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Because I’m worried about the future of the nation, I want a national discussion and debate about big issues such as the entitlement crisis and our insane tax code.

No such luck. The crowd in Washington and the media have been focusing on sideshow topics such as which side has the most fake news, the purported sloppiness of executive orders, and the Trump-Putin “bromance.”

And we now have a culture-war fight in DC thanks to Trump’s new policy on transgender bathroom usage.

The Justice and Education departments said Wednesday that public schools no longer need to abide by the Obama-era directive instructing them to allow transgender students to use bathrooms and locker rooms of their chosen gender. …The agencies said they withdrew the guidance to “in order to further and more completely consider the legal issues involved.” Anti-bullying safeguards for students will not be affected by the change, according to the letter. …There won’t be any immediate impact on schools, because the Obama guidance had been temporarily blocked since August by a federal judge in Texas, one of 13 states that sued over the directive.

Though, to be fair, Trump didn’t start this culture war. He’s simply responding to a battle that Obama triggered.

Moreover, even though I prefer that we focus attention of big-picture fiscal and economic issues, I’m not asserting that this issue should be swept under the rug.

That being said, I think the issue would largely disappear if we simply recognized boundaries. Not everything should be decided in Washington. Yes, it’s the federal government’s job to guarantee and protect universally applicable constitutional rights, but some decisions belong at the state and local level. And most decisions should take place in the private sector and civil society.

Here’s some of what I wrote in late 2015.

One of the great things about being a libertarian is that you have no desire for government sanctions against peaceful people who are different than you are, and that should be a very popular stance. You can be a libertarian who is also a serious fundamentalist, yet you have no desire to use the coercive power of government to oppress or harass people who are (in your view) pervasive sinners. For instance, you may think gay sex is sinful sodomy, but you don’t want it to be illegal. Likewise, you can be a libertarian with a very libertine lifestyle, yet you have no desire to use the coercive power of government to oppress and harass religious people. It’s wrong (in your view) to not cater a gay wedding, but you don’t want the government to bully bakers and florists. In other words, very different people can choose to be libertarian, yet we’re all united is support of the principle that politicians shouldn’t pester people so long as those folks aren’t trying to violate the life, liberty, or property of others. …And when you’re motivated by these peaceful principles, which imply a very small public sector and a very big private sector and civil society, it’s amazing how many controversies have easy solutions.

Let’s look at some more recent sensible commentary on this topic.

Roy Cordato wrote about the controversy in his state of North Carolina.

…lost in all the rhetoric surrounding this issue is the truth about both the original Charlotte law and the state’s response to it. …the Charlotte, North Carolina, city council passed an “antidiscrimination” law… The centerpiece of this law was a provision that prohibits businesses providing bathrooms, locker rooms, and showers from segregating usage of those facilities by gender, biologically defined. Biological males or females must be allowed to use the facilities of the opposite sex if they claim that that is the sex they identify with psychologically. …This ordinance was an assault on the rights of private property owners and economic freedom, regardless of one’s religious beliefs. …In a free society based on property rights and free markets, as all free societies must be, a privately owned business would have the right to decide whether or not it wants separate bathrooms strictly for men and women biologically defined, bathrooms for men and women subjectively or psychologically defined, completely gender neutral bathrooms with no labels on the doors, or no bathrooms at all.

And Roy says that the state law (which overturned the Charlotte ordinance) was reasonable in that regard.

The law in North Carolina that so many progressives are up in arms about does not prohibit businesses from having bathrooms, locker rooms, showers, etc., that allow use by people of all genders defined biologically, psychologically, or whatever. …the state of North Carolina codified a basic libertarian principle: the separation of bathroom and state.

Tim Carney of the Washington Examiner has a similar perspective.

Government needs to get out of culture war issues as much as possible, the question of transgendered people in bathrooms included. …In North Carolina, Charlotte’s City Council made the first mistake. …the city passed a non-discrimination ordinance…that…basically legislated bathroom admission. …Charlotte passed this law, exposing private business owners to lawsuits and legal punishments. …The ordinance also stirred up fears of predators — men getting into a ladies’ room thanks to this law, and then assaulting or leering at vulnerable women. Nobody showed that this was a real threat, but the same mindset behind the Charlotte law — we need a law to ban a possible bad thing — drove the state legislature to pass HB 2. HB 2 blocked Charlotte and other cities from implementing their antidiscrimination laws. …both the liberal legislation and the conservative reaction were out of place. Charlotte shouldn’t have stuck itself into private restrooms, and the state shouldn’t have stuck itself into the city’s sticking itself into restrooms.

By the way, Tim’s column also makes the key point that people should be decent human beings. A bit of civilized consideration and politeness goes a long way when dealing with potentially uncomfortable situations.

Writing for Reason, Scott Shackford opines on the topic, beginning with an appropriate defense of transgender people.

