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.

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.

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.

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).

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.

• 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.

• In France, it is against the law to say your husband is under-endowed or that your wife is fat.
• Across Europe, a satellite dish is now a human right.
• In Finland, broadband access is a basic right.
• There’s now an entitlement for free soccer broadcasts in Europe.
• In Italy, you have the right to…um…your testicles.
• Both the United Nations and the Obama Administration think there’s a right to taxpayer-financed birth control.

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.

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.

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.

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.

• The OECD has allied itself with the nutjobs from the so-called Occupy movement to push for bigger government and higher taxes.
• The OECD, in an effort to promote redistributionism, has concocted absurdly misleading statistics claiming that there is more poverty in the US than in Greece, Hungary, Portugal, or Turkey.
• The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.
• The OECD supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”
• The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

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.

When I went to college, Herschel Walker was my guy.

Now, I may have to add Evan Mathis to that distinguished list.

Who is Evan Mathis, you ask?

Well, he’s an offensive lineman for the Philadelphia Eagles who played in college for the Crimson Tide of Alabama.

Since I’m a Georgia Bulldog, I wouldn’t normally hold someone from ‘Bama in high esteem – especially since I haven’t stopped sulking since the SEC Championship Game. but when someone does something that merits high praise, I’m willing to be ecumenical.

And Evan Mathis passes that test, as explained by NBC Sports.

Already the least popular of the federal governmental agencies, the IRS has taken a significant hit in recent days amid news confirming longstanding beliefs that the U.S. tax department exercised its discretion to conduct audits and generally give folks a hard time with politics in mind. Like most if not all Americans, Eagles offensive lineman Evan Mathis doesn’t like it.  Unlike most if not all Americans, Mathis has opted to make his views known, in an entertaining way. Mathis posted on Instagram a photo of himself in the universal standing pee position by an IRS sign, with the message “Audit this.”

So what message was Mathis trying to send? It’s unclear, but there are many reasons why the IRS deserves scorn.

• It has thieving employees.
• It has incompetent employees.
• It has thuggish employees.
• It has brainless employees.
• It has protectionist employees.
• It has wasteful employees.
• And it has victimizing employees.

No wonder I thanked President Obama for unleashing this new scandal and reminding many new people that they should listen to those “voices” who warn about unchecked power in Washington.

P.S. I’m not sure how I’ll react when the IRS resorts to the novel tax-collection tactic that’s being tried in Pakistan.

P.P.S. Maybe Mathis can become a national spokesman for tax reform after he retires from football.

My first speech was yesterday in Greece, which is infamous for a government that is insanely wasteful, even to the point of subsidizing pedophiles and requiring stool samples from folks applying to set up online companies.

But I don’t want to share anything about my remarks, which would be rather familiar to regular readers of this blog.

Instead, I want to share a couple of slides from Professor Aristides Hatzis of the University of Athens.

Let’s start with a look at the number of bureaucrats over time in Greece. You don’t need to read Greek to see that featherbedding exploded over the past 35-plus years.

As you can see, it’s an expanded version of this grim chart.

Now let’s look at another slide from Professor Hatzis.

When you see these numbers (or read this information), it’s a surprise that Greece didn’t collapse earlier.

One reason that I liked the presentation from Professor Hatzis is that he included a couple of amusing cartoons, one of which he borrowed from the United States. Here’s the Gary Varvel cartoon he shared with the Greek audience.

Varvel, by the way, was part of my political cartoonist contest. His cartoon on Social Security and Bernie Madoff was my favorite, but the above cartoon would have been a good addition to the list.

Speaking of cartoons, you can see good cartoons about Obama and Greece here and here.

And here’s a cartoon about Greece and the euro.

I’ll close be recommending this very funny video from a Greek comedian and this non-PC map of how the Greeks view the rest of Europe.

The spendaholics in Washington have squandered $400,000 on underwear that detects cigarette smoke.

I’m not joking. Here are some details from CNS.

Coming Soon to Victoria’s Secret: Trendy and Sexy Government-Funded Underwear

The National Institutes of Health (NIH) has awarded more than $400,000 to a research project involving underwear that can detect when a person smokes cigarettes. …the project…so far has produced a “very early prototype” of the monitoring system, which — in its current state — fits like a vest. …“The modern methods of monitoring smoking, primarily you rely on self-report,” said Dr. Edward Sazonov, an associate professor at the University of Alabama… The PACT Sazonov created is a “very early prototype,” that fits like a vest with multiple straps and wires, far from the “non-invasive, wearable” underwear the project developers had in mind. “It’s not very user friendly,” Sazonov said.

And it’s definitely not taxpayer friendly either.

Why is Uncle Sam wasting $400,000-plus on ugly and clunky underwear? The excuse for this boondoggle is that it will help monitor whether people smoke.

I fail to see how this would promote smoking cessation. I assume 99.99 percent of smokers are aware that they smoke.

Or are we going to have some sort of nanny-state program with the government forcing people to wear the underwear so the snoops in DC can monitor our private lives.

But even if that type of intrusive system would work, why is smoking any business of the federal government? It’s certainly not one of the enumerated powers in Article I, Section VIII.

This is yet another reason why there shouldn’t be any discussion of tax increases. Any government that has $400,000 to spend on a cigarette vest obviously has far too much money on its hands.

P.S. An odious and ridiculous subset of the UK-US Stupidity Contest is anti-gun political correctness. You can read absurd examples here.

Well, a friend just sent me some posters, and four of them are very good.

Several years ago, I shared a couple of funny videos mocking Obama for relying on a teleprompter. Well, here’s a poster of John Edwards and Joe Biden enjoying a private joke on the same topic.

If you like Obama teleprompter humor, I also suggest you click here and here.

George Soros isn’t very popular on the right. If you’re one of the people who don’t like him, I strongly recommend you watch this debate he had with Richard Epstein.

But if you don’t want to deal with intellectual arguments, here’s a very amusing poster.

By the way, Soros actually is against misguided intervention – at least when it affects him.

Let’s now turn our attention to America’s national punchline. You can click here for a good Biden joke, which has the same theme as this poster.

You may also enjoy this satirical video about Biden’s home-defense advice.

Last but not least, you may recall my concern about the downside of amnesty. Well, this poster shows why I’m a bit worried.

Reminds me of one of these very good Jay Leno jokes.

Several years ago, for instance, I was very surprised to see that more than half of the French people would consider moving to the United States if they had the opportunity.

Well, the French have shocked me again. According to new polling data from Pew, the people of France support spending cuts over spending increases by a margin of 81-18, an astounding result.

I’m also surprised that the Spaniards and Italians support spending cuts. The polling results are especially impressive considering that Pew asked the question in a very biased way, presupposing that Keynesian economics actually works.

The fact that so many European saw through this inaccurate wording is very encouraging.

By the way, I can’t resist sharing this part of the Pew survey. It shows that the people of all eight nations think they’re the most compassionate.

On a humorous note, the folks from every nation chose the Germans as the most trustworthy – except the Greeks, who chose themselves.

With my twisted sense of humor, this reminds me of the funny (but un-PC) maps showing how the Greeks (and folks other nations) view the rest of Europe.

