It hasn’t even been a month since I shared the most-recent collection of libertarian humor, but I’ve received so many clever items that it’s time augment our collection.
Our first item is this cartoon strip about children getting drawn into the movement.
Speaking of children, the second item for today’s collection is this story from the Babylon Bee.
…local mom Shirley Wood had a surprise when she picked up her three-year-old to tell him it was time for bed. “Am I being detained?” shouted the toddler at the top of his lungs, greatly befuddling Mrs. Wood. …Confused, Mrs. Wood did put him down and tried to figure out what was going on. “Oh, I’ve been teaching him libertarian principles,” explained Mrs. Wood’s husband, Fred Wood. …“Then you get him to bed.” Mr. Wood approached Zach to try to non-violently persuade him to go to bed. “Hey, buddy. Seems like it’s time to sleep now.” “Can’t sleep,” replied Zach. “Fed still out there. Need to audit the Fed.” …Eventually, Mr. Wood was able to persuade Zach to go to bed with the promise of reading him a bedtime story about cryptocurrency.
Having raised three kids, I can vouch for the fact that they are natural libertarians at bedtime.
For our next item, someone made the mistake of asking a libertarian about disdain for government. Nearly two hours later…
If you wonder why it takes so much time for a libertarian to explain the flaws of government, this primer from the Babylon Bee may give you a good idea.
Libertarianism is the only logically consistent political philosophy, and it’s held primarily by crazy people. …The Bee is here to set the record straight once and for all about our weird, drug and Bitcoin-obsessed friends with this handy explainer. …Beliefs: It’s mostly about wanting to smoke weed and run around naked while shooting guns in the air, we think. …Prominent proponents: Ron Paul, that weird guy who’s always smoking weed in your drama class… Prominent critics: Republicans, Democrats, anyone who loves war and hates freedom. …Key texts: Atlas Shrugged (we think, no one’s actually ever read it)… How do you spot a Libertarian? …look for guys carting around books from the 1700s and shouting, “AM I BEING DETAINED?!” at everyone from police officers to Arby’s cashier
I’ve saved the best for last.
We libertarians think of ourselves as freedom fighters. In our Walter Mitty-style fantasies, we’re waging big fights for big principles. That doesn’t match our real lives.
Consider, for instance, Alan Viard of the American Enterprise.
He wrote a column last November arguing that we should let politicians in Washington have this new source of tax revenue, and I explained why his arguments were wrong.
But I’m obviously not very persuasive since he just reiterated his support for a VAT in an interview with the Dallas Federal Reserve Bank. Here are some of the highlights (lowlights might be a better term).
…tax increases on corporations and high-income households as well as benefit cuts could be part of a debt-reduction package…such tax increases would have limited revenue potential. …a VAT should—and undoubtedly would—be accompanied by rebates to offset the tax burden on low-income households. The Tax Policy Center estimated that a 7.7 percent VAT with rebates, which would raise the same net revenue as a 5 percent VAT without rebates, would generally be progressive. …the VAT would be only one component of the federal tax system. Individual and corporate income taxes would continue to add progressivity.
There are two remarkable admissions in the above excerpts.
He’s basically admitting a VAT would be accompanied by class-warfare tax hikes on companies and households – thus undermining the usual argument that the VAT is needed to avert these other types of tax increases.
He’s basically admitting a VAT would be accompanied by a new entitlement program of “rebates” – thus undermining the argument that VAT revenues would be used to reduce deficits and debt.
But what I found particularly amazing is that Viard never tries to empirically justify his main argument that, a) debt is a problem, and b) the VAT is part of a solution.
I don’t particularly object to the first part (though I would argue the real problem is spending). But the assertion that a VAT will solve that problem is contrary to real-world evidence.
For instance, government debt has continued to grow ever since Japan adopted a VAT.
Just like last year, April 15 isn’t the official deadline this year for filing your annual tax return. But we’re still going to “celebrate” with some memes about the income tax and the IRS.
We’ll start with something that has always bothered me, which is the fact that many people look forward to filing their taxes because they get a refund.
Yet that simply means that they gave the government free use of their money because of excessive withholding!
It also galls me when IRS documents refer to customer service when none of us are voluntary participants.
That’s the point of this next meme.
And since we’re mocking our friends at the IRS, here’s another item worth sharing.
But we should have some sympathy for tax collectors.
They sometimes have a challenging job.
For our final IRS-focused bit of satire, let’s turn to the Babylon Bee‘s report on taxation in outer space.
President Trump’s new Space Force has been stealing the imagination of the public… Not to be outdone, the Democrats are now trying to show they can also look to the future with their new proposal: Space IRS. “We also are inspired by watching shows such as Star Wars,” Nancy Pelosi told the press, “and seeing someone like Han Solo, a smuggler who is obviously avoiding taxes. …there has to be a way to follow someone like that and see how much he’s spending at cantinas and sabacc tables and know that he’s hiding income. That’s the job of Space IRS.”
My go-to example is that a nationwide 5-mph speed limit would reduce traffic fatalities, but the resulting economic damage would be so pervasive that there would a net reduction in life expectancy.
In other words, the indirect effects would outweigh the direct effects.
But that’s just a theoretical example.
We now have a real-world case study thanks to a remarkably short-sighted decision about the Johnson & Johnson vaccine by bureaucrats at the Food and Drug Administration (FDA).
Ronald Bailey of Reason is very blunt about the deadly consequences.
The U.S. Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA) issued a statement today “recommending a pause in the use” of Johnson & Johnson’s COVID-19 vaccine…based on six cases of a rare blood clot disorder in people who had been inoculated with the one-dose vaccine. There have been six cases out of 6.8 million people who have already been inoculated with the vaccine. The blood clot incidents all occurred in women between the ages of 18 and 48. Those odds amount to one in 1.13 million, which is comparable to your annual chances of being struck by lightning (1 in 1.22 million). For comparison, a November 2020 meta-analysis in The Lancet found that more than one in five very ill hospitalized and post-mortem* COVID-19 patients experienced venous thromboembolism—that is, blood clots in their veins. A 2010 study in the Journal of American Preventive Medicine reported that the annual incidence of thromboembolism between the ages of 15 and 44 was about 1.5 cases per 1,000 people. In addition, the risk of blood clots from taking oral contraceptives is about 1 in 1,000 annually. …By focusing on the not-yet-proven, very low risk of blood clots versus the known risks of the increased misery, hospitalizations, and deaths that the Johnson & Johnson vaccine would have prevented, our overly cautious public health bureaucrats will likely cause more sickness and deaths among Americans than would otherwise have occurred.
Just in case you’re tempted to dismiss the above article because of Reason‘s libertarian perspective, Philip Bump’s article in the Washington Post makes the same point about tradeoffs.
It’s easy to imagine the internal debate at the Centers for Disease Control and Prevention upon learning that six cases of a rare, dangerous blood clot have been found in women who received the Johnson & Johnson vaccine. Allowing the vaccine to be distributed while experts reviewed the cases risks exposing more people to the possible problem. Pausing distribution, though, runs a different risk… Given that about 6.8 million doses of the Johnson & Johnson vaccine have been administered and that there have been only six such incidents, the rate at which those red dots occur is about 1 in 1.1 million vaccinations. …By way of comparison, every year about 12 in 100,000 Americans die in a car crash. …more than 561,000 people in the United States have died of covid-19, the disease caused by the virus. That’s about 1.8 percent of the 31.2 million people who have contracted it. Given the effectiveness of the Johnson & Johnson vaccine in preventing serious illness and death, vaccinating 6.8 million people could have…protected millions of people probably prevented thousands of deaths — with six problematic incidents.
Mr. Bump makes the broader point that each of us make cost-benefit decisions every day.
Nearly everything we do is a balance between risk and reward. Driving down the street, as mentioned above. Walking outside, where a meteorite could suddenly slam into your skull. Sitting on your couch, where your floor could give way or an electrical fire could break out or a bear could crash through your window. None of these things is likely, so we don’t worry about them, but they could. We draw a balance.
The people on Twitter who can do math (regardless of ideology) were united in their disdain for what the bureaucrats did.
For my modest contribution to this discussion, I want people to have liberty to take the J&J vaccine, regardless of the shameful actions of the bureaucrats in Washington (or their counterparts at the state level).
As you can tell from the video, I’m not a big fan of anti-money laundering (AML) laws and know-your-customer (KYC) regulations.
And in the 11-plus years since the video was released, I’ve shared lots of additional data about the costly futility of the government anti-money laundering laws and regulations.
The good news (sort of) is that more people are noticing that the current approach is an expensive failure. Even some folks from the establishment media are waking up to the problem, as illustrated by an article in the latest edition of the Economist.
…banks remain the Achilles heel in the global war on money-laundering, despite the reams of regulations aimed at turning them into frontline soldiers in that conflict. However, closer examination suggests that the global anti-money-laundering (AML) system has serious structural flaws, largely because governments have outsourced to the private sector much of the policing they should have been doing themselves. …Money-laundering was not even a crime across much of the world until the 1980s. Since then countries from Afghanistan to Zambia have been arm-twisted, particularly by America, into passing laws. …This has turned AML compliance into a huge part of what banks do and created large new bureaucracies. It is not unusual for firms such as HSBC or JPMorgan Chase to have…more than 20,000 overall in risk and compliance.
Here’s some of the evidence cited in the article.
A study published last year…concluded that the global AML system could be “the world’s least effective policy experiment”, and that compliance costs for banks and other businesses could be more than 100 times higher than the amount of laundered loot seized. A report based on a survey of professionals, published last year by LexisNexis, an analytics firm, found that worldwide spending on AML and sanctions compliance by financial institutions (including fund managers, insurers and others, as well as banks) exceeds $180bn a year. …the numbers tell of a war being lost. …Statistics on how much is intercepted by authorities are patchy. A decade-old estimate by the United Nations Office on Drugs and Crime put it at just 0.2% of the total. In 2016 Europol estimated the confiscation rate in Europe to be a higher but still paltry 1.1%.
Sounds like a damning indictment right?