Transgender citizens have the same right as everybody else to live their lives as they please without unnecessary government interference. …As a legal and ethical matter, …it generally shouldn’t matter why somebody identifies as transgender. It’s their right. In the event that somebody decides to pose as transgender in order to engage in some sort of fraud or criminal behavior, there are already laws to punish such actions. …so it would be appropriate that in any situation where the government treats a transgender person on the basis of his or her identity it respects their form of gender expression. That means the government should allow for any official documentation—such as a driver’s license—that requires the listing of a person’s sex to match the identity by which a person lives, as much as it’s feasibly possible. …Transgender citizens are seeing some big inroads both culturally and legally, and we should all see these generally as positive developments. …Transgender citizens have the right to demand the government treat them fairly and with dignity.

But Scott correctly observes that the government should not have the power to use coercion to mandate specific choices by private individuals or private businesses.

In the private sector, it’s all a matter of cultural negotiation and voluntary agreements. The law should not be used to mandate private recognition of transgender needs, whether it’s requiring insurance companies cover gender reassignment surgeries or requiring private businesses to accommodate their bathroom choices. The reverse is also true: It would be inappropriate for the government to forbid insurance coverage or to require private businesses to police their own bathrooms to keep transgender folks out.

Last but not least, my colleague Neal McCluskey explains that federalism is part of the solution.

Much of this debate has been framed as conservatives versus liberals, or traditionalists versus social change. But the root problem is not differing views. It is government — especially federal — imposition. …Single-sex bathrooms and locker rooms have long been the norm, and privacy about our bodies — especially from the opposite sex — has long been coveted. …Of course, transgendered students should — must — be treated equally by public institutions, and their desire to use the facilities in which they feel comfortable is utterly understandable. By fair reckoning, we do not have a competition between good and evil, but what should be equally protected values and rights. How do we resolve this? …not with a federal mandate. …So how, in public schools, do we treat people equally who have mutually exclusive values and desires? We cannot. Open the bathrooms to all, and those who want single-sex facilities lose. Keep them closed, and transgender students lose. The immediate ramification of this is that decisions should be made at state, and preferably local, levels. At least let differing communities have their own rules.

But the real answer, Neal explains, is school choice.

…the long-term — and only true — solution is school choice. Attach money to students, give educators freedom to establish schools with their own rules and values, and let like-minded people freely associate. Impose on no one.  …We live in a pluralist society, and for that we should be eternally grateful. To keep that, and also be a free and equal society, people of different genders, values, etc., must be allowed to live as they see fit as long as they do not impose themselves on others. That is impossible if government imposes uniformity on all.

But I’ll admit that these libertarian principles don’t solve every problem. States will need to have some sort of policy. Not because of private businesses, which should get to choose their own policies. And not because of schools, which will be privately operated in my libertarian fantasy world and therefore also able to set their own policies.

But how should states handle bathrooms in public buildings? Even if there are less of them in a libertarian society, the issue will exist. And what about prisons in a libertarian world?

I don’t pretend to know exactly how these issues should be resolved. Conservatives argue that you should be defined by the gender on your birth certificate and leftists say you should be to choose your identify.

My gut instinct is to cut the baby in half (I’m such a moderate). Maybe the rule for prisons is not how you identify or what’s on your birth certificate, but what sort of…um…equipment you have. If you were born a man but had surgery (which is your right so long as you’re not asking me to pay for it), then you’re eligible for a women’s prison. Likewise, if you were born a woman and surgery gave you male genitalia (I confess I don’t know if that’s even possible), then you get assigned to a men’s prison.

Government bathrooms are an easier problem. From a practical perspective, I’m guessing the net result of this fight – at least for schools and public buildings – will be a shift to single-use bathrooms. In other words, multi-person facilities for men and women will be replaced by a bunch of private bathrooms.

This will be bad news for taxpayers, because it is more expensive to build and operate such bathrooms.

And it will be bad news for women because that means they will be forced to use bathrooms that are less pleasant because men…um…tend to be less fastidious about…um…personal habits such as lifting toilet seats before…well…you know.

Men only have to deal with the messes made by other men when we have to sit down in a bathroom. And even then, the problem is minimized since other men generally will use urinals when they…um…don’t need to sit down.

But if we have a world of one-person-at-a-time bathrooms, women’s lives will be less pleasant.

P.S. Speaking of bathrooms, my only goal is simply knowing how to operate the various controls. I’ve been totally stumped by the design of foreign showers and, if you check out the postscript of this column, very impressed by the sophistication of foreign toilets.

Early last month, in a column on my hopes and fears for 2017, I fretted about fiscal chaos in Italy leading to default and bailouts.

Simply stated, I fear that Italy, along with certain other “Club Med” nations, has passed the point of no return in terms of big government, demographic decline, and societal dependency.

And this means that, sooner or later, the proverbial wheels are going to fall off the bus.

And it might be sooner. I don’t always agree with his policy recommendations, but I regularly read Desmond Lachman of the American Enterprise Institute because he is one of the best-informed people in Washington on the fiscal and economic mess in Europe.

And Italy, to be blunt, is in a mess.

Here’s what Desmond just wrote about the country’s economy.