And since we’re being politically incorrect, here’s some English humor about terror alerts in other nations.

P.S. It turns out the French people also supported spending cuts by a very strong margin in a 2010 poll. So there’s something nice about the country other than attractive women. But given those poll numbers, why the heck do they elect big-government statists such as Sarkozy and Hollande?!?

P.P.S. Since I’m a proud America, I can’t resist linking to this poll which shows people in the United States favoring spending cuts by a margin of more than 8-1. So why do we elect big-government statists such as Bush and Obama?!?

• It has thieving employees.
• It has incompetent employees.
• It has thuggish employees.
• It has brainless employees.
• And it has victimizing employees.

So I wasn’t surprised to learn that it also has politically biased employees.

But some Americans probably are shocked. So I want to be the first to publicly thank President Obama for – at the very least – presiding over a culture that gave IRS bureaucrats the green light to engage in this kind of misbehavior.

Why am I thanking Obama? For the simple reason that this scandal means that more Americans now understand that the IRS is a venal agency. And that presumably means that more Americans now realize we should junk the internal revenue code and implement a simple and fair flat tax.

Since I’m in an expansive and sharing mood, I think we also owe some appreciation to some of the good people who are helping to publicize the IRS’s despicable behavior.

Let’s start with George Will, who is predictably – and bitingly – critical.

…the nature of Barack Obama’s administration is being clarified as revelations about IRS targeting of conservative groups merge with myriad Benghazi mendacities. …we are told that a few wayward souls in Cincinnati, with nary a trace of political purpose, targeted for harassment political groups with “tea party” and “patriot” in their titles.  …Jay Carney, whose unenviable job is not to explain but to explain away what his employers say, calls the IRS’s behavior “inappropriate.” No, using the salad fork for the entree is inappropriate. Using the Internal Revenue Service for political purposes is a criminal offense.

I also like that Will took the opportunity to criticize the worst (or at least close-to-worst) President in American history.

Time was, progressives like the president 100 years ago, Woodrow Wilson, had the virtue of candor: He explicitly rejected the Founders’ fears of government. Modern enlightenment, he said, made it safe to concentrate power in Washington, and especially in disinterested executive-branch agencies run by autonomous, high-minded experts. Today, however, progressivism’s insinuation is that Americans must be minutely regulated because they are so dimwitted they will swallow nonsense. Such as: There was no political motive in the IRS targeting political conservatives.

How painfully true. Sheep are not famous for their intelligence. And as the American people learn to be passively dependent on government, presumably we will acquire more sheep-like characteristics.

But the firestorm of protest leads me to think we’re not at that stage. At least not yet.

The lawless and abusive IRS even got Michael Gerson agitated.

…most Americans, myself included, become libertarians when a policeman is rude and swaggering during a traffic stop. Give me that badge number. It is precisely because police powers are essential to the public good that abusing them is so offensive. The same holds for overzealous or corrupt airport-security agents. And it is doubly true with IRS personnel who misuse their broad and intimidating powers. It is enough to bring out the Samuel Adams in anyone.

And here’s what my colleague Gene Healy wrote about the IRS’s history of political shenanigans.

Past presidents have found the IRS an extremely useful piece of federal machinery for that purpose. A lot of what we know about that sordid history comes from the Senate Select Committee on intelligence abuses, chaired by Sen. Frank Church, D-Idaho, in the mid-’70s. As Chris Hayes wrote in the Nation in 2006, “Church and many Democrats…soon found that presidents of both parties were culpable: “Secret documents obtained by the committee even revealed that the sainted FDR had ordered IRS audits of his political enemies.” In “The Lawless State,” his account of the Church Committee revelations, Morton Halperin noted that “the first organized political ‘strike force’ was formed within the IRS in 1961, and was directed against right-wing political groups.” In this case, I doubt there was ever a JFK or Nixon-style direct command from on high to harass the Tea Party. It’s more likely to be a case of “proactive” bureaucrats inspired by presidential railing against the Tea Party and Citizens United: “Will no one rid me of these meddlesome right-wing freaks?”

Let’s close with a couple of good cartoons.

The first one reminds me of the joke that “Service” is part of the IRS’s name, but only in the way that a bull services a cow.

The humor is a bit darker in this cartoon, but the message is the same.

P.S. Since I’m in such a good mood,  I’ll share some of my other IRS humor, including a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

Since they’ve allowed some glaring mistakes by Paul Krugman (see here and here), I guess the answer is no.

But some mistakes are worse than others.

Consider a recent column by David Stuckler of Oxford and Sanjay Basu of Stanford. Entitled “How Austerity Kills,” it argues that budget cuts are causing needless deaths.

Here’s an excerpt that caught my eye.

Countries that slashed health and social protection budgets, like Greece, Italy and Spain, have seen starkly worse health outcomes than nations like Germany, Iceland and Sweden, which maintained their social safety nets and opted for stimulus over austerity.

The reason this grabbed my attention is that it was only 10 days ago that I posted some data from Professor Gurdgiev in Ireland showing that Sweden and Germany were among the tiny group of European nations that actually had reduced the burden of government spending.

Greece, Italy, and Spain, by contrast, are among those that increased the size of the public sector. So the argument presented in the New York Times is completely wrong. Indeed, it’s 100 percent wrong because Iceland (which Professor Gurdgiev didn’t measure since it’s not in the European Union) also has smaller government today than it did in the pre-crisis period.

But that’s just part of the problem with the Stuckler-Basu column. They want us to believe that “slashed” budgets and inadequate spending have caused “worse health outcomes” in nations such as Greece, Italy, and Spain, particularly when compared to Germany, Iceland, and Spain.

But if government spending is the key to good health, how do they explain away this OECD data, which shows that government is actually bigger in the three supposed “austerity” nations than it is in the three so-called “stimulus” countries.

Once again, Stuckler and Basu got caught with their pants down, making an argument that is contrary to easily retrievable facts.

But I guess this is business-as-usual at the New York Times. After all, this is the newspaper that’s been caught over and over again engaging in sloppy and/or inaccurate journalism.

• Asserting that government schools are “starved of funding” when taxpayer subsidies actually have skyrocketed.
• Accidentally confirming that tax competition is needed to control the greed of the political class.
• Writing that the sequester will mean “deep automatic spending cuts” when the budget actually will climb by $2.4 trillion.
• Claiming that Italy is more prosperous than the United States and that there is less poverty.
• Urging a tax-increase budget agreement based on a chart showing that the only successful budget deal was the one that cut taxes.

Oh, and if you want to know why the Stuckler-Basu column is wrong about whether smaller government causes higher death rates, just click here.

But it’s very easy for me to bluster about “all that’s required” to satisfy this Golden Rule. It’s much harder to convince politicians to be frugal. Yes, it happened during the Reagan and Clinton years, and there also have been multi-year periods of spending discipline in nations such as Estonia, New Zealand and Canada.

But these examples of good fiscal policy are infrequent. And even when they do happen, the progress often is reversed when a new crop of politicians take power. Federal spending has jumped to about 23 percent of GDP under Bush and Obama, for instance, after falling to 18.2 percent of economic output at the end of the Clinton years.