But I wrote that the article was only “sort of” good news. That’s because the writers at the Economist fail to reach the logical conclusion.
Instead of junking the current system, they want to double down on failure.
…governments need to work harder collectively to make the AML system fit for purpose.
This is akin to looking at welfare programs, realizing that they create dependency and weaken families, but then supporting even more redistribution.
Sadly, I suspect the new evidence cited in the article won’t lead to more sensible thinking in Washington, either.
Democrats don’t care if the current approach is failing since they see anti-money laundering laws as a way of destroying financial privacy, which they think is necessary to collect more tax revenue.
Republicans don’t care if the current approach is failing because they mindlessly support a tough-on-crime approach, regardless of whether it actually produces positive results.
While debunking OECD and IMF research on inequality, I explained that it’s important to distinguish between income that is earned honestly and loot that is obtained thanks to government cronyism.
That’s also the message of this video from the Hoover Institution.
In the video, David Henderson contrasts how our lives are improved when an entrepreneur develops a new product.
The entrepreneur almost surely gets richer faster than we get richer, but we all wind up better off. Indeed, there’s a clear relationship between the share of rich people in a society and overall prosperity.
By contrast, government favoritism is a recipe for inefficiency and stagnation (and since LBJ was an awful president, I like that David used him for the example of corrupt cronyism).
In a column for CapX, Andrew Lilico correctly differentiates between moral inequality and immoral inequality.
The only legitimate questions about the distribution of wealth concern whether it is truly the property of those that possess it, as opposed to having stolen or extorted it. …Wealth is property. If it has been innocently acquired, people should be able to enjoy their property without censure or the (quite incorrect) suggestion that their flourishing causes others harm.
Not only is it incorrect to suggest that one person’s flourishing causes harm to others, it is completely wrong.
P.S. As you can see from his Wikipedia page, Professor Nordhaus is not a libertarian or conservative, so it should be clear he wasn’t trying to come up with a number to justify capitalism.
P.P.S. I also recommend my four-part series (see here, here, here, and here) on why we should care about poverty reduction rather than pushing for coerced equality, as well as my two-part series (here and here) on how statist policies produce the immoral type of inequality.
There’s a growing controversy about whether the various coronavirus-lockdown rules should be relaxed for people who have been vaccinated (as opposed to being relaxed for hypocritical politicians).
And if those restrictions are relaxed, vaccinated people presumably will need some sort of proof, like a “vaccine passport.”
Many people understandably are hesitant about this concept, particularly if government is involved. After all, we have many examples of seemingly innocuous ideas becoming nightmarish mistakes (such as adopting the income tax).
And the last thing any of us would want (I hope!) is something that could devolve into an authoritarian, Chinese-style system for monitoring and controlling private life.
But what if government isn’t involved? What if private businesses decide that customers are only allowed if they prove they’ve been vaccinated?
And that’s true even if we think the owners of the businesses are making silly choices. After all, it’s their property.
Some conservatives, however, either don’t understand libertarian principles or they’re willing to abandon those principles for political convenience.
For instance, Will Wilkinson observes that many Republicans are forgetting the libertarian principle of freedom of association.
Conservatives have been freaking out about the mere possibility of vaccine passports… The idea is that the ability to credibly prove vaccination status will speed the restoration of normal social and economic life. This works by allowing businesses, schools, sports leagues, etc. to discriminate against those who haven’t been vaccinated. …one of the bright lines dividing American liberals and conservatives concerns the limits of freedom of association. Conservatives, and especially those with a libertarian streak, are far more likely to be absolutists about the right to exclude anyone from your property, business, or private club or association for any reason. …If the Civil Rights Act is problematic because it infringes on freedom of association, the permissibility of discriminating against customers who might carry a fatal infection is a total no-brainer. Right? Ha! …there is no actual principle at work here. Conservatives are consistent only in their opportunistic incoherence.
Moreover, in his column for the Atlantic, David Frum notes that the GOP is hypocritically abandoning its support for property rights.
Whether vaccine passports ever will exist remains highly uncertain. A lot of questions remain about the technology required—and about whether the concept makes any business sense. …For now, then, the discussion about vaccine passports remains theoretical—which makes the discussion all the more impassioned and embittered. DeSantis and others are loudly advertising that with COVID-19, …their version of freedom puts greater priority on right-wing cultural folkways than on rights of property and ownership. …To appease those cultural blocs, Republican politicians must be willing to sacrifice everything, including what used to be the party’s foundational principles. …to avoid contradicting the delusions of anti-vaccine paranoiacs, property rights must give way, freedom to operate a business must yield. …with COVID-19, …the new post-Trump message from the post-Trump GOP is: Private property is socialism; state expropriation is freedom. It’s a strange doctrine for a party supposedly committed to liberty and the Constitution, but here we are.
I think it’s fair to say that neither Wilkinson nor Frum are libertarians, or even conservatives, but I also think they are correct in pointing out that there is a lot of hypocrisy and incoherence.
That being said, I am glad that there’s lots of resistance to the idea of vaccine passports. Why? Because if businesses impose such rules and there’s no pushback, that probably increases the likelihood that politicians will try something similar.
And that’s where libertarians should be drawing the line, as Professor Don Boudreaux has noted.
After all, if a business does something we don’t like, we are free to patronize competitors. But if government does something we don’t like, there’s the horrible choice of obey or go to jail (or get a fake passport on the black market).
For what it’s worth, I hope this becomes a moot point. After all, once everybody who wants to get vaccinated has been vaccinated, there’s no plausible argument for maintaining any more restrictions on normal life.
P.S. But if it does become a real issue, it will probably generate new jokes, cartoons, and memes, all of which will require me to expand my collection of coronavirus-themed humor.
Call me crazy, but I’m baffled that the IMF seems to think nations will grow faster and be more prosperous if politicians seize more money from the economy’s productive sector.
Unfortunately, the IMF has been especially active in recent months..
In a column for the U.K.-based Guardian, Larry Elliott writes about the IMF using the pandemic as an excuse to push for higher taxes.
…the IMF called for domestic and international tax changes that would boost the money available to expand public services, make welfare states more generous… “To help meet pandemic-related financing needs, policymakers could consider a temporary Covid-19 recovery contribution, levied on high incomes or wealth,” the fiscal monitor said. …Paolo Mauro, the deputy director of the IMF’s fiscal affairs department, said there had been an “erosion” of the taxes paid by those at the top of the income scale, with the pandemic offering a chance to claw some of the money back. “Governments could consider higher taxes on property, capital gains and inheritance,” he said. “One specific option would be a Covid-19 recovery contribution – a surcharge on personal tax or corporate income tax.”
Mr. Mauro, like most IMF bureaucrats, is at “the top of the income scale,” but he doesn’t have to worry that he’ll be adversely impact if politicians seek to “claw some of the money back.”
Writing for the IMF’s blog, Mr. Mauro is joined by David Amaglobeli and Vitor Gaspar in supporting higher taxes on other people.
Breaking the cycle of inequality requires both predistributive and redistributive policies. …The COVID-19 crisis has demonstrated the vital importance of a good social safety net that can be quickly activated to provide lifelines to struggling families. …Enhancing access to basic public services will require additional resources, which can be mobilized, depending on country circumstances, by strengthening overall tax capacity. Many countries could rely more on property and inheritance taxes. Countries could also raise tax progressivity as some governments have room to increase top marginal personal income tax rates… Moreover, governments could consider levying temporary COVID-19 recovery contributions as supplements to personal income taxes for high-income households.
Needless to say, the IMF is way off base in fixating on inequality instead of trying to reduce poverty.
The International Monetary Fund (IMF) says it backs a U.S. proposal for a global minimum corporate tax. IMF Chief Economist Gita Gopinath said that the fund has been calling for international cooperation on tax policy “for a long time,” adding that different corporate tax rates around the world have fueled tax shifting and avoidance. “That reduces the revenues that governments collect to do the needed social and economic spending,” Gopinath told Yahoo Finance Tuesday. “We’re very much in support of having this kind of global minimum corporate tax.” …Gopinath also backed Yellen’s push forward on an aggressive infrastructure bill… As the IMF continues to encourage countries with fiscal room to continue spending through the recovery, its chief economist said investment into infrastructure is one way to boost economic activity.
Based on the above stories we can put together a list of the tax increases embraced by the IMF, all justified by what I call “fairy dust” economics.
All supported by bureaucrats who are exempt from paying tax on their own very-comfortable salaries.
P.S. I feel sorry for two groups of people. First, I have great sympathy for taxpayers in nations that follow the IMF’s poisonous advice. Second, I feel sorry for the economists and other professionals at the IMF (whooftenproducehigh–qualityresearch). They must wince with embarrassment every time garbage recommendations are issued by the political types in charge of the bureaucracy.
In this clip from a recent interview with Gunther Fehlinger, I explore the connection between two very important important economic concepts: Convergence and Wagner’s Law.
Before launching into further discussion, let’s nail down two very important definitions.
Convergence is the notion that poor countries should grow faster than rich countries and eventually attain a similar level of prosperity.
Wagner’s Law is the seemingly paradoxical observation that richer nations tend to have larger fiscal burdens than poorer nations.
These two concepts deserve elaboration because many people either fail to recognize the implications or they draw the wrong conclusions.
Moreover, Wagner’s Law shows that politicians figure out how to extract more money and fund bigger government once nations become rich, but some people reverse the causality and assert that big government somehow caused nations to become rich.
The key takeaway from these observations, as I explained in the interview, is that poor nations that want convergence need to copy the policies that rich nations had when they became rich (in the interview at about 0:56, I mistakenly said “were rich” rather than “became rich”).
Which gives me another excuse to re-issue my never-answered challenge: Please show me an example, from any point in world history, of a country became rich after adopting big government.
Back in 2012, I shared a video clip of Ice-T defending the 2nd Amendment, but that video is now dead, so I’m glad to see that Prager University has added his comments as a prologue to this defense of gun rights by Prof. Eugene Volokh.
Ice-T and Prof. Volokh make for a good combination, one dispensing common sense and the other sharing academic analysis.