…while the euro could very well survive a Greek exit, it certainly could not survive in anything like its present form were Italy to have a full-blown economic and financial crisis that forced it to default on its public debt mountain. …Among the reasons that there should be greater concern about an Italian, rather than a Greek, economic crisis is that Italy has a very much larger economy than Greece. Being the third-largest economy in the eurozone, Italy’s economy is around 10 times the size of that of Greece. Equally troubling is the fact that Italy has the world’s third-largest sovereign bond market with public debt of more than $2.5 trillion. Much of this debt is held by Europe’s shaky banking system, which heightens the risk that an Italian sovereign debt default could shake the global financial system to its core. …the country’s economic performance since 2008 has been abysmal. Indeed, Italian living standards today are around 10 percent below where they were 10 years ago. Meanwhile, Italy’s banking system has become highly troubled and its public sector debt as a share of gross domestic product (GDP) is now the second highest in the eurozone.

And here’s some of what he wrote late last year.

…today there would seem to be as many reasons for worrying about the Italian economy as there were for worrying about the Greek economy back in 2009. Like Greece then, Italy today checks all too many of the boxes for the making of a full-blown economic and financial crisis within the next year or two. …the Italian economy today is barely above its level in 1999 when the country adopted the Euro as its currency. Worse still, since the Great Global Economic Recession in 2008-2009, the Italian economy has experienced a triple-dip recession that has left its economy today some 7 percent below its pre-2008 crisis peak level and its unemployment rate stuck at over 11 percent. …deficiencies of its ossified labor market that contributes so importantly to the country’s very poor productivity performance. As a result, since adopting the Euro in 1999, Italy’s unit labor costs have increased by around 15 percentage points more than have those in Germany. …Italian banks now have around EUR 360 billion in non-performing loans, which amounts to a staggering 18 percent of their loan portfolio. If that were not bad enough, the Italian banks also hold unhealthily large amounts of Italian government debt, which now total more than 10 percent of their overall assets. …the country’s public debt level has risen from 100 percent of GDP in 2008 to 133 percent of GDP at present.

The numbers shared by Lachman are downright miserable.

And he’s not the only one pointing out that Italy’s economy is in the toilet.

I shared numbers last year showing the pervasive stagnation in the country.

So what’s the Italian government doing to solve these problems? Is it slashing tax rates? Reducing the burden of government? Cutting back on red tape?

Of course not. The politicians are either making things worse or engaging in pointless distractions.

Speaking of which, I’m tempted to laugh at the Italian government’s campaign to boost birthrates. Here’s some of what’s been reported by the New York Times.

…a government effort to promote “Fertility Day” on Sept. 22, a campaign intended to encourage Italians to have more babies. …Italy has one of the lowest birthrates in the world… Italian families have been shrinking for decades. In 2015, 488,000 babies were born in Italy, the fewest since the country first unified in 1861. It has one of the lowest birthrates in Europe, with 1.37 children per woman, compared with a European average of 1.6, according to Eurostat figures.

By the way, I actually commend the government for recognizing that falling birthrates are a problem.

Not because women should feel obliged to have kids if that’s not what they want. But rather because Italy has a massive tax-and-transfer welfare state that is predicated on an ever-expending population of workers (i.e., taxpayers) to finance benefits to retirees.

But old people are living longer and low birthrates mean that there won’t be enough taxpayers to prop up the Ponzi Scheme of big government.

But while the government deserves kudos for acknowledging a problem, it deserves mockery for thinking empty slogans will make a difference.

Moreover, there’s also a problem in that Italian voters have been so conditioned to expect handouts that they think the answer to the problem is even more government!

The problem is not a lack of desire to have children, critics of the campaign say, but rather the lack of meaningful support provided by the government and many employers. …”I still feel very offended,” said Vittoria Iacovella, 37, a journalist and mother of two girls, ages 10 and 8. “The government encourages us to have babies, and then the main welfare system in Italy is still the grandparents.” …Italy’s government has tried to help families with a so-called baby bonus of 80 to 160 euros, or about $90 to $180, for low- and middle-income households, and it has approved labor laws giving more flexibility on parental leave.

Ms. Iacovella is crazy for thinking that more taxes, more spending, more regulation, and more mandates will make things better.

Heck, even leftists are now admitting such laws undermine employment and specifically hurt women by making them less attractive to employers.

Meanwhile, the Italian government is taking lots of other dumb steps. Including, as reported by the Telegraph, creating a new entitlement for teenagers.

Italian school leavers may face the dismal prospect of 40 per cent youth unemployment, but at least they have one thing to look forward to – a €500 “culture bonus”, courtesy of the government. From next month, every 18-year-old will be entitled to claim the money and spend it on culturally enriching pursuits such as going to theatres, concerts and museums, visiting archaeological sites, and buying books. The scheme, which starts on Sept 15, will benefit 575,000 teenagers, at a cost to the government of €290 million (£250 million).

By the way, is anyone shocked to learn that Italian teenagers look forward to these handouts?

…it has been welcomed by 18-year-olds, who face a difficult economic landscape when they leave school – high unemployment, a lack of secure, long-term contracts and an economy that has performed dismally for a decade. “Of course we’re happy…,” said Angelica Magazzino, a teenager from the southern region of Puglia who turns 18 in November.

