I don’t like tax increases, but I like having additional evidence that higher tax rates change behavior. So when my leftist friends “win” by imposing tax hikes, I try to make lemonade out of lemons by pointing out “supply-side” effects.
- Such as the big drop in soda purchases after a tax on sugary drinks was imposed in Berkeley.
- Such as the big drop in home sales after a tax was imposed in Vancouver on purchases by foreigners.
I’m hoping that if leftists see how tax hikes are “successful” in discouraging things that they think are bad (such as consumers buying sugary soda or foreigners buying property), then maybe they’ll realize it’s not such a good idea to tax – and therefore discourage – things that everyone presumably agrees are desirable (such as work, saving, investment, and entrepreneurship).
Though I sometimes worry that they actually do understand that taxes impact pro-growth behavior and simply don’t care.
But one thing that clearly is true is that they get very worried if tax increases threaten their political viability.
This is why Becket Adams, in a column for the Washington Examiner, is rather amused that Mayor Kenney of Philadelphia has been caught with his hand in the tax cookie jar.
Philadelphia Mayor Jim Kenney fought hard to pass a new tax on soda and other sugary drinks. He won, and the 1.5-cents-per-ounce tax is now in place, affecting both merchants and consumers, because that’s how taxes work. Businesses pay the levies, and they offset the cost by charging higher prices. That is as basic as it gets. The only person who doesn’t seem to understand this is Kenney, who is now accusing business owners of extortion. “They’re gouging their own customers,” the mayor said.
Yes, consumers are being extorted and gouged, but the Mayor isn’t actually upset about that.
He’s irked because people are learning that it’s his fault.
Philadelphians are obviously outraged by the skyrocketing cost of things as simple as a soda, which has prompted some businesses to post signs explaining why the drinks are now do damned expensive. Kenney said that this effort by businesses to explain the rising cost is “wrong” and “misleading.” The mayor apparently thought the city council could impose a major new tax on businesses, and that customers somehow wouldn’t be affected.
In other words, it’s probably safe to say that Mayor Kenney has no regrets about the soda tax. He’s just not pleased that he can’t blame merchants for the price increase.
The International Monetary Fund, by contrast, may actually have learned a real lesson that higher taxes aren’t always a good idea. That bureaucracy is infamous for blindly supporting tax increases, but if we can believe this story from the Wall Street Journal, even those bureaucrats don’t think additional tax hikes in Greece would be a good idea.
IMF officials have said Greece’s economy is already overtaxed. New taxes that came into affect on Jan. 1 are squeezing household incomes further. Economists say even-higher income taxes—in the form of lower tax-free income allowances—could add to a mountain of unpaid taxes. Greeks currently owe the state €94 billion ($99 billion), equivalent to 54% of gross domestic product, and rising, in taxes that they can’t pay.
Here are some stories to illustrate the onerous tax system in Greece, starting with a retired couple that will probably lose their house because of a new property tax.
…the 87-year-old former economist and his 81-year-old wife are unable to repay the property tax imposed on their 70-year old house, a family inheritance. The annual tax is around €33,000, but Mr. Kokkalis’s pension—already cut by half—is €28,000 a year. The couple borrowed money when the tax was imposed, initially as a temporary austerity measure in 2011. But they are already behind on nearly €200,000 of tax payments and can’t borrow more. Mr. Kokkalis says the state is calculating tax based on outdated property prices that have since collapsed, and that if he tried to sell the house now, nobody would be interested. “They impose taxes on an imaginary value,” Mr. Kokkalis says. “This is confiscation.”
I’ve already written about this punitive property tax. The good news is that property taxes generally are transparent, so people know how much they’re paying.
The bad news is that the tax in Greece is far too onerous.
And I’ve also noted that small businesses are being wiped out in Greece as well. The WSJ has a new example.
Tax increases under previous rounds of austerity have put a middle-class lifestyle beyond reach for many. “Our only goal now is survival,” says arts teacher Mimi Bonanou. Until recent years she also made a living as a practicing artist, selling her works in Greece and abroad. But increasingly heavy taxes that self-employed Greeks must pay at the start of each year, based on the state’s often-ambitious forecast of their incomes, have forced her to rely on teaching alone.
All things considered, Greece is a painful example that a country can’t tax its way to prosperity (though some politicians never learned that lesson).
Moreover, it’s nice to have further evidence that even the IMF recognizes that Greece is on the wrong side of the Laffer Curve.
And if a left-leaning bureaucracy is now willing to admit that excessive taxation can lead to less revenue, maybe eventually the Republicans on Capitol Hill will install people at the Joint Committee on Taxation who also understand this elementary insight.