In the case of Prof. Volokh, he walks through the language of the Constitution and succinctly explains why the 2nd Amendment clearly was designed to protect the individual right to keep and bear arms.
And that’s the view that consistent with the liberty-focused attitude of the Founding Fathers, who correctly saw government as a potential source of tyranny.
But there’s another part of the video that also deserves attention. Shortly before the 4:00 mark of the video, Volokh explains that the Founders gave people – through their legislators – the option of amending the Constitution (the great Thomas Sowell has made the same point).
P.S. A British writer argued that defending gun rights was akin to defending slavery. In reality, the 2nd Amendment has been especially valuable for blacks.
Way back in 2007, I narrated this video to explain why tax competition is very desirable because politicians are likely to overtax and overspend (“Goldfish Government“) if they think taxpayers have no ability to escape.
The good news is that tax competition has been working.
As explained in the above video, there have been big reductions in personal tax rates and corporate tax rates. Just as important, governments have reduced various forms of double taxation, meaning lower tax rates on dividends and capital gains.
These pro-growth tax reforms didn’t happen because politicians read my columns (I wish!). Instead, they adopted better tax policy because they were afraid of losing jobs and investment to countries with better fiscal policy.
Now for the bad news.
There’s been an ongoing campaign by high-tax governments to replace tax competition with tax harmonization. They’ve even conscripted international bureaucracies such as the Organization for Economic Cooperation and Development (OECD) to launch attacks against low-tax jurisdictions.
And now the United States is definitely on the wrong side of this issue.
Here’s some of what the Biden Administration wants.
The United States can lead the world to end the race to the bottom on corporate tax rates. A minimum tax on U.S. corporations alone is insufficient. …President Biden is also proposing to encourage other countries to adopt strong minimum taxes on corporations, just like the United States, so that foreign corporations aren’t advantaged and foreign countries can’t try to get a competitive edge by serving as tax havens. This plan also denies deductions to foreign corporations…if they are based in a country that does not adopt a strong minimum tax. …The United States is now seeking a global agreement on a strong minimum tax through multilateral negotiations. This provision makes our commitment to a global minimum tax clear. The time has come to level the playing field and no longer allow countries to gain a competitive edge by slashing corporate tax rates.
As Charlie Brown would say, “good grief.” Those passages sound like they were written by someone in France, not America
And Heaven forbid that countries “gain a competitive edge by slashing corporate tax rates.” Quelle horreur!
There are three things to understand about this reprehensible initiative from the Biden Administration.
Tax harmonization means ever-increasing tax rates – It goes without saying that if politicians are able to create a tax cartel, it will merely be a matter of time before they ratchet up the tax rate. Simply stated, they won’t have to worry about an exodus of jobs and investment because all countries will be obliged to have the same bad approach.
Corporate tax harmonization will be followed by harmonization of other taxes – If the scheme for a harmonized corporate tax is imposed, the next step will be harmonized (and higher) tax rates on personal income, dividends, capital gains, and other forms of work, saving, investment, and entrepreneurship.
Tax harmonization denies poor countries the best path to prosperity – The western world became rich in the 1800s and early 1900s when there was very small government and no income taxes. That’s the path a few sensible jurisdictions want to copy today so they can bring prosperity to their people, but that won’t be possible in a world of tax harmonization.
New York is ranked #50 in the Economic Freedom of North America.
New York is ranked #48 in the State Business Tax Climate Index.
New York is ranked #50 in the Freedom in the 50 States.
New York is next-to-last in measures of inbound migration.
New York is ranked #50 in the State Soft Tyranny Index.
The good news is that New York’s politicians seem to be aware of these rankings and are taking steps to change policy.
The bad news is that they apparently want to be in last place in every index, so they’re looking at a giant tax increase.
The Wall Street Journalopined on the potential tax increase yesterday.
…lawmakers in Albany should be shouting welcome home. Instead they’re eyeing big new tax increases that would give the state’s temporary refugees to Florida—or wherever—one more reason to stay away for good. …Here are some of the proposals… Impose graduated rates on millionaires, up to 11.85%. …Since New York City has its own income tax, running to 3.88%, the combined rate would be…a bigger bite than even California’s notorious 13.3% top tax, and don’t forget Uncle Sam’s 37% share. …The squeeze is worse when you add the new taxes President Biden wants. A second factor: In 2017 the federal deduction for state and local taxes was capped at $10,000, so New Yorkers will now really feel the pinch. As E.J. McMahon of the Empire Center for Public Policy writes: “The financial incentive for high earners to move themselves and their businesses from New York to states with low or no income taxes has never—ever—been higher than it already is.”
The potential deal also would increase the state’s capital gains tax and the state’s death tax, adding two more reasons for entrepreneurs and investors to escape.
Here are some more details from a story in the New York Times by Luis Ferré-Sadurní and Jesse McKinley.
Gov. Andrew M. Cuomo and New York State legislative leaders were nearing a budget agreement on Monday that would make New York City’s millionaires pay the highest personal income taxes in the nation… Under the proposed new tax rate, the city’s top earners could pay between 13.5 percent to 14.8 percent in state and city taxes, when combined with New York City’s top income tax rate of 3.88 percent — more than the top marginal income tax rate of 13.3 percent in California… Raising taxes on the rich in New York has been a top policy priority of the Democratic Party’s left flank… The business community has warned that raising income taxes could prompt millionaires who have left the state during the pandemic and are working remotely to make their move permanent, damaging the state’s tax base. Currently, the top 2 percent of the state’s highest earners pay about half of the state’s income taxes. …The corporate franchise tax rate would also increase to 7.25 percent from 6.5 percent.
There are two things to keep in mind about this looming tax increase.
Second, New York politicians are pushing through a huge tax hike even though the federal tax code no longer allows taxpayers to fully deduct state and local taxes (though they obviously hope to repeal that provision of the 2017 tax reform).
That second item is a big reason why so many taxpayers already have escaped New York and moved to states with better tax policy (most notably, Florida).
And even more will move if tax rates are increased, as expected.
Indeed, if the left’s dream agenda is adopted, I wouldn’t be surprised if every successful person left New York. In a column for the Wall Street Journal, Mark Kingdon warns about other tax hikes being considered, especially a wealth tax.
Legislators in Albany are considering two tax bills that could seriously damage the economic well-being and quality of life in New York for many years to come: a wealth tax and a stock transfer tax. …Should New York enact a 2% wealth tax, a wealthy New Yorker could wind up paying a 77% tax on short-term stock market profits. And that’s a conservative estimate: It assumes that stocks return 9% a year. If the return is 4.4% or less, the tax would be more than 100%. …65,000 families pay half of the city’s income taxes, and they won’t stay if the taxes become unreasonable… The trickle of wealthy émigrés out of New York has become a steady stream… It will be a flood if New York enacts a wealth tax with an associated tax on unrealized gains, which would lower, not raise, tax revenues, as those who leave take with them jobs and related services, such as legal and accounting. …The geese who have laid golden eggs for years see what is happening in Albany, and they’ll fly south to avoid being carved up.
The good news – at least relatively speaking – is that a wealth tax is highly unlikely.
But that a rather small silver lining on a very big dark cloud. The tax increases that will happen are more than enough to make the state even more hostile to private sector growth.
I’ll close with a few observations.
There are a few states that can get away with higher-than-average taxes because of special considerations. California, for instance, has climate and scenery. In the case of New York, it can get away with some bad policy because some people think of New York City as a one-of-a-kind place. But there’s a limit to how much those factors can be exploited, as both California and New York are now learning.
What politicians don’t realize (or don’t care about) is that people look at a range of factors when deciding where to live. This is especially true for successful entrepreneurs, investors, and business owners, who have both resources and knowledge to assess the costs and benefits of different locations. The problem for New York is that it looks bad on almost all policy metrics.
If the tax increases is enacted, expect to see a significant drop in taxable income as upper-income taxpayers either leave the state or figure out other ways of protecting their income. I don’t know if the state will be on the downward-sloping portion of the Laffer Curve, but it’s safe to assume that revenues over time will fall far short of projections. And it’s very safe to assume that the economic damage will easily offset any revenues that are collected.
The second is how profits should be taxed, and that’s the focus of today’s column.
My perfect-world answer is that there should be no tax on profits because we have a government that is so small that there’s no need for any type of income tax. But I’m in the United States rather than a fiscal paradise such as Bermuda, Monaco, or the Cayman Islands. So if we start with the assumption that a corporate income tax is going to exist, how should it operate?
To answer that question, let’s start with this simple example of a kid’s lemonade stand. Here’s how much money it spent and how much revenue it generated (before it was shut down by overzealous bureaucrats).
How much profit did our budding entrepreneur make?
The correct answer, of course, is that the business didn’t earn any profits. Indeed, it lost $2. So there obviously should not be any tax.
But some people don’t understand the difference between taxable income (which is largely based on cash flow in one year) and “book income” (which is largely a backward-looking, accrual-based estimate of profits to help inform shareholders about the overall financial condition of a corporation).
Or, maybe they do understand and simply prefer to engage in dishonest demagoguery. For instance, let’s look at a recent report by Patricia Cohen in the New York Times.
…a new study finds that at least 55 of America’s largest paid no taxes last year on billions of dollars in profits…thanks to a range of legal deductions and exemptions that have become staples of the tax code, according to the analysis. Salesforce, Archer-Daniels-Midland and Consolidated Edison were among those named in the report, which was done by the Institute on Taxation and Economic Policy, a left-leaning research group in Washington. …Twenty-six of the companies listed, including FedEx, Duke Energy and Nike, were able to avoid paying any federal income tax for the last three years even though they reported a combined income of $77 billion. Many also received millions of dollars in tax rebates.
Sounds terrible, right.
Except if you read the fine print, in which case you’ll find out the report discussed in the article isn’t based on company tax returns. Instead, the leftist group, the Institute on Taxation and Economic Policy (ITEP), used financial statements to make up some numbers.
And ITEP’s use of book income meant it didn’t properly measure things such as business investment expenditures and net operating losses, which are necessary to determine whether a company has an actual cash-flow profit.