If you read the entire story, you’ll learn that the government justifies this new entitlement by saying it will fight terrorism. I don’t know if that’s more crazy or less crazy than the American leftists who blame terrorism on climate change or inequality.

Last but not least, CNN is reporting that the government is also enabling other forms of Italian “culture.”

Italy’s highest court has ruled that masturbation in public is not a crime, as long as it is not conducted in the presence of minors.

No, this is not a joke.

The decision came down from the Italian Supreme Court…in the case of a 69-year-old man…The man was convicted in May 2015 after he performed the act in front of students on the University of Catania campus, according to documents filed with Supreme Court. The man was sentenced to three months in prison and ordered to pay a fine of €3,200 (around $3,600). However, the defendant’s lawyer appealed the case to the country’s highest court, which ruled on the side of the accused in June but only just made its decision public. Judges ruled that public masturbation out of the presence of minors is no longer deemed criminal conduct due to a change in the law last year, which decriminalized the act.

Great. I’m looking forward to my next trip to Italy. Though I guess it’s nice to see Italian seniors are staying active in their communities.

More seriously, this is why I’m sympathetic to Italians that are either privately dodging or publicly revolting when you have a government this profligate and senseless.

P.S. Amazingly, some leftists think the United States should have a bigger government and be more like Italy.

I’ve shared several surveys that people can take to determine whether they are libertarian.

Now the good folks from FreedomFest are taking this to the next level by conducting a survey to determine the “50 Most Influential Libertarians.”

I invite everyone to participate by clicking here, especially since filling out the survey gives you a $100 discount when registering for this year’s FreedomFest (to be held in mid-July).

Having worked in libertarian circles for many decades, I’m going to look at each of the categories and take a guess on who will get the most votes and also give my two cents on which of the people are the most under-appreciated.

We’ll start with libertarian authors.

I’m guessing P.J. O’Rourke will get first place in this category, though Robert Higgs and Charles Murray also are possibilities.

The most under-appreciated choice is James Bovard. I’ve known Jim for decades and his writing is both principled and entertaining. I’ve shared several of his columns if you want to get a taste.

Now let’s move the business and finance category.

I actually know only about half of the people on this list, so take my views here with a grain of salt. For my guess on who will win, I’m torn between listing David Koch and Charles Koch, who have done so much to build libertarian institutions, and Steve Forbes, who has done so much to popularize free markets.

For the most under-appreciated libertarian, I’m going with John Aglialoro. How can you not applaud a guy who finally delivered a movie version of Atlas Shrugged?

Now let’s look at libertarian celebrities.

I have no idea who will win this category. I’m wondering if voters will pick the biggest celebrity, meaning perhaps Clint Eastwood.

It’s also hard to pick the most under-appreciated libertarian in this category. But I’ll go with Penn Jillette. I’ve seen his Las Vegas show (Penn and Teller) two times and I imagine hundreds of thousands, if not millions, of Americans have been both entertained and enlightened by the experience.

By the way, I wonder why Howard Stern wasn’t listed.

Time now for the top libertarian in freedom organizations.

This is another hard-to-guess category. If I’m basing my choice on (deserved) celebrity status, I would have to pick between Mark Skousen, who has made FreedomFest a must-attend event, Jeffrey Tucker, the guy who is dramatically expanding FEE’s outreach, and Johan Norberg, who is famous for his short videos on freedom.

For under-appreciated libertarians, Tom Palmer deserves praise as one of the most determined and effective libertarians ever to traverse the globe (literally and figuratively). And Barbara Kolm deserves some sort of prize for her yeomanlike (yeowomanlike?) efforts to save Europe with her annual Free Market Road Show.

Let’s shift to the media category.

I would be stunned if John Stossel didn’t win this category, though Judge Napolitano and the guys from Reason may give him a tough race.

My choice for under-appreciated libertarian would be Neal Boortz or Julie Borowski.

The big oversight is that Glenn Reynolds of Instapundit isn’t listed.

Here are the choices for politics.

I assume there’s not much suspense on who will win. If Ron Paul doesn’t come in first place, I’ll eat my hat. Actually, I retract that offer. Based on my less-than-impressive election predictions, I no longer feel confident about my ability to prognosticate. But I still think Ron Paul wins, perhaps followed by his son.

For under-appreciated libertarians, I’m going with Justin Amash and Thomas Massie. It is very helpful to have a couple of solid libertarians in the House of Reprehensibles. They probably should have included Congressman Brat as well.

Here’s another very difficult category, the top libertarian professors.

It’s impossible to make good selections since there are so many good choices. If you put a gun to my head, I wouldn’t be surprised to see Walter Williams or Thomas Sowell emerge in first place because they’ve both done such a great job over the decades with their books and columns.

It’s also difficult to pick the most under-appreciated libertarian. The crowd from George Mason University is superb, Richard Epstein and Randy Barnett are amazing legal minds, and the Schoollands do great work.