This is why many advocates of limited government argue that some sort of external force is needed to somehow limit the tendency of politicians to over-tax and over-spend.

I’ve argued on many occasions that tax competition is an important mechanism for restraining the greed of the political class. But even in my most optimistic moments, I realize that it’s a necessary but not sufficient condition.

Another option is budget process reform. If you can somehow convince politicians to tie their own hands (in the same way that alcoholics can sometimes be convinced to throw out all their booze), then perhaps rules can be imposed that improve fiscal policy.

But what sort of rules? Europe has “Maastricht” requirements that theoretically limit deficits and debt, and 49 states have some sort of balanced budget requirement, but these policies have been very unsuccessful – perhaps because they mistakenly focus on the symptom of red ink rather than the underlying disease of government spending.

Are there any budget process reforms that do work? Well, I’ve written about Switzerland’s “debt brake,” which has generated some good results over the past 10 years because it actually imposes an annual spending cap.

Some American states also impose expenditure limits. Have they been successful?

Unfortunately, they usually don’t seem to do a good job of controlling spending. Here are some key passages from a new study by Benjamin Zycher from the American Enterprise Institute.

…tax and expenditure limits (TELs) vary substantially in terms of their details, definitions, and underlying structures, but the empirical finding reported here is simple and powerful: TELs are not effective. …The ineffectiveness of TELs is unambiguous in terms of summary statistics, case-study examination of the records of several individual states, and estimation of an econometric model. This model was estimated for both state and local spending combined and state outlays considered alone.

The author finds some positive impact, but it’s unclear whether the results are meaningful…or durable.

In terms of the growth rates of per capita outlays, 20 of the 30 states display a decline in that growth rate during the periods when the respective TELs were effective, but none of those differences is statistically significant. …to the (highly limited) extent that spending limits prove effective, they are likely to be subject to erosion driven by the same political factors that yield the fiscal pressures.

Though three states seem to have generated genuine budgetary savings.

Among the 30 states with TELs in effect during 1970–2010, the econometric analysis finds that only three of those limits had the effect of reducing total outlays, by approximately 4–6.5 percent. This evidence does not provide grounds for optimism that an emphasis on spending limits would prove useful in terms of reducing long-term fiscal pressures.

Looking at all the evidence, Zycher is not very optimistic about expenditure limits, though he does recognize the valuable role of tax competition.

…a TEL is unlikely by itself to reverse the underlying conditions that yield expanding government. In particular, the incentives of interest groups to circumvent and neutralize the effects of TELs are unsurprising; that may be one central lesson from the California and Washington experiences. Future efforts to restrain the growth in government spending may find greater success if they are directed at increasing competition… One obvious way to achieve this is to strengthen the institutions of federalism, thus forcing states and localities to compete with each other.

Other researchers also have looked at tax and expenditure limits, so let’s see whether they have different perspectives.

Matt Mitchell (no relation) has a slightly more optimistic assessment. Here’s some of what he wrote in a study for the Mercatus Center.

…some varieties of TELs can decrease state spending as a share of state income, but the effect is small—in the range of about 2 to 3 percent. …Certain characteristics can make TELs more effective. These include constitutional (as opposed to statutory) codification, a focus on spending rather than on revenue, a provision that automatically and immediately refunds surpluses, and—of particular importance—a provision that requires either a supermajority vote or a public vote for override.

Here are some of his specific findings.

Weak TELs…tend not to impact state spending very much in either low or high-income states. At best, they decrease spending by about 1/10 of one percentage point in low-income states. At worst, they increase spending by less than 1/100 of one percentage point in high-income states. The most-stringent TELs, on the other hand, do have an appreciable impact on state spending. …Those TELs that limit budgets to inflation plus population growth seem to limit combined state and local spending. In states with this variety of TEL, state and local spending as a share of state income is about 6/10 of a percentage point less than in other states (this is a 3-percent difference relative to the average state and local spending share). …This variety of TEL is often favored by advocates of limited government because it is particularly restrictive (the sum of inflation and population growth is typically less than income growth).

Michael New of the University of Michigan-Dearborn also found that the design of a TEL makes a big difference. Here are some excerpts from his study, which was published in the State Politics and Policy Quarterly.

…most TELs have been enacted by state legislatures, and it is not clear that legislators have the incentive to reduce their autonomy by placing meaningful constraints on their own behavior. …Conversely, TELs enacted through citizen initiatives are likely to be drafted by interest groups that actually possess an interest in limiting state spending, giving them considerably greater potential for effectiveness.

Here are some of his results.

Why has Colorado’s TABOR been more effective than other fiscal limits? …the results of Models 2 and 4, which categorize TELs based on how they were adopted, lend considerable support to my hypothesis. These models indicate that TELs enacted by citizen initiative are the most effective at limiting the size of government. Model 2 predicts that after a TEL is passed by a citizen initiative, annual growth in per capita state and local expenditures will be reduced by $35.70. Similarly, Model 4 predicts that the annual growth in per capita state and local revenues will be reduced by $35.64. Both findings are statistically significant.

Professor New’s research shows that it is very important to limit spending so it grows at inflation plus population rather than letting it climb as fast as personal income.

…holding increases in expenditures to increases in personal income is a relatively easy threshold for a state to maintain. …During the early 1990s, however, two states enacted TELs with a lower limit. Both Colorado’s Taxpayer’s Bill of Rights (TABOR) and Washington state’s Initiative 601 (I-601) established a limit of inflation plus population growth. …Table 4 provides further evidence that strong TELs have been able to restrict government growth. Holding other factors constant, strong TELs annually reduce growth in both state expenditures and state revenues by over $100 per capita. …Both the coefficient for TABOR and the coefficient for I-601 are negative in all four regressions and statistically significant in three of the four. …My analysis provided solid evidence that these two TELs were even more effective at restraining expenditures and revenues as demonstrated by both statistical analysis and case studies.

Some people would conclude from the research of Zycher, Mitchell, and New that spending limits are not very effective. But that’s a hasty conclusion. The real lesson is that spending limits work, but only if they actually limit spending so that it grows slower than personal income, just as suggested by my Golden Rule.

In other words, spending limits are like speed limits in school zones. They are only effective if they’re set low enough to actually protect taxpayers and children.

This debate reminds me of the intellectual fight over the starve-the-beast hypothesis. Some have argued that tax cuts are not an effective way of limiting spending. But the research actually shows that tax cuts are an effective way of “starving the beast” if lawmakers don’t subsequently raise taxes.

The bottom line is that expenditure limits – if properly designed and enforced – are an effective way of controlling government spending. That doesn’t mean that politicians won’t figure out ways to over-spend, just like locks on doors don’t always stop burglars. But both are better than the alternative of no limits or no locks.

In prior posts, I’ve shared research showing that the United States today would be very close to a balanced budget if we had implemented something akin to the Swiss Debt Brake.

So far as I know, there’s no legislation to impose a spending cap specifically modeled on the Swiss system, but I’ve previously noted that Senator Corker’s CAP Act and Congressman Brady’s MAP Act both have sequester-enforced spending limits.