Ms. Cohen never should have written a story about ITEP’s shoddy and dishonest report, though at least she acknowledged that there are reasons to question the findings.
A provision in the 2017 tax bill allowed businesses to immediately write off the cost of any new equipment and machinery. The $2.2 trillion CARES Act…included a provision that temporarily allowed businesses to use losses in 2020 to offset profits earned in previous years, according to the institute. …many deductions and credits are there for good reason — to encourage research and development, to promote expansion and to smooth the ups and downs of the business cycle, taking a longer view of profit and loss than can be calculated in a single year.
The bottom line is that the ITEP report is garbage.
There’s no reason to expect taxable income to match up with financial statements or “book income.”
Indeed, the differences between those measures is why there are also companies that – according to ITEP’s sloppy methodology – pay tax when they supposedly have losses.
For those who actually care about the truth, the top half of this visual shows how a proper business tax system should work (i.e., one that taxes profits when they actually occur).
Time to add to our collection of satire about the foolishness of gun control.
We’ll start with a comparison of the logic of those who believe in the 2nd Amendment and those who believe only the government should have guns.
The obstacle course isn’t as elaborate as my regulation obstacle course, but maybe that’s because the anti-gun crowd doesn’t have the fortitude of business owners.
For the next item in today’s collection, this headline from the Babylon Bee basically needs to commentary, but I’ll add that the War on Poverty also has been a costly failure.
Feel free to draw the obvious conclusion about government competency (or lack thereof).
This next item doesn’t just apply to Democratic gun control “logic,” but also to the cognitive shortcomings of any Republican or independent who thinks disarming law-abiding people is the right solution to criminal behavior.
This following meme is a clever twist on an old theme.
And I like this next bit of satire because the bottom frame captures the mindset of naive leftists who think passing a law will magically achieve a certain result.
Last but not least, here’s my favorite because it cleverly shows the real consequences of gun control. The people who obey such laws are never threats to society. Meanwhile, anti-gun laws are almost no barrier to bad people.
And remember that life is much better for criminals when there are fewer guns in the hands of law-abiding people.
Infrastructure often is a good thing. Government-financed infrastructure is a questionable thing. Infrastructure financed by Uncle Sam is a bad thing. Those three rules guide my thinking and make for a perfect introduction to this must-watch video from Reason on high-speed rail.
That means shutting down the entire Department of Transportation.
But let’s focus specifically on Amtrak. Chris Edwards wrote wisely on the topic for the Foundation for Economic Education.
The federal government does a lot of things poorly… After the government helped ruin private passenger rail in the post-WWII years, it took over the remaining passenger rail routes in the 1970s under the Amtrak brand. Amtrak was supposed to become self-supporting, but it has consumed tens of billions of taxpayer dollars over the years. …Amtrak operates 44 routes on 21,000 miles of track in 46 states. Amtrak owns the trains, but freight rail companies own nearly all the track. A Pew analysis found that Amtrak loses money on 41 of its 44 routes… The few routes that earn positive returns are in the Northeast, and the biggest money losers are the long-distance routes. …the best fit for the future would be a privatized Amtrak. Privatization would allow for innovation and cost-cutting to improve service and make rail more financially viable. A private rail company (or companies) could…end harmful union rules. It would be able to close the routes that are losing the most money and shift resources to the core routes to improve service quality. Congress should get out of the passenger rail business and give rail the private-sector flexibility it needs to better compete against other transportation modes.
Amen. If inter-city rail travel makes sense, it can and will attract funding from the private sector.
Sadly, President Biden wants to move in the opposite direction. His so-called infrastructure plan makes taxpayers foot the bill.
The White House wants $80 billion for rail, though it’s unclear how much money would be allocated specifically to Amtrak compared to other rail projects.
It’s simple to mock Democrats like Joe Biden, Alexandria Ocasio-Cortez, and Bernie Sanders. One reason they’re easy targets is they want people to believe that America can finance a European-style welfare state with higher taxes on the rich.
Some folks on the left admit this is true. I’ve shared many examples of big-government proponents who openly acknowledge that lower-income and middle-class people will need to be pillaged as well.
In 2019, an out-of-the-closet socialist admitted a big welfare state requires big tax hikes on lower-income and middle-class people.
Last year, two leftists opined in the Washington Post that ordinary people need to pay much higher taxes to finance bigger government.
I disagree with these people on policy, but I applaud them for being straight shooters. They get membership in my “Honest Leftists” club.
And we have a new member of that group.
Catherine Rampell opines in the Washington Post that President Biden should openly embrace tax increases on everybody.
President Biden is trying to address…big, thorny problems…with one hand tied behind his back. Yet he’s the one who tied it, with a pledge to bankroll every solution solely by soaking the rich. …Some have compared Biden’s efforts to Franklin D. Roosevelt’s New Deal, Lyndon B. Johnson’s Great Society or other ambitious endeavors of the pre-Reagan era — when government was more commonly seen as a solution rather than the problem. …Like many Democrats before him, Biden has promised to pay for government expansions by raising taxes only on corporations and the “rich,” everyone else spared. Exactly who counts as “rich” is an ever-shrinking sliver of the population. Barack Obama defined it as households making $250,000 or more a year; now, Biden says it’s anyone making $400,000 or more. …more than 95 percent of Americans are excluded from helping to foot the bill… But…there aren’t enough ultrarich people and megacorporations out there to fund the massive new economic investments and social services Democrats say they want… Democrats sometimes point to Sweden or Denmark as examples of generous,successful welfare states. But in those countries, taxes are higher and broader-based. Here, the middle class pays much lower taxes… Here’s the argument I wish Biden would make: These new spending projects are worth doing. …we should all be financially invested in their success, at least a little. Taxation is the price we pay for a civilized society, as Supreme Court Justice Oliver Wendell Holmes Jr. put it. …If Biden wants to permanently transform the role of government, that may need to be his trajectory.
Needless to say, I fundamentally disagree with Ms. Rampell’s support for an even bigger welfare state, regardless of which taxpayers are being pillaged.
But at least she wants to pay for it and knows that means the IRS reaching into all of our pockets. And kudos to her for acknowledging the high tax burdens on lower-income and middle-class people in nations such as Sweden and Denmark.
Though I can’t resist commenting on the quote (“Taxation is the price we pay for a civilized society”) from Oliver Wendell Holmes.
People on the left love to cite that sentence, but they conveniently never explain that Holmes reportedly made that statement in 1904, nine years before there was an income tax, and then again in 1927, when federal taxes amounted to only $4 billion and the federal government consumed only about 5 percent of economic output.
As I wrote in 2013, “I’ll gladly pay for that amount of civilization.”
Let’s close with a couple of tweets that underscore how Democrats are pushing for giant spending increases, well beyond what can be financed by confiscating more money from the rich.
First, a reporter from the Washington Postlists some of the insanely expensive spending schemes being pushed on Capitol Hill.
And “SALT change” refers to restoring the state and local tax deduction, which is supported by many Democrats from high-tax states even though (or perhaps because) it is a huge tax break for the rich.
What tax increases (on the rich) will be left when the left want to push their “green new deal“? Or the “public option” for Medicare? Or any of the other spending schemes circulating in Washington.
The bottom line is that – sooner or later – politicians will follow Ms. Rampell’s advice and squeeze you and me.
P.S. It’s not a good idea to turn America into a European-style welfare state – unless the goal is much lower living standards.
I have a four-part series (here, here, here, and here) about the conceptual downsides of Joe Biden’s class-warfare approach to tax policy.
Now it’s time to focus on the component parts of his agenda. Today’s column will review his plan for a big increase in the corporate tax rate. But since I’ve written about corporate tax rates over and over and over again, we’re going to approach this issue is a new way.
I’m going to share five visuals that (hopefully) make a compelling case why higher tax rates on companies would be a big mistake.
Visual #1
One thing every student should learn from an introductory economics class is that corporations don’t actually pay tax. Instead, businesses collect taxes that are actually borne by workers, consumers, and investors.
There’s lots of debate in the profession, of course, about which group bears what share of the tax. But there’s universal agreement that higher taxes lead to less investment, which leads to less productivity, which leads to lower pay.
Here’s a depiction of the relationship of corporate taxes and worker pay.
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Visual #2
The previous image explains the theory. Now it’s time for some evidence.
Here’s a look at how much faster wages have grown in countries with low corporate tax rates compared to nations with high corporate tax rates.
Biden, for reasons beyond my comprehension, wants America on the red line.
It’s very bad news that Biden wants a big increase in the corporate tax rate, but let’s not forget that the IRS double-taxes corporate income (i.e., that same income is subject to a second layer of tax when shareholders receive dividends).
The combined effect, as shown in this visual, is that the United States will have the dubious honor of having the highest effective corporate tax rate in the entire developed world.
The economic damage of higher corporate tax rates means that there is less taxable income (i.e., we need to remember the Laffer Curve).
Will the damage be so extensive, causing taxable income to fall so much, that the IRS collects less revenue with a higher tax rate?
We’ll learn the answer to that question over time, but we have some very strong evidence from the IMF that lower corporate tax rates don’t lead to less revenue. As you can see from this chart, revenues held steady as tax rates plummeted over the past few decades.
In other words, lower rates led to enough additional economic activity that governments have collected just as much money with lower tax rates. But now Biden wants to run this experiment in reverse.
It’s possible the government will collect more revenue, of course, but only at a very high cost to workers, consumers, and shareholders.
Those pictures probably tell you everything you need to know about this issue.
But let’s add some more analysis. The Wall Street Journalopined today on Biden’s class-warfare agenda. Here are some of the key passages from the editorial.
The bill for President Biden’s agenda is coming due, starting with Wednesday’s proposal for the largest corporate tax increase in decades. …Mr. Biden’s corporate increase amounts to the restoration of the Obama-era corporate tax burden, only much more so. …Mr. Biden wants to raise the corporate rate back up to 28%, but that’s the least of his proposals. He also wants to add penalties that would make inversions punitive, and he’d impose a global minimum corporate tax of 21%. This would shoot the tax burden on U.S. companies back toward the top of the developed world list. …The larger Biden goal is to end global tax competition… “The United States can lead the world to end the race to the bottom on corporate tax rates,” says the White House fact sheet. Mr. Biden says he wants “other countries to adopt strong minimum taxes on corporations” so nations like Ireland can no longer compete for capital with lower tax rates. This has long been the dream of the French and Germans, working through the Organization for Economic Cooperation and Development. …All of this is in addition to the looming Biden tax increases on dividends, capital gains and other investment income. …Mr. Biden’s corporate tax increases will hit the middle class hard—in the value of their 401(k)s, the size of their pay packets, and what they pay for goods and services.