But I suppose I’ll go with either James Gwartney, since his work on Economic Freedom of the World is so valuable, or Deirdre McCloskey, who deserves praise for her books and other works.

By the way, it’s a terrible oversight that Robert Murphy and Ed Stringham are not on the list.

Last but not least, we have the think tank crowd.

It goes without saying that the Cato Institute (America’s most principled and effective think tank) should win this category. And you have lots of Cato people from which to choose, so pretend you’re a dead person in Chicago and vote early and vote often.

For the most under-appreciated libertarian, I’m going to pick someone who isn’t even on the list. Veronique de Rugy of the Mercatus Center deserves lots of write-in votes. Not only did she escape France, but she’s been one of the most effective and determined policy economists in Washington. If you need any extra convincing, just watch this video.

Once again, here’s the link for those who want to take the survey.

P.S. On another issue, Paul Krugman once again has attacked me for my comments about California. For those  interested, here is my response.

As part of an otherwise very good tax reform plan, House Republicans have proposed to modify the corporate income tax so that it becomes a “destination-based cash-flow tax.”

For those not familiar with wonky inside-the-beltway tax terminology, there are three main things to understand about this proposal.

  • First, the tax rate on business would drop from 35 percent to 20 percent. This is unambiguously positive.
  • Second, it would replace depreciation with expensing, which is a very desirable change that would eliminate a very counter-productive tax on new investment outlays. This is basically what makes the plan a “cash-flow” tax.
  • Third, any income generated by exports would be exempt from tax but the 20-percent tax would be imposed on all imports. These “border-adjustable” provisions are what makes the plan a “destination-based” tax.

I’m a big fan of the first two provisions, but I’m very hostile to the third item.

I don’t like it because I worry it sets the stage for a value-added tax. I don’t like it because it is designed to undermine tax competition. I don’t like it because it has a protectionist stench and presumably violates America’s trade commitments. I don’t like it because that part of the plan only exists because politicians aren’t willing to engage in more spending restraint. And I don’t like it because politicians should try to reinvent the wheel when we already know the right way to do tax reform.

Heck, I feel like the Dr. Seuss character who lists all the ways he would not like green eggs and ham. Except I can state with complete certainty I wouldn’t change my mind if I was suddenly forced to take a bite of this new tax.

Today, I’m going to augment my economic arguments by noting that the plan also is turning into a political liability. Here are some excerpts from a news report in the Wall Street Journal about opposition in the business community.

A linchpin of the House Republicans’ tax plan, an approach called “border adjustment,” has split Republicans and fractured the business world into competing coalitions before a bill has even been drafted. …There is also global uncertainty: Other countries may retaliate, either by border-adjusting their corporate taxes or by challenging the U.S. plan at the World Trade Organization as too tilted toward American producers.

And The Hill reports that grassroots organizations also are up in arms.

Americans for Prosperity is stepping up its efforts to advocate against a proposal from House Republicans to tax imports and exempt exports, as lawmakers are increasingly raising concerns about the proposal. …AFP has hundreds of volunteers and staff who are making phone calls about the proposal. The group has about 100 meetings set up with Congress members and their staff for next week, while Congress is in recess.

Meanwhile, the Economist reports that the plan is causing uncertainty around the world.

To offset a border-adjusted tax of 20%—the rate favoured by House Republicans—the greenback would need to rise fully 25%, enough to destabilise emerging markets burdened with dollar-denominated debts. If the dollar stayed put and wages and prices rose 25% instead, the Federal Reserve would have to decide how to respond to an unprecedented surge in inflation. Why tolerate such disruption?

Holman Jenkins of the Wall Street Journal has a devastating take on the issue.

Like a European value-added tax, its cost would be deeply hidden in the price of goods, thus easily jacked up over time. Also, compared with the current tax structure, businesses would see less incentive to move abroad in search of lower taxes, eroding a useful pressure on politicians to be fiscally sane. And because the tax would alter the terms of trade, it would be expected to lead to a sharp increase in the dollar. U.S. holders of foreign assets would suffer large paper losses. Since many foreigners borrow in dollars too, a global debt crisis might follow. The tax might also violate World Trade Organization rules, inviting other countries to impose punitive taxes on U.S. exports.

Last but not least, John Tamny outlines some of the political downsides at Real Clear Markets.

…the House of Representatives…is aggressively promoting a…tax on imports. …When we get up and go to work each day, our work is what we exchange for what we don’t have, including voluminous goods and services produced for us around the world.  …Party members are proudly seeking a tax on our work. …Only the “stupid” Party could come up with something so injurious to every American, to the American economy, and to its growth-focused brand.  But that’s where we are at the moment.  The Party that attained majorities with its tax cutting reputation is aggressively seeking to shed its growth brand through the introduction of tax hikes meant to give politicians even more of what we the people produce.  If so, the majority Party can kiss its majority goodbye.  It will have earned its minority status.

For what it’s worth, I think John overstates the case against the plan. The additional revenue from border-adjustable tax provision would be used to cut taxes elsewhere. Heck, the plan is actually a significant net tax cut.

