Archive for April 11th, 2010

The overall fiscal burden in the United States may be lower than it is in Europe, but there are some features of the internal revenue code that are far worse than what can be found on the other side of the Atlantic. America has a “worldwide” tax system, for instance, which means that our government interferes with the sovereignty of other nations by taxing income earned by Americans inside their borders. Good tax policy, by contrast, relies on the “territorial” principle of only taxing income earned inside national borders – and every other developed nation uses this system. Not surprisingly, both the flat tax and national sales tax are based on this common-sense approach. If an American earns income in Hong Kong, it should be up to Hong Kong to decide how that money gets taxed. Likewise, if a German earns money in the United States, then he is fair game for the IRS. There’s an old saying that good fences make good neighbors, and territorial taxation is the fiscal policy equivalent of this sound rule. Not surprisingly, however, other nations want to mimic this horrible feature of the American tax code. The Financial Times is even urging European nations to jointly make that misguided choice. Fortunately, it is almost certain that some nations will refuse to join in such a statist cartel:

The US is unique in using citizenship in determining whether a person’s worldwide income is subject to taxation. Most countries do not impose tax on their citizens who are not resident within their borders – apart from any income that is sourced in that country. But the US system has much to commend it. After all, any citizen of a country enjoys the implicit legal and physical protection it affords. …provision is made to avoid double taxation. Moreover, there is an exit for individuals who do not accept it as they can renounce their citizenship and move elsewhere. But perhaps the best thing about it is that a worldwide system linked to citizenship is simple and easy to understand. Most American citizens do accept it, although more have handed back their passports recently. It would be hard for, say, the UK or Germany to introduce such a system unilaterally. There would be the risk of citizens jurisdiction-hopping by swapping one passport for another within a common economic area. But all European Union states could introduce the same rule. That would not be impossible. After all, EU countries already co-ordinate their policies on savings taxes and their tax authorities exchange information.

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The quote in the last gun control poster apparently was an urban legend, but it did reflect an essential truth that armed societies are harder to enslave. I don’t know if the specific numbers in this poster are accurate, but it does emphasize another fundamental truth. Many leftist politicians are insulated from the dangers of ordinary life and this may be one of the reasons that they have little regard for Second Amendment rights.

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The serial mendacity that characterizes Washington is on full display today in David Border’s column entitled “Without higher taxes, the national debt will be crushing.” Yes, this is the same David Broder who did not write columns about the threat of deficits and debt when politicians were bailing out their friends on Wall Street. Moreover, this is the same David Broder who did not fret about red ink when politicians were enacting a so-called stimulus. And this is the same David Broder who was peacefully oblivious to the long-term fiscal nightmare of Obamacare. But now that higher taxes are on the agenda, debt is somehow a crisis that must be addressed. Like Bernanke, Broder is part of the Washington establishment that thrives when more money is seized from the productive sector of the economy, so it is appropriate to always remember that his tired words reflect a statist agenda:

With every passing day, it is becoming clearer that next year the issue of paying for the government will be back at the center of political debate. There will be a head start on the discussion this summer or fall, because some of the expiring Bush tax cuts must be extended. But the hangover from the Great Recession and the lagging unemployment numbers will make it impossible to focus on improving the Internal Revenue Code. Come 2011, however, the demand to start dealing seriously with the overhang of deficits and debt threatening the nation’s future will become irresistible. …The forces converging to make taxes a top agenda item in 2011 can also make it a year of opportunity — if legislators and the president step up.

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