Amen.
Let’s conclude with some gallows humor.
This meme shows how some of our leftist friends will celebrate if the tax increase is imposed.
I wrote one week ago about a big victory for education in West Virginia. The Mountain State arguably now has the most extensive system of school choice in the country.
Kentucky legislators have just overridden the governor’s veto, meaning that students in the state will now have expanded educational opportunities. Eric Boehm of Reasonhas some of the details.
The new law, originally House Bill 563, allows students in Kentucky public schools to switch school districts, and it creates a new tax-advantaged education savings program for families to use for private school tuition, to pay for tutoring, or to cover other educational expenses. The most controversial part of the proposal was the creation of a $25 million scholarship fund—to be filled by donations from private businesses, for which they would receive state tax credits—that students in Kentucky’s largest counties can tap to help pay for private school tuition. …With the passage of the first school choice bill in state history, Kentucky is now the 28th state with some form of school choice.
Speaking of other states, the Wall Street Journaleditorialized about the beginning of a very good trend.
The pandemic has been a revelation for many Americans about union control of public schools… That awakening is helping to spur some welcome reform progress as several state legislatures are moving to expand school choice. One breakthrough is in West Virginia, where the Legislature passed a bill creating the state’s first education savings account (ESA) program. …Meanwhile in Georgia, the House passed a bill last week that would expand eligibility for the state’s voucher program for special-education students. The Senate, which had already passed the legislation, voted to approve House amendments on Monday and the bill is headed to Republican Gov. Brian Kemp’s desk. In South Dakota this month, Republican Gov. Kristi Noem signed a bill that expands eligibility for the state’s tax-credit scholarship program to students already enrolled in private schools. …in Kentucky, where Democratic Gov. Andy Beshear vetoed a bill last week that would establish a new tax-credit scholarship program. But the state legislature voted late Monday to override the veto… Nearly 50 school-choice bills have been introduced this year in 30 states. It’s a testament to how school shutdowns have made the advantage of education choice more evident, and its need more urgent.
By the way, school choice has existed for a long time in Vermont. Yes, the state that regularly reelects Crazy Bernie has dozens of small towns that give vouchers to students. Laura Williams explains in an article for the Foundation for Economic Education.
Vermont’s “tuition towns”…distribute government education funds to parents, who choose the educational experience that is best suited to their family’s needs. If the school doesn’t perform up to parents’ expectations, they can take their children, and the tuition dollars they control, elsewhere. …Ninety-three Vermont towns (36 percent of its 255 municipalities) have no government-run school at all. …the funds local governments expect to spend per pupil are instead given directly to the parents of school-age children. This method gives lower- and middle-income parents the same superpower wealthy families have always had: school choice. …parents have the ability to put their kids in school anywhere, to buy the educational experience best suited to each child. …A variety of schools has arisen to compete for these tuition dollars. …Eligibility for tuition vouchers actually increased home values in towns that closed their public schools. Outsiders were eager to move to these areas… Having watched these models develop nearby, two more Vermont towns voted in 2013 to close their government-run schools and become “tuition towns” instead.
Rhode Island is another unexpected example. That deep-blue state recently expanded charter schools in Providence.
That’s not as good a genuine school choice, but it gives parents some ability to escape traditional government schools. The Wall Street Journalopined last year on this development.
…this particular hell may have frozen over, as last week the state’s education council voted to expand and open more charter schools to rescue students in the district. About 13% of Providence’s 30,000 students attend 28 charter schools, some in other districts. But demand far exceeds supply. Only 18% of the 5,000 or so charter school applicants were offered a seat this school year, according to the state education department. …The state education council last week gave preliminary approval for more than 5,700 new charter seats in Providence and other districts. Three of four new charters that applied got a green-light to open, pending final approval in the spring, and three existing charters (two of which serve Providence) are expanding. …The teachers union isn’t happy. In a letter to Gov. Gina Raimondo, three union leaders including American Federation of Teachers President Randi Weingarten complained… This is the usual rhetorical union trick. Charters are public schools, albeit without the barnacles and costs of union control.
Let’s now add to our collection of evidence about the benefits of school choice.
In an article for National Review, James Piereson and Noami Schaefer Riley discuss the track record of the Children’s Scholarship Fund.
Children’s Scholarship Fund enables low-income children to attend private schools — and thrive. …parents who receive financial aid from the organization…send their children to inner-city private (mostly Catholic) schools. …When it came to how satisfied they were with their children’s education, almost 90 percent graded their school a 4 or 5 out of 5. …Since its inception in 1998, the fund has helped more than 180,000 children attend private schools. CSF’s high-school graduation and college matriculation rates far surpass those of the urban public schools that surround them. In Philadelphia, for instance, 96 percent of CSF eighth-graders graduated from high school on schedule — compared with Philadelphia’s public-school graduation rate of only 62 percent. A study of CSF in Baltimore found that 84 percent of scholarship recipients were enrolled in college five to ten years after completing eighth grade, compared with fewer than half of students from local public schools. Nor are these high-priced private schools. The average tuition at these schools is about $5,300 per year, and the average scholarship award is $2,200.
Because they have to deliver a good product. Either that, or parents will take their money elsewhere.
It’s a simple question of incentives, as illustrated by this meme about why private schools have been much better than government schools during the pandemic.
While the obvious argument for school choice is that it delivers better educational outcomes (and at lower cost), it’s worth noting that there are all sorts of secondary benefits.
As explained by W. Bradford Wilcox in an article for the American Enterprise Institute, private schools produce better families.
The public debate surrounding the efficacy of private versus public schools tends to revolve around their relative success in boosting test scores, graduation rates, and college admissions. …But there is more to life than excelling at school and work. For instance, there is the opportunity to be formed into a woman or man of good character, a good citizen, or a good partner and parent. …Until now, however, we have known little about how different types of schools are linked to students’ family life as adults. …In this report, we examine how enrollment in American Catholic, Protestant, secular private, and public schools is associated with different family outcomes later in life. …Adults who attended Protestant schools are more than twice as likely to be in an intact marriage as those who attended public schools. They are also about 50% less likely than public-school attendees to have a child out of wedlock. …Compared with public-school attendees, ever-married adults who attended a secular private school are about 60% less likely to have ever divorced. Catholic-school attendees are about 30% less likely to have had a child out of wedlock than those who attended public schools.
And Corey CeAngelis notes in this tweet that school choice reduces segregation.
The research generally suggests private school choice leads to more integration. pic.twitter.com/TBRmY7uVBI
And the Wall Street Journaleditorialized last December about school choice improving mental health.
Teachers unions have pushed to shut down schools during the pandemic no matter the clear harm to children, just as they oppose charters and vouchers. Now comes a timely study suggesting school choice improves student mental health. Several studies have found that school choice reduces arrests and that private-school students experience less bullying. One reason is that charter and private schools enforce stricter discipline than traditional public schools. …The new study in the journal “School Effectiveness and School Improvement” is the first to…analyze the correlation between adolescent suicide rates and the enactment of private-school voucher and charter programs over the last several decades. They find that states that enacted charter school laws witnessed a 10% decrease in suicide rates among 15- to 19-year-olds. Private-school voucher laws were also associated with fewer suicides, though the change was not statistically significant. The effect would likely be larger if more students received vouchers. …The researchers also looked for any correlation between students who attended private school as teenagers and their mental health as adults. …individuals who attended private schools were two percentage-points less likely to report a mental health condition when they were roughly 30 years old.
Let’s conclude with some excerpts from a strong editorial from National Review. The magazine points out that teacher unions wield power in blue parts of the nation and schools are run for their benefit rather than for the best interests of children.
…the interests of children and their families take a distant second place to the desires of the public-sector unions that dominate Democratic politics around the country and run the show practically unopposed in California. …unionized teachers…have turned up their noses at the children they are supposed to be serving and looked instead to their own two-point agenda: (1) not going to work; (2) getting paid. Randi Weingarten exercises more real practical political power than any senator or cabinet secretary, and her power is exercised exclusively in the interest of public-sector workers and the Democratic Party, which they effectively control. Perhaps it is time for Americans to take back some of that power.
And what’s the way to take back power?
It’s possible to reform labor laws so teachers don’t have out-sized influence. That sort of happened in Wisconsin under Governor Scott Walker.
But that’s difficult to achieve and difficult to maintain.
To address that question, let’s start with this video from Prager University, which is narrated by Professor Paul Kengor of Grove City College.
At the risk of understatement, the video is a damning indictment of Marx’s legacy.
His political ideas provided the justification for the genocides of dictators such as Stalin, Mao, and Pol Pot.
His economic ideas led to policies that produced mass deprivation, starvation, and immense human suffering.
Now let’s take a closer look at Marx rather than just his ideas.
Was he a good person who simply had some horribly misguided ideals?
Hardly. Everything we know suggests he was a sickeningly despicable excuse for a human being.
Professor Richard Ebeling has some of the sordid details in an article for Intellectual Takeout.
Karl Marx was born on May 5, 1818, in the Rhineland town of Trier. …he was generally a lazy and good-for-nothing student. …Marx’s only real jobs during his lifetime were as occasional reporters for or editors of newspapers and journals most of which usually closed in a short period of time… He had sex enough times with the family maid that she bore him an illegitimate son… He often used racial slurs and insulting words to describe the mannerisms or appearance of his opponents in the socialist movement. …In Marx’s mind, the Jew in bourgeois society encapsulated the essence of everything he considered despicable in the capitalist system… Marx’s caricaturing description of the asserted “Jewish mindset” rings amazingly similar to those that were later written by the Nazi “race-scientists” of the 1930s.