But John is right when you look at the issue through a political lens. If the DBCFT actually began to move through the legislative process, opponents would start running commercials about the “GOP scheme to impose new consumption tax on Americans.” Journalists (most of whom dislike Republicans) would have a field day publicizing reports about the “GOP plan to raise average family tax bill by hundreds of dollars.”

Such charges would be ignoring the other side of the equation, of course, but that’s how politics works.

All of which brings me back to one of my original points. We already know that the flat tax is the gold standard of tax reform. And we already know the various ways of moving the tax code in that direction.

My advice is that Republicans abandon the border-adjustable provision and focus on lowering tax rates, reducing double taxation, and cutting back on loopholes. Such ideas are economically sounder and politically safer.

Back in 2014, I shared some data from the Tax Foundation that measured the degree to which various developed nations punished high-income earners.

This measure of relative “progressivity” focused on personal income taxes. And that’s important because that levy often is the most onerous for highly productive residents of a nation.

But there are other taxes that also create a gap between what such taxpayers earn and produce and what they ultimately are able to consume and enjoy. What about the effects of payroll taxes? Of consumption taxes and other levies?

To answer that question, we have a very useful study from the European Policy Information Center on this topic. Authored by Alexander Fritz Englund and Jacob Lundberg, it looks at the total marginal tax rate on each nation’s most productive taxpayers.

They start with some sensible observations about why marginal tax rates matter, basically echoing what I wrote after last year’s Super Bowl.

Here’s what Englund and Lundberg wrote.

The marginal tax rate is the proportion of tax paid on the last euro earned. It is the relevant tax rate when deciding whether to work a few extra hours or accept a promotion, for example. As most income tax systems are progressive, the marginal tax rate on top incomes is usually also the highest marginal tax rate. It is an indicator of how progressive and distortionary the income tax is.

They then explain why they include payroll taxes in their calculations.

The income tax alone does not provide a complete picture of how the tax system affects incentives to work and earn income. Many countries require employers and/or employees to pay social contributions. It is not uncommon for the associated benefits to be capped while the contribution itself is uncapped, meaning it is a de facto tax for high-income earners. Even those social contributions that are legally paid by the employer will in the end be paid by the employee as the employer should be expected to shift the burden of the tax through lower gross wages.

Englund and Lunberg are correct. A payroll tax (sometimes called a “social insurance” levy) will be just as destructive as a regular income tax if workers aren’t “earning” some sort of additional benefit. And they’re also right when they point out that payroll taxes “paid” by employers actually are borne by workers.

They then explain why they include a measure of consumption taxation.

One must also take value-added taxes and other consumption taxes into account. Consumption taxes reduce the purchasing power of wage-earners and thus affect the return to working. In principle, it does not matter whether taxation takes place when income is earned or when it is consumed, as the ultimate purpose of work is consumption.

Once again, the authors are spot on. Taxes undermine incentives to be productive by driving a wedge between pre-tax income and post-tax consumption, so you have to look at levies that grab your income as it is earned as well as levies that grab your income as it is spent.

And when you begin to add everything together, you get the most accurate measure of government greed.

Taking all these taxes into account, one can compute the effective marginal tax rate. This shows how many cents the government receives for every euro of additional employee compensation paid by the firm. …If the top effective tax rate is 75 percent, as in Sweden, a person who contributes 100 additional euros to the economy will only be allowed to keep 25 euros while 75 euros are appropriated by the government. The tax system thus drives a wedge between the social and private return to work. …High marginal tax rates disconnect the private and social returns to economic activity and thereby the invisible hand ceases to function. For this reason, taxation causes distortions and is costly to society. High marginal tax rates make it less worthwhile to supply labour on the formal labour market and more worthwhile to spend time on household work, black market activities and tax avoidance.

Here’s their data for various developed nation.

Keep in mind that these are the taxes that impact each nation’s most productive taxpayers. So that includes top income tax rates, both for the central governments and sub-national governments, as well as surtaxes. It includes various social insurance levies, to the extent such taxes apply to all income. And it includes a measure of estimated consumption taxation.

And here’s the ranking of all the nations. Shed a tear for entrepreneurs in Sweden, Belgium, and Portugal.

Slovakia wins the prize for the least-punitive tax regime, though it’s worth noting that Hong Kong easily would have the best system if it was included in the ranking.

For what it’s worth, the United States does fairly well compared to other nations. This is not because our personal income tax is reasonable (see dark blue bars), but rather because Barack Obama and Hillary Clinton were unsuccessful in their efforts to bust the “wage base cap” and apply the Social Security payroll tax on all income. We also thankfully don’t have a value-added tax. These factors explain why our medium-blue and light-blue bars are the smallest.

By the way, this doesn’t mean we have a friendly system for upper-income taxpayers in America. They lose almost half of every dollar they generate for the economy. And whether one is looking at Tax Foundation numbers, Congressional Budget Office calculations, information from the New York Times, or data from the IRS, rich people in the United States are paying a hugely disproportionate share of the tax burden.

Though none of this satisfies the statists. They actually would like us to think that letting well-to-do taxpayers keep any of their money is akin to a handout.