And the good news about sequestration is that the savings are real, unlike the gimmicks that you get when the politicians are in charge of “cutting” spending.

They may over-tax, over-spend, and over-regulate, but at least we can deny them the public affection they so desperately crave.

This is why I like sharing anti-politician humor. Even if, on occasion, it means some PG-13 jokes like the meeting between Harry Reid, Chuck Schumer, and some ranchers.

Or the little girl expressing her opinion of Obamanomics, this prostitute risking her reputation by hanging out with the wrong type of person, or this mistaken anatomy episode.

And here’s one featuring “Little Johnny,” the foul-mouthed kid who inevitably says something inappropriate to his class.

Speaking of Little Johnny, here’s  a new joke.

Actually, it was probably new last November, but I only saw it recently

========================================================

A teacher goes around her class asking each of the kids what they need at home?

Joey says “A computer.”

The teacher replies, “That would be very useful.”

Kimmy says “A new lawn mower.” and gets a similar response.

Little Johnny pops up and says “At my house we don’t need nothing!”

The teacher asks him to think again carefully, as everybody needs something.

Little Johnny replies, “No I’m sure. When Obama was re-elected, I remember my Dad saying, ‘Well, that’s the last f**king thing we need.’”

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By the way, as you can see from this joke (warning, probably R-rated instead of PG), it’s not as if Little Johnny’s dad had many options.

Here are some additional jokes that also are a bit crude, but acceptable (in my mind) because they target politicians.

• The link between physics and Obama.
• Some sado-masochism on Capitol Hill.
• A bonding moment between Bill Clinton and Arnold Schwarzenegger.
• This not-safe-for-work Obamacare joke.
• The three-part jobs legacy.
• Another risqué Obamacare joke.

Last but not least, I can’t resist sharing the joke about the rabbi and the IRS.

I’m also getting asked about other aspects of this debate, ranging from the desirability of a border fence to what I think about skills-based immigration vs. family-reunification immigration.

The short answer to just about every question is that I don’t know. I’ve never studied the issue and I’m not knowledgeable enough to give competent answers. As I remarked in my one interview on the subject, I like immigration but want people coming to America for opportunity rather than welfare.

Not exactly bold stuff, I realize. Heck, everyone from John McCain to Jeff Sessions presumably would be willing to publicly endorse those sentiments.

But I don’t want to dodge the issue completely, and one reader posed a question that got me thinking. She asked me to name the strongest arguments for and against amnesty.

I won’t pretend that these are the strongest arguments, but I will tell you the arguments that I find most compelling.

The most compelling argument for amnesty is that it’s a recognition of reality. Simply stated, the illegals are already here, any kids born in the US already are citizens, and there’s no practical way of getting any of them to leave. What’s the point of pretending otherwise?

I realize that’s a very practical argument, which distinguishes me from some fellow libertarians who make the moral case that people shouldn’t be constrained by government-imposed borders. But that argument doesn’t sweep me off my feet since it implies that everybody in the world has a right to come to the United States.

The most compelling argument against amnesty is that it will make America more statist. I’m not an expert on voting patterns, but I think it’s safe to assume that immigrants will have below-average incomes for the foreseeable future and that they generally will be likely – once they get voting rights – to support politicians who want to make America more like Europe. I’m 99.99 percent confident that this thought has crossed Chuck Schumer’s mind.

Once again, I realize I’m making a practical argument. And you can probably tell that my real concern is with redistributionism and majoritarianism, not immigration. But the bottom line is still the same. We desperately need to scale back the welfare state and I fear amnesty will make that an even bigger challenge.

But to close an a humorous note, perhaps this concern about amnesty can be allayed if we can encourage this type of emigration.

And since we’re sharing some humor, here’s a funny video about Americans sneaking into Peru.

Well, the same thing happens internationally, as France’s greedy politicians are now learning.

It’s a lot harder for Americans to escape our tax system, though, in part because of reprehensible exit taxes that are disturbingly reminiscent of some of the awful policies of past totalitarian regimes.

But it still happens, and that’s a very damning indictment of Obamanomics and a worrying referendum on the future of the United States. Here are some blurbs from a recent Fortune article.

Americans are ditching their U.S. passports in record numbers, a sign of growing frustration with a system that taxes U.S. citizens on their global wealth whether they live in Montana or Mongolia. …on the list, published quarterly by the Internal Revenue Service, is Isabel Getty, the daughter of jet-setting socialite Pia Getty and Getty oil heir Christopher Getty. In total, more than 670 U.S. passport holders gave up their citizenship — and with it, their U.S. tax bills — in the first three months of this year. That is the most in any quarter since the I.R.S. began publishing figures in 1998. And it is nearly three-quarters of the total number for all of 2012, a year in which the wealthy songwriter-socialite Denise Rich (christened “Lady Gatsby” by Yachting magazine) and Facebook co-founder Eduardo Saverin joined more than 932 other Americans in tossing their passports. …Expatriations first picked up pace in 2010, when more than 1,530 Americans dumped their passports.

The problem is particularly serious for Americans who live and work overseas. The United States is one of the few nations (and the only developed nation) to have “worldwide” taxation, which means overseas Americans have to pay tax to the IRS as well as to the nation where they live.

And thanks to laws such as “FATCA,” that burden just became far more onerous.

While dumping citizenship may seem unpatriotic or smack of tax avoidance to some critics, tax lawyers blame the byzantine complexity of American tax regulations. The rules “are confusing, complex, and so complicated that even Americans with good intentions can easily find themselves running afoul of the law,” said Jeffrey Neiman, a former federal prosecutor who was involved in the government’s offshore banking probe and is now in private practice in Fort Lauderdale, Fla. “This very well may explain why we are seeing a record number of Americans renouncing their United States citizenship.”

No wonder more and more people are escaping Obamanomics.

The good news, by the way, is that Senator Rand Paul has introduced legislation to repeal the worst parts of FATCA.

But that’s not going to happen while Obama’s still in the White House, so let’s focus on the Americans who are “going Galt.”

I have mixed feelings about these rich people. Many of them did nothing to help the fight for liberty while they were U.S. citizens.

And notwithstanding my post about where I would go if America suffers a Greek-style fiscal collapse, I suspect I’ll stay in the United States and fight until my last breath. So I get a little bit irked that they escape and leave the rest of us to deal with the mess created by our political elite.

Nonetheless, I strongly believe that all individuals have the right to protect themselves from predatory government.

And when you add up the various forms of double taxation in the internal revenue code (particularly the death tax), it makes little sense for families with high net worth to stay in the United States when there are many jurisdictions around the world that will welcome them with open arms.

In other words, let’s not blame the victims and castigate Americans who redomicile in jurisdictions with better tax policy. Let’s fix the awful internal revenue code with a flat tax.

P.S. I’m ashamed to admit that France has a more pro-liberty policy on tax migration than the United States.

P.P.S. But that may not last too long. Other nations are looking to copy America’s disgraceful worldwide tax approach.

This is because I’m old fashioned and I actually think the Founding Fathers weren’t joking when they granted only a few enumerated powers to the federal government.