All told, it appears that Marx lacked a single redeeming feature. He was a very bad person with very bad ideas.
P.S. For those seeking more economic analysis, Marx advocated for the pure version of socialism, meaning government ownership of the means of production (state factories, collective farms, etc).
P.P.S. It’s disgusting that there’s a statue of Marx in his birth city and it’s equally disgusting that the former President of the European Commission went there to celebrate the 200th anniversary of his birth.
P.P.P.S. Marx gets featured frequently in my collection of jokes mocking communism.
My response is easy. I care about results rather than rhetoric. And while GOP politicians often pay lip service to the principles of limited government, they usually increase spending even faster than Democrats.
This is bad news because it means the burden of government expands when Republicans are in charge.
And, as Gary Abernathy points out in a column for the Washington Post, Republicans then don’t have the moral authority to complain when Democrats engage in spending binges.
President Biden is proposing another $3 trillion in spending… There are objections, but none that can be taken seriously. …Republicans had lost their standing as the party of fiscal responsibility when most of them succumbed to the political virus of covid fever and rubber-stamped around $4 trillion in “covid relief,”… With Trump out and Biden in, Republicans suddenly pretended that their 2020 spending spree happened in some alternate universe. But the GOP’s united opposition to Biden’s $1.9 trillion package won’t wash off the stench of the hypocrisy. …I noted a year ago that we had crossed the Rubicon, that our longtime flirtation with socialism had become a permanent relationship. Congratulations, Bernie Sanders. The GOP won’t become irrelevant because of its association with Trump, as some predict. It will diminish because it is bizarrely opposing now that which it helped make palatable just last year. Fiscal responsibility is dead, and Republicans helped bury it. Put the shovels away, there’s no digging it up now.
For what it’s worth, I hope genuine fiscal responsibility isn’t dead.
Maybe it’s been hibernating ever since Reagan left office (like Pepperidge Farm, I’m old enough to remember those wonderful years).
Subsequent Republican presidents liked to copy Reagan’s rhetoric, but they definitely didn’t copy his policies.
Spending restraint was hibernating during the presidency of George H.W. Bush.
Spending restraint also was hibernating during the presidency of George W. Bush.
And spending restraint was hibernating during the presidency of Donald Trump.
I’m not the only one to notice GOP hypocrisy.
Here are some excerpts from a 2019 column in the Washington Post by Fareed Zakaria.
In what Republicans used to call the core of their agenda — limited government — Trump has been profoundly unconservative. …Trump has now added more than $88 billion in taxes in the form of tariffs, according to the right-leaning Tax Foundation. (Despite what the president says, tariffs are taxes on foreign goods paid by U.S. consumers.) This has had the effect of reducing gross domestic product and denting the wages of Americans. …For decades, conservatives including Margaret Thatcher and Ronald Reagan preached to the world the virtues of free trade. But perhaps even more, they believed in the idea that governments should not pick winners and losers in the economy… Yet the Trump administration…behaved like a Central Planning Agency, granting exemptions on tariffs to favored companies and industries, while refusing them to others. …In true Soviet style, lobbyists, lawyers and corporate executives now line up to petition government officials for these treasured waivers, which are granted in an opaque process… On the core issue that used to define the GOP — economics — the party’s agenda today is state planning and crony capitalism.
Zakaria is right about Republicans going along with most of Trump’s bad policies (as illustrated by this cartoon strip).*
The bottom line is that Republicans would be much more effective arguing against Biden’s spending orgy had they also argued for spending restraint when Trump was in the White House.
And we’re getting more stimulus spending on stimulus.
But not the economic kind of stimulus. Paul Bedard of the Washington Examinerreports that people are using handout cash for interesting purchases.
An analysis of spending on Amazon following the distribution of the latest coronavirus stimulus, a massive $1.9 trillion package, suggests that people are using it to let off some steam. The global e-commerce firm Pattern said that the biggest surges in sales were for the PlayStation 5 and a female sex toy called the “Rose Flower Sex Toy.” …Rose’s sales (check Amazon for the description) shot up 334%. …“Distribution of stimulus checks on Wednesday, March 17…may have represented an opportunity for some retail therapy,” said the company.
I’m sure there’s probably some interesting social commentary to make about guys playing video games and neglecting their wives and girlfriends.
The problem is much bigger than the humorous/irritating example discussed above.
In a column for the Foundation for Economic Education, Brad Polumbo shares some big-picture data on how politicians have squandered our money.
Whenever the government spends money, a significant portion is lost to bureaucracy, waste, and fraud. But the…unprecedented scope of federal spending in response to the COVID-19 pandemic—an astounding $6 trillion total—has led to truly unthinkable levels of fraud. Indeed, a new report shows that the feds potentially lost $200 billion in unemployment fraud alone. …More than $200 billion of unemployment benefits distributed in the pandemic may have been pocketed by thieves… To put that $200 billion figure in context, it is equivalent to $1,400 lost to fraud per federal taxpayer. (There goes your stimmy check!) Or, comparing it to the $37 billion the federal government spent on vaccine and treatment development, it’s more than five times more lost to fraud than went to arguably the most crucial COVID initiative of all. That’s just scratching the surface. According to the American Enterprise Institute, “unemployment fraud” now ranks as the 4th biggest federal COVID expenditure out of more than 17 different categories.
If you’re a taxpayer, hundreds of billions of dollars in fraud sounds like a bad outcome.
But if you’re a Keynesian economist, it’s not a problem. All they care about is having the government borrow and spend a bunch of money. They think that making government bigger automatically generates benefit for the economy, even if the money goes to thieves and crooks.
I’m not joking. This is why people like Paul Krugman said a fake attack by space aliens would be good for the economy because Washington would spend a bunch of money in response.
And it’s why Nancy Pelosi actually said the economy benefits if we subsidize joblessness.
In Part I of this series, I explained why it’s absurd to think illegal immigration can be stopped by sending foreign aid to less-developed countries, such as many of those in Central America.
Like most libertarians, I want to solve the problem by getting rid of the welfare state.
Immigrants are a big net plus so long as they are coming to work and be productive.
Indeed, because of their entrepreneurial skills and work ethic, immigrants from many nations wind up earning more than native-born Americans.
That’s something to celebrate. The American Dream in action!
But will that story of success continue if the welfare state is expanded?
Two advocates of increased immigration are worried. First, Jason Riley of the Wall Street Journalrecently explained that Biden’s agenda is a recipe for immigrant dependency.
…it is a growing belief on the political left that people should be allowed to enter the U.S. on their terms rather than ours, and that it is our collective responsibility to take care of them if they can’t take care of themselves. Milton Friedman said that open immigration and large welfare states are incompatible, and today’s progressives in Congress and the White House are eager to test that proposition. …Another concern is the left’s determination to sever any connection between work and benefits, something all the more worrisome since it is occurring while destitute foreign nationals with little education are being lured here en masse. …Earlier this month, the Biden administration quietly announced that it would no longer enforce a policy that limited the admission of immigrants who were deemed likely to become overly dependent on government benefits. What could go wrong? …In countries like Italy and France, generous aid programs have attracted poor migrants who are more likely than natives to be heavy users of welfare and less likely to be working. It’s a mistake to think it can’t happen here.
In a column last year for Reason, Shikha Dalmia warned that welfare programs undermine support for immigration.
…economists Alberto Alesina, Armando Miano, and Stefanie Stantcheva…administered online questionnaires to 24,000 respondents in six countries: U.S., U.K., France, Germany, Italy, and Sweden. The explicit aim was to study attitudes toward legal, not illegal, immigration. …restrictionists have succeeded most spectacularly is in depicting immigrants as welfare queens. …In America, over 25 percent of respondents said the person with the ..immigrant-sounding name would pay less in taxes than he collected in welfare… The study’s findings pose a particular dilemma for Democrats like Sen. Elizabeth Warren (D–Mass.), who wants to combine grandiose welfare schemes like free health care, pre-K, and college for everyone with generous immigration policies, because the mere mention of immigration reduces support for such schemes. Respondents who were asked about immigration became less concerned about inequality and less supportive of soak-the-rich schemes. …as long as immigrants are seen as succeeding through their own grit, natives may have no real objection to them. What is most likely to sour the public on immigration are the grandiose universal freebies… Immigrants should be wary of Democrats bearing gifts.
Both Riley and Dalmia raise good points.
My modest contribution to this discussion is to provide a practical example.
In his so-called American Rescue Plan, Joe Biden included a huge giveaway program that will shower $3,000-$3,600 to non-rich households for every kid they have.
This is a one-year, one-time handout, but many Democrats (and some Republicans!) want to make these enormous per-child payments a permanent part of America’s welfare state.
If that happens, the incentive to move to the United States almost surely will skyrocket.
Here’s a map I made, showing the annual handout for two children in the United States and the average per-capita income in some nearby nations.
At the risk of stating the obvious, there will be a huge incentive to migrate to America – but not for the right reasons. And my little example doesn’t include the value of any of the dozens of other redistribution programs in Washington.
The bottom line is that we shouldn’t have a welfare system that rewards dependency, whether for people in the country legally or illegally.
And if you like immigration in theory, you should be especially opposed to handouts that will undermine public support for newcomers in practice.
I’ve authored a five-part series about coronavirus and the failure of big government (here, here, here, here, and here), as well as columns specifically highlighting the failures of the FDA, CDC, and WHO bureaucracies.
Today, let’s look at how free enterprise came to the rescue when government barriers were reduced. Starting with this video.
To elaborate on this message, millions of lives are now being saved because pharmaceutical companies have produced multiple vaccines.
I even got my first shot yesterday before leaving town for a softball tournament.
Will this save my life? I like to think I’m reasonably healthy and would have survived if I caught the virus, but I’m very happy to now put that possibility in the rear-view mirror.
So I’m feeling very happy that I live in a nation where private companies, in their pursuit of profits, have had a big incentive to produce vaccines.
Yes, I realize the government dumped a bunch of taxpayer money into vaccine production, so I don’t want to pretend Uncle Sam played no role. But I also have great faith that the profit motive would have led to vaccines being developed regardless.
