroughs.

Speaking of subsidized birth control, you can enjoy some laughs at Sandra Fluke with this great Reason video, this funny cartoon, and four more jokes here.

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With so many scandals percolating, there are lots of good cartoons being produced.

But I think this Chip Bok gem deserves special praise.

It manages to weave together both the costly Obamacare boondoggle with the reprehensible politicization of the IRS.

So BOHICA, my friends.

IRS Obamacare

If you want other Chip Bok cartoons, click here, here, here, here, here, here (my favorite), here and here.

And for cartoons that mix the IRS and Obamacare, click here, here, and here.

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I have to start this post with a big caveat.

OECD bureaucrats get tax-free salaries but urge higher taxes for everyone else

I’m not a fan of the Paris-based Organization for Economic Cooperation and Development. The international bureaucracy is infamous for using American tax dollars to promote a statist economic agenda.

Most recently, it launched a new scheme to raise the tax burden on multinational companies, which is really just a backdoor way of saying that the OECD (and the high-tax nations that it represents) wants higher taxes on workers, consumers, and shareholders.

But the OECD’s anti-market agenda goes much deeper.

Now that there’s no ambiguity about my overall position, I can admit that the OECD isn’t always on the wrong side. Much of the bad policy comes from its committee system, which brings together bureaucrats from member nations.

The OECD also has an economics department, and they sometimes produce good work. Most recently, they produced a report on the Swiss tax system that contains some very sound analysis – including a rejection of Obama-style class warfare and a call to lower income tax burdens.

Shifting the taxation of income to the taxation of consumption may be beneficial for boosting economic activity (Johansson et al., 2008 provide evidence across OECD economies). These benefits may be bigger if personal income taxes are lowered rather than social security contributions, because personal income tax also discourages entrepreneurial activity and investment more broadly.

I somewhat disagree with the assertion that payroll taxes do more damage than VAT taxes. They both drive a wedge between pre-tax income and post-tax consumption.

But the point about income taxes is right on the mark.

Interestingly, the report also endorses tax competition as a means of restraining the burden of government spending.

Evidence also suggests that tax autonomy may lead to a smaller and more efficient public sector, helping to limit the tax burden and improve tax compliance… Efficiency-raising effects of tax autonomy and tax competition on the public sector have also been reported in empirical research with Norwegian and German data… Tax autonomy generates opportunities to choose the level of public service provision and taxation, although in practice such “voting with your feet” seems mostly limited to young, highly educated and high-income households. Decentralised tax setting also fosters benchmarking of the performance of jurisdictions belonging to the same government level by voters, even in the absence of “voting with your feet”.

The report also notes that tax competition has reduced corporate tax rates.

Tax competition is likely to have contributed significantly to lowering corporate tax rates in Switzerland over the past 25 years. Indeed, empirical evidence shows that the responsiveness of sub-national governments to tax changes of other subnational governments (“tax mimicking”) is the strongest in the case of corporate taxation (Blöchliger and Pinero Campos, 2011). …Progressive corporate income taxes harm incentives for businesses to grow. Since growing businesses are likely to be high performers in terms of productivity, such disincentives are likely to hit high-performing businesses the most, with losses to aggregate productivity performance, which has been modest in Switzerland relative to best-performing high-income countries.

P.S. This isn’t the first time the economists at the OECD have broken ranks with the political hacks that generally control the bureaucracy. In a 1998 Economic Outlook (see page 166), they wrote that “the ability to choose the location of economic activity offsets shortcomings in government budgeting processes, limiting a tendency to spend and tax excessively.”

And in another publication (see page 1), the economists noted that “legal tax avoidance can be reduced by closing loopholes and illegal tax evasion can be contained by better enforcement of tax codes. But the root of the problem appears in many cases to be high tax rates.”

These passages sound like they could have been authored by Pierre Bessard!

P.P.S. I hasten to add that none of this justifies handouts from American taxpayers to the Paris-based bureaucracy any more than occasional bits of rationality from the World Bank (on government spending), IMF (on the Laffer Curve), or United Nations (also on the Laffer Curve) justify subsidies to those organizations.

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