And when I check that list, I don’t see anything about steroid investigations, housing, or disaster relief. Nor do I see anything about childhood obesity.

Which is what makes this cartoon from Ken Catalino amusing. At least in a morbid way.

I would have labeled the guy “Washington” instead of “Congress,” but that’s nitpicking. The point I’m trying to make is that we have a bloated federal government that is sapping the economy’s vitality and undermining social capital.

We should be trying to rein in that behemoth, not allowing it to get involved in other areas of life.

This doesn’t mean we don’t have a problem with overweight children. It simply means that it’s absurd to think the answer will come from a bunch of politicians and bureaucrats in Washington.

P.S. I very much enjoy cartoon that portray Washington as a flat slob. For other examples, see here, here,here, here, here and here.

P.P.S. Here’s another Ken Catalino cartoon that I like, even though it perpetuates an inaccurate portrayal of Robin Hood as a redistributionist.

But sometimes the IRS deserves some negative attention. The tax collection bureaucracy has thieving employees, incompetent employees, thuggish employees, brainless employees, and victimizing employees.

The senior folks at the IRS also deserve scorn for bone-headed decisions such as squandering millions of dollars on a P.R. campaign and a scheme to regulate and control private tax preparers.

Now it seems we have another reason to condemn the tax-collection bureaucracy. The IRS is engaging in Nixon-type political harassment.

Here’s some of what the Associated Press just reported.

The Internal Revenue Service inappropriately flagged conservative political groups for additional reviews during the 2012 election to see if they were violating their tax-exempt status, a top IRS official said Friday. Organizations were singled out because they included the words “tea party” or “patriot” in their applications for tax-exempt status, said Lois Lerner, who heads the IRS division that oversees tax-exempt groups.

Heaven forbid somebody self-identify as being patriotic. Obviously a cause for investigation by the IRS.

And it’s rather ironic that the IRS felt compelled to apologize just a few days after President Obama just told us we shouldn’t listen to “voices” telling us that bad things happen in Washington.

But it’s not just that the IRS targeted groups opposing big government. The bureaucrats also violated the rules designed to protect taxpayers from IRS abuse.

…groups were asked for their list of donors, which violates IRS policy in most cases, she said. “That was wrong. That was absolutely incorrect, it was insensitive and it was inappropriate. That’s not how we go about selecting cases for further review,” Lerner said at a conference sponsored by the American Bar Association. “The IRS would like to apologize for that,” she added.

But you can put your mind at ease because senior IRS officials assure us that the targeting of Tea Party groups had nothing to do with political bias.

Lerner said the practice was…not motivated by political bias. …IRS Commissioner Douglas Shulman told Congress in March 2012 that the IRS was not targeting groups based on their political views. “There’s absolutely no targeting. This is the kind of back and forth that happens to people” who apply for tax-exempt status, Shulman told a House Ways and Means subcommittee.

Just like we’re supposed to believe that political bias had nothing to do with all the IRS harassment of conservative groups during the Clinton years. The message from the elites in Washington is “Nothing to see here, move along.”

But as the Wall Street Journal warned at the time, it seems there is a remarkable lack of curiosity about patterns of IRS abuse.

…once we agree that a politicized IRS is a dangerous thing, it is hard to understand the see-no-evil approach taken by the Congress, the press and the judiciary about serious, current allegations of exactly this. …organizations have been using the Freedom of Information Act to find out if there is anything to the extraordinary run of audits that happened to hit a number of tax-exempt organizations that might reasonably be described as Clinton enemies. …we have lots of Clinton enemies who have suffered actual audits, and very little interest in finding out whether this was simply a massive coincidence or the result of something more sinister.

And now we’re going through the same process again.

Maybe, just maybe, there’s a lesson to be learned about the dangers of giving power to politicians and bureaucrats.

Yet another argument for the flat tax. If there’s no charitable deduction, there’s no opening for a politically biased IRS bureaucracy to investigate and harass non-profit groups because of their philosophical beliefs.

P.S. On a lighter note, here’s the IRS version of the quadratic formula, and a cartoon showing how GPS would work if operated by the IRS.

Comedians remember him for the laughable hypocrisy of urging higher taxes for others while cheating on his own tax return.

But I mostly think of him as being the Forrest Gump of international economics.

This was the guy, after all, who unintentionally caused Chinese students to burst out laughing in 2009 when he claimed the Obama Administration supported a strong dollar.

And Europeans told him to get lost when he tried to lecture them on fiscal policy in 2011. But don’t think they were being rude. They already had to endure his bad advice earlier that year and back in 2010 as well.

Well, Geithner’s successor apparently is equally oblivious. He’s badgering the Germans to adopt Keynesian policies to “stimulate” growth, even though the Germans are doing better than most other European nations – in part because they are one of the few nations that have reduced the burden of government spending in recent years!

Here are some blurbs from the EU Observer on Treasury Secretary Lew’s attempt to export bad ideas.

US treasury secretary Jack Lew will repeat calls for Germany to stimulate demand in order to drag the eurozone out of recession, according to US government sources. …The US stance is likely to meet resistance from the German government, which is reluctant to increase wages and stimulate domestic spending, preferring instead to keep wages low to encourage manufacturing and exports. But Berlin is under pressure to reduce its 7 percent export surplus. In April, Lew used his first trip to Berlin as Treasury Secretary to urge counterpart Wolfgang Schaueble to put in place measures to stimulate consumer spending. For his part, Schaueble commented that neither the US or Germany should try to give “lessons” or “grades” to each other.

I’m actually in favor of giving “lessons” and “grades” to governments, but not if it’s a case of the blind leading the blind.

This is not to say that Germany has good fiscal policy. Indeed, the best that can be said about the Merkel government is that it hasn’t moved Germany much further in the wrong direction in recent years.

The Obama Administration, by contrast, is moving the United States in the wrong direction at faster pace, so the last thing the Germans need is advice from Treasury Secretary Lew or anyone else associated with the White House.

P.S. If you want some unintentional humor, the Washington Post referred to Germany as being “fiscally conservative.”

P.P.S. As you can see here and here, there’s little reason to be optimistic about the intellectual climate in Germany.

P.P.P.S. But at least we have some amusing videos involving Germany, as you can see here, here, and here.

P.P.P.P.S. Geithner also should be remembered for pushing through an IRS regulation that forces American banks to put foreign tax law above U.S. tax law.

And the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that Hall of Fame.

Or I guess we should call it a Hall of Shame (you can click on the image to see my selections).

Whatever we call it, I’m now at the point where I realize that Woodrow Wilson and Teddy Roosevelt are the charter members. Why? Well, because they were the first Presidents to reflect the progressive ideology.

More specifically, they shared the ideology of the progressive movement, which saw a powerful and activist central government as a force for good – a radical departure from the views of America’s Founding Fathers, who hoped that the Constitution would protect people by keeping government very small.

Not surprisingly, Barack Obama is in that “progressive” tradition, even to the point of attacking the views of the Founding Fathers in a recent speech at Ohio State University.

I commented on this issue in this Fox News segment.

That short clip only scratches the surface.