And we would have had the vaccines even sooner if the FDA was even better about getting out of the way.
Allysia Finley celebrated capitalism’s key role in a recent column for the Wall Street Journal. Here’s some of what she wrote about the decades of research and investment that enabled pharmaceutical companies to deliver miracles for humanity.
Large corporations are political villains, derided on the left and right. Yet the main, and perhaps only, reason the Covid-19 scourge is easing is vaccines developed by Big Pharma. …There are…lessons for those who think capitalism is merely about rapacious profit. “We would never be in the position where we are today if we had not invested billions of dollars over decades so that we could respond,” Mr. Gorsky, 60, says in an interview… J&J’s vaccine is the third to obtain FDA approval, but preliminary results from trials on AstraZeneca and Novavax suggest they are also highly effective. All these Covid-19 vaccines use innovative technologies that have been developed and tested over decades on other diseases. …The Pfizer-BioNTech and Moderna vaccines inject the virus’s genetic code via mRNA… It seems like an incredible stroke of luck and science that we have so many Covid-19 vaccines so soon. But it’s more than that. Credit years of research and investment by drug makers… “I think this is a golden moment, not only for Johnson & Johnson, but the biopharmaceutical industry,” he says. “We fundamentally believe that having a market-based, innovation-based, biopharmaceutical as well as a medical-technology environment, is critical long term to produce the best overall outcomes for healthcare.”
There are a couple of big lessons for today.
The first lesson, as shown in the video, is that we can save lives by permanently reducing bureaucratic red tape at bureaucracies such as the Food and Drug Administration.
The second lesson is that we should celebrate the profit motive. The desire to make a buck is what drives companies to produce goods and services that make our lives better.
And one takeaway of that second lesson is that we should reject short-sighted policies such as European-style price controls on drug companies. Such an approach would undermine our ability to deal with future pandemics and also reduce the likelihood of new and improved treatments for things such as cancer, dementia, and heart disease.
P.S. I like pharmaceutical companies when they are being honest participants in a free market. I don’t like them when they get in bed with big government.
I think it’s not-so-great that illegal immigration, as Walter Williams explained, makes a mockery of the rule of law.
The combination of these conflicting factors helps to explain why I rarely write on this topic.
But sometimes there are aspects of the immigration debate that are so foolish that I feel compelled to comment. And high on that list is the anti-empirical notion that foreign aid can produce more prosperity in foreign countries.
How is this connected to the immigration debate, you may be wondering?
In a column for the Washington Post, Greg Sargent writes that putting Kamala Harris in charge of immigration policy is “a big deal” because she will use foreign aid to improve Central American economies and thus discourage migration to the United States.
President Biden has assigned Vice President Harris the task of overseeing the administration’s efforts to stem the flow of migrants at the Mexican border… Here’s why this could prove to be a big deal. …it could help shift part of the conversation…and focus it on the deeper causes of these migrations. …The real challenge…entails addressing problems in Central America to reduce “push factors,” i.e., conditions that spur these migrations in the first place — such as…poverty… Which is where Harris comes in. …“A large part of her portfolio will be to develop strategies regarding root causes that generate migrants and refugees,” Sharry continued… The Biden reading of the problem is that push factors matter. …The Biden plan would invest billions in improving economic conditions, combating corruption and strengthening democracy in Central America.
Congresswoman Veronica Escobar makes the same argument in a column for the New York Times.
…the real crisis is not at the border but outside it, and that until we address that crisis, this flow of vulnerable people seeking help at our doorstep will not end anytime soon. …Overwhelmingly and consistently, Central American refugees tell stories of fleeing…calamitous economic conditions in their countries. …The good news is that we now have an administration willing to work on the issue. …reinstating aid…is a good start.
I actually agree with Congresswoman Escobar on one point. It’s true that “reinstating aid…is a good start.”
But it’s only a good start if your goal, perversely, is to undermine prosperity in poor nations.
The bottom line is that we know the recipe for growth and prosperity.
Which is why I’m very excited that we’re about to see a massive expansion of school choice in West Virginia.
The state legislature has enacted and the governor is expected to sign (fingers crossed!) legislation creating education savings accounts (ESAs) providing $4,600 per child.
These accounts, called Hope Scholarships, will be available to all families with kids in government schools (and every single new kindergarten student). Parents then can use the funds for private school tuition, homeschooling expenses, and a range of other approved items.
The state’s leading think tank, the Cardinal Institute, has a primer on the issue.
ESAs allow parents to apply for eligible students to receive the state portion of education funds into a personal, parent-controlled account. Parents are then empowered to customize an education experience that meets the individual needs of their child, using their account to pay for approved services like tuition, therapy, tutoring, textbooks, and more. …the bill would extend ESAs to students who are enrolled in a public elementary or secondary school… parents will only be able to purchase approved items and services. This makes ESAs as—if not more—transparent than any other form of education spending. …The key aspect that distinguishes ESAs from vouchers is parent control and customization. Instead of the state sending funds directly from the state to a specific private school, the state instead deposits funds into a parent-controlled account. These funds can then be spent on wide array of approved education services, not only tuition
Corey DeAngelis and Neal McCluskey address some of the hot-button issues in an article for Reason.
West Virginia’s public schools spend an average of $12,644 per child per year, while the estimated amount of funding that would follow the child under HB 2013 would be about $4,600. If the legislation becomes law, public schools would keep large amounts of funding for children even after they left, meaning they would end up with more money per child. …choice opponents in the state also are claiming that $4,600 is too low to cover private school tuition. But do those same people oppose Pell Grants just because they don’t cover the full cost of attending many universities? …And $4,600 would actually go a long way in West Virginia as the average private school tuition in the state is just $6,068 and the average elementary school cost is $4,890. …The worst thing about anti-school choice myths is that they disproportionately prevent the least advantaged from access to much-needed education options.
Amen to the last point.
School choice should be the civil rights issue of the 21st century since black and brown kids are the biggest victims of the government school monopoly.
I’ll close by observing that teacher unions traditionally have done a very good job of protecting their monopoly. Every time I think a state is poised to make progress on school choice (most recently in Pennsylvania and Colorado), the unions dump tons of money into campaigns so they can maintain their privileges.
Assuming West Virginia’s Republican governor, Jim Justice, doesn’t betray children by unexpectedly vetoing the legislation, the union win streak will have ended.
P.S. Here’s a video explaining the benefits of school choice.
P.P.S. There’s international evidence fromSweden, Chile, Canada, and the Netherlands, all of which shows superior results when competition replaces government education monopolies.
That’s true if you look at average levels of consumption in different nations, but the most compelling data is the fact that lower-income people in the United States generally enjoy living standards that are equal to or even higher than those for middle-class people in most European countries.
A bigger burden of government is not just a theoretical concern. President Biden has already pushed through a $1.9 trillion spending bill that includes some temporary provisions – such as per-child handouts – that, if made permanent, could add several trillion dollars to the burden of government spending.
And the White House has signaled support for $3 trillion of additional spending for items such as infrastructure, green energy, and other boondoggles.
So what will it mean for America if our medium-sized welfare state morphs into a European-style large welfare state?
The answer to that question is rather unpleasant, at least if some new research from the Congressional Budget Office is any indication. The study, authored by Jaeger Nelson and Kerk Phillips, considers the impact on growth based on six different scenarios (based on how much the spending burden increases and what taxes are increased).
If permanent spending is financed by new or increased taxes, then those taxes influence people’s decisions about how much to work and save. Those decisions then affect how much the economy produces and businesses invest and, ultimately, how much people can consume. Different types of taxes have different economic effects. Taxes on labor income reduce after-tax wages, so they reduce the return on each additional hour worked. …Higher taxes on capital income, such as dividends and capital gains, lower the average after-tax rate of return on private wealth holdings (or the return on investment), which reduces the incentive to save and invest and leads to reductions in saving, investment, and the capital stock. …we compare the effects of raising additional revenues through three illustrative tax policies: a flat tax on labor income, a flat tax on all income (including both labor and capital income), and a progressive tax on all income. The additional revenues generated by these policies are in addition to the revenues raised by taxes that already exist and are used to finance two specific increases in government spending. The two increases in government spending are set to 5 percent and 10 percent of GDP in 2020.
Here are some of the key results, as illustrated by the chart.
The least-worst result (the blue line) is a decline in GDP of about 3 percent, and that happens if the spending burden expand by 5-percentage points of GDP and is financed by a flat tax.
The worst-worst result (dashed red line) is a staggering decline in GDP of about 10 percent, and that happens if the spending burden climbs by 10-percentage points and is financed by a progressive tax.
Here’s some additional analysis, including a description of why progressive taxes impose the most damage.
This paper shows that flat labor and flat income tax policies have similar effects on output; labor taxes reduce the labor supply more, and income taxes reduce the capital stock more. For all three policies, the decline in income contracts the tax base considerably over time. As a result, to continuously generate enough revenues to finance the increase in government spending in each year, tax rates must steadily increase over time to account for the decline in the tax base. Moreover, labor and capital taxes put upward pressure on interest rates by reducing the capital-to-labor ratio over time… The largest declines in economic activity among the financing methods considered occur with the progressive tax on all income. Those declines occur because high-productivity workers reduce their hours worked and because higher taxes on asset income reduce the incentive to save and invest relatively more than under the two flat taxes.
There’s lots of additional information in the study, but I definitely want to draw attention to Table 4 because it shows that lower-income people will suffer big reductions in living standards if there’s an increase in the burden of government spending (circled in red).
What makes these results especially remarkable is that the authors only look at the damage caused by higher taxes.
Yet we know from other research that the economy also will suffer because of the higher spending burden. This is because of the various ways that growth is reduced when resources are diverted from the productive sector to the government.
For background, here’s a video on the theoretical reasons why government spending hinders growth.
And here’s a video with some of the scholarly evidence.
P.S. The CBO study also points out that financing new spending with a value-added tax wouldn’t avert economic damage.
…by reducing the cost of time spent not working for pay relative to other goods, a consumption tax could reduce hours worked through a channel like that of a tax on labor.