Now would be an appropriate time to remind everyone that imposing high tax rates doesn’t necessarily mean collecting high tax revenues.

In the 1980s, for instance, upper-income taxpayers paid far more revenue to the government when Reagan lowered the top income tax rate from 70 percent to 28 percent.

Also keep in mind that these calculations don’t measure the tax bias against saving and investment, so the tax burden on some upper-income taxpayers may be higher or lower depending on the degree to which countries penalize capital formation.

P.S. If one includes the perverse incentive effects of various redistribution programs, the very highest marginal tax rates (at least when measuring implicit rates) sometimes apply to a nation’s poor people.

P.P.S. Our statist friends sometimes justify punitive taxes as a way of using coercion to produce more equality, but the net effect of such policies is weaker growth and that means it is more difficult for lower-income and middle-income people to climb the economic ladder. In other words, unfettered markets are the best way to get social mobility.

All forms of statism are despicable because they’re morally and practically evil.

They’re morally evil since they’re based on coercion. And they’re practically evil since they deliver such awful results for ordinary people.

The good news is that some forms of statism are widely discredited. Outside of universities, you don’t find many people who defend and advocate communism. And other than a few lonely cranks, you don’t find many people who defend and advocate national socialism and other forms of fascism.

But for some inexplicable reason, you still find some folks who harbor positive feelings about socialism.

To be sure, that opens up a bunch of questions, such as whether they even understand that socialism – at least in theory – involves government ownership and operation of the means of production. Such as the United Kingdom in the post-WWII era.

For what it’s worth, the fans of Bernie Sanders probably don’t understand anything about economics (goes without saying, right?) and they probably think that socialism is simply a system with lots of redistribution. Such as modern Denmark (even though that nation is just as market-oriented as the United States).

I’m not sure how we educate these people, and I doubt these three photos will have much impact on them, but I chuckled when this showed up in my inbox.

I guess the top photo might be Detroit. The second photo could be Cuba. And the last photo might be where Al Gore lives.

If that’s the case, the first is actually an image showing the destructive impact of the welfare state and the third is actually an image the benefits of insider cronyism, but let’s not get hung up on details. The real point is that corrupt insiders are the only real beneficiaries of big government.

P.S. Two of the most popular columns I’ve produced involve semi-amusing stories that highlight the failure of socialism, redistributionism, and collectivism. “The Tax System Explained in Beer” and “Does Socialism Work? A Classroom Experiment” succinctly capture why it’s very shortsighted and misguided to have an economic system that punishes success and rewards sloth.

P.P.S. Yes, socialism breeds misery, but it also generates some clever humor. See here, here, here, here, here, and here.

P.P.P.S. And even though self-proclaimed socialists pontificate about sharing and compassion, their ideology actually promotes a bad kind of selfishness.

I’ve written many times that Washington is both a corrupt city and a corrupting city. My point is that decent people go into government and all too often wind up losing their ethical values as they learn to “play the game.”

I often joke that these are people who start out thinking Washington is a cesspool but eventually decide it’s a hot tub.

During the presidential campaign, Trump said he wanted to “drain the swamp,” which is similar to my cesspool example. My concern is that El Presidente may not understand (or perhaps not even care) that shrinking the size and scope of government is the only effective way to reduce Washington corruption.

In any event, we’re soon going to get a very strong sign about whether Trump was serious. With Republicans on Capitol Hill divided on how to deal with this cronyist institution, Trump basically has the tie-breaking vote on the issue.

In other words, he has the power to shut down this geyser of corporate welfare. But will he?

According the Susan Ferrechio of the Washington Examiner, Trump may choose to wallow in the swamp rather than drain it.

President Trump now may be in favor of the Export-Import Bank, according to Republican lawmakers who met with him privately Thursday, even though Trump once condemned the bank as corporate welfare.

Veronique de Rugy of the Mercatus Center is one on the Ex-Im Bank’s most tenacious opponents, and she’s very worried.

…if the reports are true that Trump has decided to support the restoration of the crony Export-Import Bank’s full lending authority, it would be akin to the president deciding to instead happily bathe in the swamp and gargle the muck. …If true, the news is only “great” for Boeing, GE, and the other major recipients of Ex-Im’s corporate welfare. It is also at odds with his campaign promises since much of the way the program works is that it gives cheap loans — backed by Americans all over the country — to foreign companies in China, Russia, Saudi Arabia, and the UAE. Restoring Ex-Im’s full lending-authority powers is renewing the policy to give cheap loans backed by workers in the Rust Belt to companies like Ryanair ($4 billion in guarantee loans over ten years) and Emirates Airlines ($3.9 billion over ten years) so they can have a large competitive advantage over U.S. domestic airlines like Delta and United. It continued to subsidize the large and prosperous state-owned Mexican oil company PEMEX ($9.7 billion over ten years). Seriously? That’s president Trump’s vision of draining the swamp?

Ugh. It will be very disappointing if Trump chooses corporate welfare over taxpayers.