For more detail, here are some excerpts from a column by Andrew Napolitano. Like me, he isn’t impressed by the President’s statolatry.

It should come as no surprise that President Obama told Ohio State students at graduation ceremonies last week that they should not question authority… And he blasted those who incessantly warn of government tyranny. Yet, mistrust of government is as old as America itself. America was born out of mistrust of government. …Thomas Jefferson…warned that it is the nature of government over time to increase and of liberty to decrease. And that’s why we should not trust government. In the same era, James Madison himself agreed when he wrote, “All men having power should be distrusted to a certain degree.” …The reason Obama likes government and the reason it is “a dangerous fire,” as George Washington warned, and the reason I have been warning against government tyranny in my public work is all the same: The government rejects the natural law because it is an obstacle to its control over us. …Because the tyranny of the majority can be as dangerous to freedom as the tyranny of a madman, all use of governmental power should be challenged and questioned. Government is essentially the negation of liberty.

Napolitano also warns against majoritarianism in his column, which is music to my ears.

Though I’m not sure our battle today is with majoritarianism or the progressive ideology.

Our real challenge is redistributionism. Far too many people think it is okay to use the coercive power of government to obtain unearned benefits. And that’s true whether the benefits are food stamps or bailouts.

And as we travel farther and farther down this path, it leads to ever-greater levels of dependency and ever-higher levels of taxation. But that simply means more people decide it makes more sense to ride in the wagon rather than pull the wagon.

Somehow, we have to reverse this downward spiral.

Unless we want America to become Greece or France, at which point productive people may be forced to emigrate – assuming there are still some sensible nations left in the world.

I’m a big fan of the flat tax, in part because I hate when powerful interest groups use their insider connections to get special treatment. This corrupt process helps explain why the tax code is now a 74,000-page monstrosity.

I want to get rid of all preferences, deductions, credits, deductions, exclusions, and shelters, including one that benefit me such as the home mortgage interest deduction, the charitable contributions deduction, and the state and local tax deduction.

On the other hand, I favor just about anything that lets people keep more of their money. Loopholes are escape hatches that people can use to protect themselves from the grasping claws of the IRS.

The bottom line is that we should only get rid of loopholes if every penny of potential new revenue is used to finance lower tax rates.*

Now that we’ve covered some basics, let’s stop being serious and boring and look at what has to be the strangest tax loophole in the United States.

And it wasn’t even concocted by the crowd in Washington. The award for strangest tax loophole goes to the politicians of Nevada, who decided at some point not to apply the sales tax to prostitution.

Here are some of the details from the New York Daily News.

The tax man may soon be visiting a few Nevada brothels. …Assembly Speaker Marilyn Kirkpatrick (D-North Las Vegas) says the bill would target events and businesses that have either been deemed exempt from state sales taxes or have simply been overlooked. Those operations include brothels, which Nevada lawmakers have been hesitant to tax out of fear that doing so would further legitimize the stigmatized, but legal trade. …George Flint, the director of the Nevada Brothel Association, fears that so-called houses of ill repute could not handle an 8% tax on money spent at brothels, and has proposed a $5 entrance fee instead.

As a libertarian, I suppose I should be impressed. Not only is this “victimless crime” legal, but it isn’t taxed!

But as an observer of politics, I’m completely perplexed. Normally, politicians love to impose “sin taxes” on behaviors that are seen as unseemly. It’s sort of a win-win situation for them. They get to collect more revenue while telling us that it’s for our own good.

This helps explain why there are high taxes on things such as booze, cigarettes, energy, and fast food.

So why have Nevada politicians overlooked (at least up to now) the chance to tax prostitution?

I suppose I could make a joke that they didn’t want to tax the things that they consume, but I’m being serious.

Are the lobbyists for brothels super effective? Well, they probably do have the best holiday parties, but is that why prostitution isn’t taxed?

Beats me. Sounds like a good opportunity for public policy research.

*Another concern is that many politicians don’t understand the difference between a tax loophole such as ethanol and a tax penalty such as double taxation, so their version of tax reform could make bad policies even worse.

P.S. Since this post is about taxes and prostitution, I can’t resist sharing this bit of humor.

P.P.S. Speaking of prostitution, did you know that British taxpayers finance sex trips to Amsterdam?

P.P.P.S. You won’t be surprised to learn that climate-change ideologues claim that global warming causes prostitution.

P.P.P.P.S. You also won’t be surprised to learn that the Germans have figured out very creative ways of taxing prostitution.

If you’re a glass-half-full person, you’ll want to focus on some positive trends.

• The joblessness rate fell to 7.5 percent, the lowest level since Obama became President.
• Private-sector jobs are increasing.
• As I’ve noted before, the economy seems to do better if there’s gridlock.
• One reason for better economic performance is that the burden of government spending has been reduced, at least when measured as a share of GDP.

I made many of these points in the beginning of this interview for Real News on Blaze TV.

On the other hand, if you’re a glass-half-empty person, you might focus on these grim details.

• This is the weakest job performance for any recovery since the end of World War II.
• Unemployment is far higher than the White House predicted it would be if the so-called stimulus was enacted.
• There are headwinds that are undermining job creation, such as Obamacare, higher payroll tax rates, and the President’s class-warfare tax hike.
• The employment-population ratio is terrible, suggesting that the lower unemployment rate is really a measure of people dropping out of the labor force.

So who’s right, the optimists or pessimists? At the risk of sounding like a politicians, they’re both right.

If it sounds like I’m trying to have it both ways, that’s simply the reality of public policy. There are both headwinds and tailwinds impacting the labor market, which is why I talked about scales balancing in the interview.

But I will state without ambiguity that small government and free markets are the right formula to improve economic performance. In other words, get rid of the bad policies and adopt more of the good policies. Be more like Hong Kong and less like France.

This is a nation where you can own a tank or a machine gun, and it’s a country where there are probably more guns than people.

Yet it’s also a country where little kids get suspended for throwing imaginary grenades while playing alone on a playground. A country where cops arrest 10-year olds for having toy guns. And a country where small children get kicked out of school for pretending their hands are guns and saying “pow, pow.”

And now, apparently, it’s a country where kids can’t point a pencil at a buddy and make shooting noises.

Oh my God, It’s an assault pencil!

Here are some of the absurd details from a local CBS news report.

Two Suffolk second graders have been suspended for making shooting noises while pointing pencils at each other. Media outlets report the 7-year-old boys were suspended for two days for a violation of the Suffolk school system’s zero-tolerance policy on weapons. They were playing with one another in class Friday at Driver Elementary. “When I asked him about it, he said, ‘Well I was being a Marine and the other guy was being a bad guy,’” said Paul Marshall, one of the boys’ fathers. “It’s as simple as that.” Marshall, a former Marine, said he believes school officials overreacted. …Bradshaw said the policy has been in place for at least two decades. It also bans drawing a picture of a gun and pointing a finger in a threatening manner. Marshall said his son has good grades and no history of being disruptive in class. On the suspension note, the teacher noted that the boy stopped when she told him to do so. He said school administrators failed to use common sense.

I’m almost at a loss for words. This wasn’t just one brainless bureaucrat. At the very least, both a teacher and an administrator were involved in this farce.