And since it’s comparatively easy to control the timing, level, and composition of that income, class-warfare taxes generally backfire.
Heck, well-to-do taxpayers can simply shift all their investments into tax-free municipal bonds (that’s bad for the rest of us, by the way, since it’s better for growth if they invest in private businesses rather than buying bonds from state and local governments).
Or, they can simply buy growth stocks rather than dividend stocks because politicians (thankfully) haven’t figured out how to tax unrealized capital gains.
Some of my left-leaning readers probably think that my analysis can be ignored or dismissed because I’m a curmudgeonly libertarian.
But I’m simply recycling conventional economic thinking on these issues.
And to confirm that point, let’s review a study on taxes and growth that the International Monetary Fund published last December. Written by Khaled Abdel-Kader and Ruud de Mooij, there are passages that sound like they could have been written by yours truly.
Such as the observation that taxes hinder prosperity by reducing economic output (what economist refer to as deadweight loss).
…public finance…theories teach us some important lessons about efficient tax design. By transferring resources from the private to the public sector, taxes inescapably impose a loss on society that goes beyond the revenue generated. …deadweight loss (or excess burden) is what determines a tax distortion. Efficient tax design aims to minimize the total deadweight loss of taxes. The size of this loss depends on two main factors. First, losses are bigger the more responsive the tax base is to taxation. Second, the loss increases more than proportionately with the tax rate: adding a distortion to an already high tax rate is more harmful than adding it to a low tax rate. Two prescriptions for efficient tax policy follow: (i) it is efficient to impose taxes at a higher rate if things are in inelastic demand or supply; and (ii) it is best to tax as many things as possible to keep rates low. …empirical studies on the growth impact of taxes…generally find that income taxes are more distortive for economic growth than taxes on consumption.
There are several parts of the above passage that deserve extra attention, such as the observation about elasticity (similar to the point I made in the video about why higher tax rates on upper-income taxpayers are so destructive).
But the most important thing to understand is what the authors wrote about how “the [deadweight] loss increases more than proportionately with the tax rate.”
In other words, it’s more damaging to increase top tax rates.
This observation, which is almost certainly universally recognized in the economics profession, tells us why class-warfare taxes do the most economic damage, on a per-dollar-collected basis.
The IMF study also has worthwhile observations on different types of taxes, such as why it’s a good idea to have low income tax rates on people.
Optimal tax theory emphasizes the trade-off between equity and efficiency. …This requires balancing the revenue gain from a higher marginal top PIT rate at the initial base against the revenue loss induced by behavioral responses that a higher tax rate would induce—such as reduced labor effort, avoidance or evasion—measured by the elasticity of taxable income. …high marginal rates cause other adverse economic effects, e.g. on innovation and entrepreneurship, and thus create larger economic costs than is sometimes assumed.
Capital income—interest, dividends and capital gains—is used for future consumption so that taxes on it correspond to a differentiated consumption tax on present versus future consumption—one that compounds if the time horizon expands. Prudent people who prefer to postpone consumption to later in life (or transfer it to their heirs) will thus be taxed more than those who do not, even though they have the same life-time earnings. This violates horizontal equity principles. Moreover, it causes a distortion by encouraging individuals to substitute future with current consumption, i.e. they reduce savings. The tax is therefore also inefficient. A classical result, formalized by Chamley (1986) and Judd (1985), is that the optimal tax on capital is zero.
Indeed, the study even asks whether there should be a corporate income tax when the same income already is subject to dividend taxation when distributed to shareholders.
…capital income taxes can be levied directly on the people that ultimately receive that income, i.e. shareholders and creditors. So: why is there a need for a CIT? It is hard to justify a CIT on efficiency grounds. As explained before, the incidence of the CIT in a small open economy falls largely on workers, not on the firm or its shareholders. Since it is more efficient to tax labor directly than indirectly, the optimal CIT is found to be zero. …CIT systems…in most countries…create two major economic distortions. First, by raising the cost of capital on equity they distort investment decisions. This hurts economic growth and adversely affects efficiency. Second, by differentiating between debt and equity, they induce a bias toward debt finance. This not only creates an additional direct welfare loss, but also threatens financial stability. Both distortions can be eliminated by…cash-flow taxes, which allow for full expensing of investment instead of deductions for tax depreciation
And I like the fact that the study makes very sensible points about why there should not be a pro-debt bias in tax codes and why there should be “expensing” of business investment costs.
I’ll close by noting that the IMF study is not a libertarian document.
The authors are simply describing the economic costs of taxation and acknowledging the tradeoffs that exist when politicians impose various types of taxes (and the rates at which those taxes are imposed).
But that doesn’t mean the IMF is arguing for low taxes.
There are plenty of sections that make the (awful) argument that it’s okay to impose higher tax rates and sacrifice growth in order to achieve more equality.
And there are also sections that regurgitate the IMF’s anti-empirical argument that higher taxes can be good for growth if politicians wisely allocate the money so it is spent on genuine public goods.
Politicians doing what’s best for their countries rather than what’s best for themselves? Yeah, good luckwith that.
If someone writes and talks about poverty, I generally assume that they care about poor people. They may have good ideas for helping the poor, or they may have bad ideas. But I usually don’t doubt their sincerity.
But when someone writes and talks about inequality, I worry that they don’t really care about the less fortunate and that they’re instead motivated by envy, resentment, and jealousy of rich people.
And this concern probably applies to a couple of law professors, Michael Heller of Columbia and James Salzman of UCLA. They recently wrote a column for the Washington Post on how the government should grab more money from the private sector when rich people die.
They seem particularly agitated that states such as South Dakota have strong asset-protection laws that limit the reach of the death tax.
Income inequality has widened. One…way to tackle the problem. Instead of focusing only on taxing wealth accumulation, we can address the hidden flip side — wealth transmission. …The place to start is South Dakota… The state has created…wealth-sheltering tools including the aptly named “dynasty trust.” …Congress can…plug holes in our leaky estate tax system. One step would be to tax trusts at the passage of each generation and limit generation-skipping tax-exempt trusts. A bigger step would be to ensure that appreciated stocks…are taxed… Better still, let’s start anew. Ditch the existing estate tax and replace it with an inheritance tax
There’s nothing remarkable in their proposals. Just a typical collection of tax-the-rich schemes one might expect from a couple of academics.
But I can’t resist commenting on their article because of two inadvertent admissions.
First, we have a passage that reveals a twisted sense of morality. They apparently think it’s a “heist” if people keep their own money.
America’s ultra-wealthy have pulled off a brilliantly designed heist, with a string of South Dakota governors as accomplices.
For all intents and purposes, the law professors are making an amazing claim that it’s stealing if you don’t meekly surrender your money to politicians.
Second, the law professors make the mistake of trying to be economists. They want readers to think the national economy suffers if money stays in the private sector.
Nearly no one in South Dakota complains, because the harm falls on the national economy… We all suffer high and hidden costs…getting less in government services. …South Dakota locks away resources that could spark entrepreneurial innovation.
According to their analysis, a nation such as Singapore must be very poor while a country such as Greece must be very rich.
Libertarians have a reputation for being principled, albeit a bit quirky. Maybe even dorky. And that creates opportunities for satire, even if we’re making fun of ourselves. Like in this video.
I don’t know if Ms. Dehbozorgi is a libertarian, but she definitely knows how to make some libertarians feels guilty.
I actually have some libertarian-minded friends in the bowels of various bureaucracies (and they all admit they are overpaid and most acknowledge their comfy jobs shouldn’t exist).
Some of them are even out of the closet. I gather they don’t care about irritating their colleagues for the simple reason that libertarians rarely get too worked up about what others think.
As reflected in this next meme.
This next item would have been more appropriate last month, but it’s still worth sharing (at the risk of triggering a squabble with the Randians).
And here’s my favorite item from today’s collection.
It’s almost like taking the 24 types of libertarians, combining them into one, and then doing a brain scan.
My favorite item from today’s collection is this bit of satire about redistribution from Arthur Chrenkoff. But not tax-and-spend redistribution.
…generations of radicals, socialists and progressives inspired by his vision have fought for a better world animated by egalitarian values; a classless world without the bourgeoisie and the proletariat, where from each it is taken according to their ability and to each given according to their needs. …but in its pursuit the Marxists have seemingly overlooked and done nothing about the even more glaring inequalities between men and women and the hot and the not. Sure, the control of the means of production is important, but what about the means of reproduction? …Shall we tolerate this outrageous situation where some people monopolise the attention and attraction of the opposite sex (or the same sex – we, progressives, don’t judge) while the great majority fight for scraps? Surely, it is not just and it is not equitable that a small minority of those with an unearned privilege (the good looks) should lord it over the aesthetically poor masses. …I now call for the redistribution from the few to the many. …the distinctions between the attractive and those less so will be abolished forever. Everyone will have an equal access to attention and love and everyone will be expected to be attracted to everyone else, without distinctions and discrimination.
Very clever. And akin to this mockery of Elizabeth Warren class warfare.
But there’s a serious point to be made. As noted by Prof. Robin Hanson, there is a great deal of attractiveness inequality yet nobody seriously (at least so far!) is proposing government-coerced redistribution of sex.
“Oh, I’ve been teaching him libertarian principles,” explained Mrs. Wood’s husband, Fred Wood. …“Then you get him to bed.” Mr. Wood approached Zach to try to non-violently persuade him to go to bed. “Hey, buddy. Seems like it’s time to sleep now.” “Can’t sleep,” replied Zach. “Fed still out there. Need to audit the Fed.” …Eventually, Mr. Wood was able to persuade Zach to go to bed with the promise of reading him a bedtime story about cryptocurrency.
while shooting guns in the air, we think. …Prominent proponents: Ron Paul, that weird guy who’s always smoking weed in your drama class… Prominent critics: Republicans, Democrats, anyone who loves war and hates freedom. …Key texts: Atlas Shrugged (we think, no one’s actually ever read it)… How do you spot a Libertarian? …look for guys carting around books from the 1700s and shouting, “AM I BEING DETAINED?!” at everyone from police officers to Arby’s cashier