What presumably matters most, though, is whether a bad decision on the Ex-Im Bank is a deviation or a harbinger of four years of cronyism.

In other words, when the dust settles, will the net effect of Trump’s policies be a bigger swamp or smaller swamp?

The New York Times opined that Trump is basically replacing one set of insiders with another set of insiders, which implies a bigger swamp.

Mr. Trump may be out to challenge one establishment — the liberal elite — but he is installing one of his own, filled with tycoons, Wall Street heavyweights, cronies and a new rank of shadowy wealthy “advisers” unaccountable to anyone but him. …Take first the Goldman Sachs crowd. The Trump campaign lambasted global financiers, led by Goldman, as having “robbed our working class,” but here come two of the alleged miscreants: Gary Cohn, Goldman’s president, named to lead the National Economic Council, and Steven Mnuchin, named as Treasury secretary. …Standing in the rain during Mr. Trump’s inaugural speech, farmers and factory workers, truckers, nurses and housekeepers greeted his anti-establishment words by cheering “Drain the Swamp!” even as the new president was standing knee-deep in a swamp of his own.

I’m skeptical of Trump, and I’m waiting to see whether Gary Cohn and Steven Mnuchin will be friends for taxpayers, so I’m far from a cheerleader for the current administration.

But I also think the New York Times is jumping the gun.

Maybe Trump will be a swamp-wallowing cronyist, but we don’t yet have enough evidence (though a bad decision on Ex-Im certainly would be a very bad omen).

Here’s another potential indicator of what may happen to the swamp under Trump’s reign.

Bloomberg reports that two former Trump campaign officials, Corey Lewandowski and Barry Bennett have cashed in by setting up a lobbying firm to take advantage of their connections.

The arrival of a new president typically means a gold rush for Washington lobbyists as companies, foreign governments, and interest groups scramble for access and influence in the administration. Trump’s arrival promises to be different—at least according to Trump. Throughout the campaign, he lambasted the capital as a den of insider corruption and repeatedly vowed to “drain the swamp,” a phrase second only in the Trump lexicon to “make America great again.” …Trump’s well-advertised disdain for lobbying might seem to augur poorly for a firm seeking to peddle influence. …“Business,” Lewandowski says, “has been very, very good.”

This rubs me the wrong way. I don’t want lobbyists to get rich.

But, to be fair, not all lobbying is bad. Many industries hire “representation” because they want to protect themselves from taxes and regulation. And they have a constitutional right to “petition” the government and contribute money, so I definitely don’t want to criminalize lobbying.

But as I’ve said over and over again, I’d like a much smaller government so that interest groups don’t have an incentive to do either the right kind of lobbying (self-protection) or the wrong kind of lobbying (seeking to obtain unearned wealth via the coercive power of government).

Here’s one final story about the oleaginous nature of Washington.

Wells Fargo is giving a big payout to Elaine Chao, the new Secretary of Transportation.

Chao, who joined Wells Fargo as a board member in 2011, has collected deferred stock options —  a compensation perk generally designed as a long-term retention strategy — that she would not be able to cash out if she left the firm to work for a competitor. Her financial disclosure notes that she will receive a “cash payout for my deferred stock compensation” upon confirmation as Secretary of Transportation. The document discloses that the payments will continue throughout her time in government, if she is confirmed. The payouts will begin in July 2017 and continue yearly through 2021. But Wells Fargo, like several banks and defense contractors, provides a special clause in its standard executive employment contract that offers flexibility for awarding compensation if executives leave the bank to enter “government service.” Such clauses, critics say, are structured to incentivize the so-called “reverse revolving door” of private sector officials burrowing into government. …Golden parachutes for executives leaving firms to enter government dogged several Obama administration officials. Jack Lew, upon leaving Citigroup to join the Obama administration in 2009, was given a cash payout as part of his incentive and retention awards that wouldn’t have been paid if he had left the firm to join a competitor or under ordinary circumstances. But Lew’s Citigroup contract stipulated that there was an exception for leaving to work in a “full time high level position with the U.S. government or regulatory body.” Goldman Sachs, Morgan Stanley, and Northrop Grumman are among the other firms that have offered special financial rewards to executives who leave to enter government.

This rubs me the wrong way, just as it rubbed me the wrong way when one of Obama’s cabinet appointees got a similar payout.

But the more I think about it, the real question isn’t whether government officials get to keep stock options and other forms of deferred compensation when they jump to government.

What bothers me much more is why companies feel that it’s in their interest to hire people closely connected to government. What value did Jacob Lew bring to Citigroup? What value did Chao bring to Wells Fargo?

I suspect that the answer has a lot to do with financial institutions wanting people who can can pick up the phone and extract favors and information from senior officials in government.

For what it’s worth, I’m not a fan of Lew because he pushed for statism while at Treasury. By contrast, I am a fan of Chao because she was one of the few bright spots during the generally statist Bush years.

But I don’t want a system where private companies feel like they should hire either one of them simply because they have connections in Washington.

I hope that Trump will change this perverse set of incentives by “draining the swamp.” But unless he reduces the size and scope of government, the problem will get worse rather than better.

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