These are the people we want educating our children?!?

At least the dad had the cojones to criticize the bureaucrats.

With apologies to Martin Niemöller, I can’t resist this bit of satire.

First they came for the pop tarts,
and I didn’t speak out because I didn’t care for breakfast pastries.

Then they came for the pink bubble blowers,
and I didn’t speak out because I wasn’t a bubble blower.

Then they came for the cupcakes,
and I didn’t speak out because I wasn’t a cupcake eater.

Then they came for pencils,
and there was no one left to speak for me.

By the way, the United States is not the only nation suffering from a pathetic and wimpy form of political correctness. Here are some examples of how our cousins across the ocean have gone bonkers about guns.

• A women who was being threatened by thugs got in trouble with the police for brandishing a knife in her own home.
• There was a proposal to prevent children from watching Olympic shooting events.
• A man got arrested for finding a gun in his yard and turning it over to the police.
• Starting pistols have been banned from some school races.
• There have been calls for knife bans.
• A man was arrested for shooting a burglar who invaded his house.

These are all example from my series comparing brainless policies in the United States and United Kingdom. Though I’m ashamed to say that this latest story puts the United States in the lead in this government-stupidity contest.

Now I’m defending a different form of tax competition for CNN, another news outlet that leans left. In this case, the topic is whether states can reach beyond their borders for tax revenue.

Here’s some of what I wrote about the so-called Marketplace Fairness Act that was just approved by the Senate and presumably will soon be considered by the House. I start by explaining that the powers of governments should be constrained by borders.

Let’s assume you live in Utah, Hawaii or South Carolina, and you go to Nevada for a vacation. While in Las Vegas, you spend some money in the casinos. Gambling is illegal in the state where you live, so should the cops in your home state be able to track your activities and arrest you for what happened in Nevada? The answer, needless to say, is no. Or at least it should be no. Common sense tells us that state laws should only apply to things that happen inside a state’s borders. But this sensible principle is being tossed out the window by the U.S. Senate, which has approved a proposal that would give states the ability to impose their taxes on out-of-state sellers.

I also explain that this issue isn’t about whether the Internet should be taxed. Indeed, as a fan of the flat tax, I don’t want special favors or special penalties in the tax code. Internet profits and Internet sales should face the same (ideally low) taxes as all other sectors of the economy.

Instead, the fight is really about whether a state government has the right to force out-of-state merchants to act as deputy tax collectors. If you believe that borders should limit the power of governments, the answer is no.

But that rubs politicians the wrong way.

…some governors and state legislators don’t like this system because many states don’t bother imposing any tax on sales to out-of-state consumers. And even if states levied taxes on sales to out-of-state consumers, what about the five states that don’t have any sales tax? Wouldn’t those states become “tax havens” for Internet sales? For these reasons, some politicians fret that the Internet will put competitive pressure on them to keep their sales tax rates from getting too high.

But this is exactly why politicians shouldn’t be allowed to tax beyond their borders. We want tax competition in order to limit the greed of the political class.

States with no payroll income taxes, such as Nevada, Florida, Tennessee, Texas and New Hampshire, help restrain the greed of politicians in states that have punitive income tax systems, such as California, Illinois, New York and Massachusetts. And if politicians in the high-tax states refuse to adjust their bad tax policies, then people should have the freedom to escape and earn income in other states. The same principle applies to sales taxes. If politicians in, say, Arizona are worried that consumers will go online or travel across the border to avoid the punitive sales tax, then they should reduce their sales tax rate.

So what’s the bottom line?

Politicians can choose to maintain uncompetitive tax systems, of course, but they also should be prepared to accept the consequences. I don’t think California and Illinois should try to become the France and Greece of America, but that’s something for the voters of those states to figure out for themselves. In any event, they shouldn’t have the right to force out-of-state sellers to act as deputy tax collection officials if they decide to impose bad tax policy. …To be blunt, a sales tax cartel is bad news for tax policy and bad news for privacy. Let’s limit the power of state governments so they can only screw up things inside their own borders.

Let’s close on a light note. Here’s a clever cartoon from Nate Beeler.

I agree with the cartoon’s message, at least to the extent that onerous taxes can be very deadly to an industry. But, as noted above, I don’t want special tax-free status for the Internet.

So the ideal cartoon would show lots of surfers from all industries exercising the freedom to pick the waves with the smallest and least destructive sharks. Some might even call that federalism.

Yes, a few of them behave honorably, seeking to protect their clients from bad tax and regulatory policy, but most of them are in the business of seeking special favors. And as government gets bigger, the opportunities for this type of corruption expand.

This lucrative “industry” also helps explain why Washington is now the richest metropolitan area in the country.

And it goes without saying that I also don’t like politicians (including Republicans!).

So if I have a chance to simultaneously mock both lobbyists and politicians, you know I’m unable to resist. With that in mind, here’s a cartoon (I assume from the New Yorker) that showed up in my inbox.

Though, to be fair, sometimes the relationship is reversed, with politicians holding the whip hand and extorting money from lobbyists.

Anyhow, if you like anti-politician jokes, here’s some additional material.

You can read about how these men and women spend their time screwing us and wasting our money.

And we have some examples of what people in Montana, Louisiana, Nevada, and Wyoming think about big-spending politicians.

This little girl is rather blunt about our political masters, while a blind rabbit thinks he has found a politician.

And  here are a couple of good images capturing the relationship between politicians and taxpayers, and here is a somewhat off-color Little Johnny joke.

Last but not least, let’s not forgot to include this joke by doctors about the crowd in Washington.

• The World Bank published a study of national tax systems and countries with higher tax burdens were rewarded with a grade of “high effort.”
• A German bureaucrat accused a Czech politician of  “obstructing the democratic process” for blocking a treaty, even though voters weren’t allowed to vote on the treaty in 26 out of 27 EU nations.
• American politicians, including President Obama, deliberately cause confusion by referring to tax provisions as being forms of government spending.

I prefer the honest approach. If you believe in bigger government and higher taxes, you should “man up” and openly express your views. Don’t dissemble, prevaricate, mislead, and obfuscate.

The same is true, by the way, for advocates of individual freedom and smaller government. I’ve always admired Barry Goldwater, who famously wrote, “I have little interest in streamlining government or in making it more efficient, for I mean to reduce its size. I do not undertake to promote welfare, for I propose to extend freedom. My aim is not to pass laws, but to repeal them.” There’s no ambiguity in that statement!

Anyhow, we have a new entry in this contest for the most egregious use of Orwellian word games. And, not surprisingly, it’s by a statist.

Fred Hiatt, the editorial page editor of the Washington Post, wrote a column claiming that people are getting an entitlement if the government doesn’t double tax their retirement savings.

This spring Obama proposed a cap of about $3.4 million on how much people can save in their tax-advantaged IRAs and 401(k) plans… Obama isn’t keeping people from saving as much money as they can or want. The question is how much the rest of us should have to chip in. Obama is suggesting that at some point retirement accounts, invented to encourage working people to set aside enough for their sunset years, no longer need a helping hand from taxpayers. …The entitlement culture…runs deeper than the entitlement programs we normally think of, like Medicare and Social Security. …Now it’s the top one-thousandth demanding their right to tax breaks for socking away unlimited wealth in retirement plans.

There are several things about these excerpts that rub me the wrong way.

First, IRAs and 401(k)s are not “tax advantaged.” They’re tax neutral. These vehicles exist so that people don’t get double taxed on their savings. As I explained last year.

If you have a traditional IRA (or “front-ended” IRA), you get a deduction for any money you put in a retirement account, but then you pay tax on the money – including any earnings – when the money is withdrawn. If you have a Roth IRA (or “back-ended” IRA), you pay tax on your income in the year that it is earned, but if you put the money in a retirement account, there is no additional tax on withdrawals or the subsequent earnings. From an economic perspective, front-ended IRAs and back-ended IRAs generate the same result. Income that is saved and invested is treated the same as income that is immediately consumed.

But let’s set that aside. My main gripe with Hiatt’s column is that he wants us to think that people with IRAs and 401(k)s are getting “a helping hand from taxpayers” and that this is part of an “entitlement culture.”

This is statist nonsense. If somebody has an IRA and 401(k), they’re saving their own money. There’s no obligation being imposed on me or any other taxpayer.

But Hiatt presumably thinks that the government’s decision not to impose double taxation is somehow akin to a giveaway. But that only makes sense if you assume that government has a preemptive claim to all private income.

And if you have that bizarre mindset, then I guess it makes sense that IRAs and 401(k)s are part of the “entitlement culture.”

In other words, Hiatt wants us the think that there’s no moral, ethical, or economic difference between giving person A $5,000 of other people’s money and person B being allowed to keep $5,000 of his or her own money.

But if that’s true, why bother producing and subjecting yourself to stress when your reward is punitive tax rates? Why not participate in the easy side of the “entitlement culture” and simply take other people’s money?

In the real world, of course, that leads to policies with ever-growing numbers of people choosing to ride in the wagon and fewer and fewer people pulling the wagon.

The most important, powerful, and relevant argument against the value-added tax in the long run is that more than 100 percent of America’s long-term fiscal problem is too much spending.

So why even consider giving politicians a new source of revenue such as the VAT, particularly since this hidden form of national sales tax helped cause the European fiscal crisis by facilitating a bigger welfare state?*

And now Europeans are doubling down on that failed approach, thus confirming that politicians will rarely make necessary spending reforms if they think more revenue can be squeezed from taxpayers.

Here’s a chart taken from the recent European Commission report on taxation trends in the EU. As you can see, the average VAT rate in Europe has jumped by nearly 2 percentage points in just five years.

As I explained last week, European politicians also have been increasing income tax rates, so taxpayers are getting punished when they earn their income and they’re getting punished when they spend their income.

Which helps to explain why much of Europe is suffering from economic stagnation. Given the perverse incentives created by redistributionist fiscal policy, it makes more sense to climb in the wagon of government dependency.

For more information, here’s my video that describes the VAT and explains why it’s a bad idea.

*The same thing is now happening in Japan.

P.S. I don’t know if you’ll want to laugh or cry, but the tax-free bureaucrats at the Organization for Economic Cooperation and Development actually argue that the VAT is good for jobs and growth.

I’m conflicted. More and more people get lured into some form of government dependency every year, and this suggests Americans eventually will adopt a  European-style moocher mentality.

This worries me.

On the other hand, I periodically see polls suggesting that the American people have very libertarian views on key issues.

• By a margin of almost 4-1, Americans support a spending cap.
• Two-thirds of gun owners are willing to defy the law if politicians ban private possession of firearms.
• Recognition that big government is the greatest danger to America’s future.
• An increasingly negative view of the federal government.
• More than eight-to-one support for less spending rather than higher taxes.
• Strong support for bureaucrat layoffs and/or entitlement reforms instead of higher taxes.
• Three-fourths of voters think the top tax rate should be no higher than 30 percent.

These are encouraging numbers. And here’s another bit of good news. A recent poll by Fox News found that a plurality of Americans would not give up personal freedoms to reduce the threat of terrorism. What’s especially remarkable is that this poll took place immediately following the bombing of the Boston Marathon by the welfare-sponging Tsarnaev brothers.

Interestingly, I had a conversation with a left-leaning friend who said this poll showed that Americans were a bunch of “paranoid nuts” because this poll showed that they viewed their government with suspicion.

But perhaps people are simply rational. I had an intern look up data on the probability of getting killed by a terrorist. He found an article from Reason that reported.

…a rough calculation suggests that in the last five years, your chances of being killed by a terrorist are about one in 20 million. This compares annual risk of dying in a car accident of 1 in 19,000; drowning in a bathtub at 1 in 800,000; dying in a building fire at 1 in 99,000; or being struck by lightning at 1 in 5,500,000.

In other words, the odds of being killed by a terrorist are very low. And with the risk so low, why give up liberty? Particularly when it’s highly unlikely that sacrificing more of your freedom will actually reduce the already-low threat of terrorism.

This reminds me of the money laundering issue. Just a few decades ago, there was no such thing as anti-money laundering laws. Then politicians decided we need these laws to reduce crime.

These laws, we were told, would give law enforcement more tools to catch bad guys and also reduce the incentive to commit crimes since it would be harder for criminals to enjoy their ill-gotten gains.

That sounds good, but the evidence shows that these laws have become very expensive and intrusive, yet they’ve had no measurable impact on crime rates.

So how did politicians respond? In a stereotypical display of Mitchell’s Law, they decided to make anti-money laundering laws more onerous, imposing ever-higher costs in hopes of having some sort of positive impact.

This is bad for banks, bad for the poor, and bad for the economy.

So when I see polls showing the American people are skeptical about surrendering freedom to the government, I don’t think they are being “paranoid.” I think they’re being very rational.

Pretending to be a jet-setter in Monaco

I have also praised Switzerland because of policies such as genuine federalism and financial privacy, and it goes without saying that I admire tax havens such as Bermuda, Monaco, and the Cayman Islands

I’m a big fan of Estonia, which has made big strides thanks to the flat tax and other free market reforms.

Australia also is one of my favorite nations, in part because of its privatized Social Security system.

Even Canada and Sweden have earned my praise for recent economic reforms.

But here’s a video, produced by the folks at The Fund for American Studies, that identifies an even more impressive economic miracle.

I did guess the country in the video, but only a few seconds before the narrator spilled the beans. My excuse is that I watched early on Sunday morning, when civilized people should still be asleep.

But allow me to atone for my slowness by adding a very important point about growth. The country in the video became successful because it enjoyed a very long period of decent growth. But that has recently changed for the worse.

And things got worse when statists were in power, as even the Washington Post has acknowledged.

The lesson to be learned is that even small differences in growth can make a big difference over time.

By some measures, Hong Kong and Singapore are now richer than the United States. The simple reason is that those jurisdictions have been enjoying 5 percent-plus growth for decades while the United States economy has struggled to achieve 3 percent growth.

Then again, the United States is more prosperous than most European nations, though that may be an example of damning with faint praise.