[…] of examples designed to educate my friends on the left (here’s Part I, Part II, Part III, Part IV, Part V, and Part […]
[…] tax burden is now so stifling that even the IMF admits the country may be on the wrong side of the Laffer […]
[…] The big drop in soda purchases after a tax was imposed in Philadelphia. […]
[…] The big drop in soda purchases after a tax was imposed in Philadelphia. […]
[…] see if this is possible, with a seemingly endless parade of tax increases (so many that even the tax-loving folks at the IMF have […]
[…] best to see if this is possible, with a seemingly endless parade of tax increases (so many that even the tax-loving folks at the IMF have balked). At the very least, they’ve pushed the private sector into hospice […]
[…] best to see if this is possible, with a seemingly endless parade of tax increases (so many that even the tax-loving folks at the IMF have […]
[…] The big drop in soda purchases after a tax was imposed in Philadelphia. […]
[…] The big drop in soda purchases after a tax was imposed in Philadelphia. […]
[…] The big drop in soda purchases after a tax was imposed in Philadelphia. […]
[…] The big drop in soda purchases after a tax was imposed in Philadelphia. […]
[…] As Daniel J. Mitchell wrote in his blog: […]
[…] Republished from Dan Mitchell’s blog. […]
Somehow, I don’t think the following will gain the traction they think it will:
https://www.thenation.com/article/why-millennials-arent-afraid-of-the-s-word/
the greedy vacuum cleaner of state, relentlessly driven into the pockets of the upper 10% will not produce the results that are intended.
Income, wealth, and consumption have one thing in common. They are each tax bases. When some income (i.e. capital gains, payroll taxes), wealth (i.e. real property, Estate Tax) or consumption (i.e. soda, cigarettes) are taxed at different rates it represents government interfering with the free market. To avoid taxes, people are coerced to work, invest, or spend the lower-tax way verses the higher-tax way. This tax inequality always has unintended consequences. More importantly, when the government relies primarily on one tax base (i.e. income) and fails to proportionately tax other tax bases; the rates are skewed in such a manner that tax expenditures (deductions, credits, special rates, deferrals and exemptions) become politically inevitable.
The right blend of tax bases can produce low rates and flexible choices over a lifetime. Assume a 4% VAT (on consumption) and 8% income rate on corporations with no job killing payroll taxes. The low rates would maximize U.S. business and U.S. jobs.
The individual income tax is really a large tax on lower wage workers (when payroll taxes are included), a larger progressive tax on managers and professionals, and a giveaway to the ultra-wealthy who avoid tax on most income, their net wealth, and the real value of pass-through businesses. The inverse taxation of wealth and income could equalize the burden without the need for $1.3 trillion in tax expenditures.
Consider income tax rates of 8% to 28% paired with a wealth tax of 2% decreasing to zero. An individual could pay any paired rate – because the paired combination is fair to all. There would be a $500,000 wealth tax exemption for retirement, health care, and education to help families save their first million. A deduction against the estate tax for wealth taxes paid would also help successful families that willingly paid their fair share over a lifetime.
Go this from a friend- stated better than I’ve ever heard it. thought you’d like it, Dan.
ANOTHER WAY TO EVALUATE BHO’S RECORD
This is certainly a different way to look at what’s happened!
After last night’s farewell speech in Chicago, and further reflection on the transfer of power about to happen soon, from Obama to Trump, I have now realized that I love Obama for what he’s managed to accomplish. If one really thinks about it, Obama is amazing, and has managed to rebuild the American dream! Let’s not forget that God works in mysterious ways. So, for the next few weeks, I will thank God for what the President has done, and here’s why:
1. Obama destroyed the Clinton Political Machine, driving a stake through the heart of Hillary’s presidential aspirations -something no Republican was ever able to do.
2. Obama killed off the Kennedy Dynasty – no more Kennedys trolling Washington looking for booze and women wanting rides home.
3. Obama is destroying the Democratic Party before our eyes! Dennis Moore had never lost a race. Evan Bayh had never lost a race. Byron Dorgan had never lost a race. Harry Reid – soon to be GONE! These are just a handful of the Democrats whose political careers Obama has destroyed. By the end of 2016, dozens more will be gone.
Just think, in December of 2008 the Democrats were on the rise. In two election cycles, they had picked up 14 Senate seats and 52 House seats. The press was touting the death of the Conservative Movement and the Republican Party. However, in just one term, Obama put a stop to all of this and gave the House and the Senate back to the Republicans.
4. Obama has completely exposed liberals and progressives for what they are. Sadly, every generation seems to need to re-learn the lesson on why they should never actually put liberals in charge. Obama is bringing home the lesson very well: Liberals tax, borrow and spend. Liberals won’t bring themselves to protect America. Liberals want to take over the economy. Liberals think they know what is best for everyone. Liberals are not happy until they are running YOUR life, but making sure it exempts themselves whenever it inconveniences them.
5. Obama has brought more Americans back to conservatism than anyone since Reagan. In one term, he had rejuvenated the Conservative Movement and brought out to the streets millions of freedom loving Americans. Name one other time when you saw your friends and neighbors this interested in taking back America!
6. Obama, with his “amazing leadership,” has sparked the greatest period of sales of firearms and ammunition this country has seen. Law abiding citizens have rallied and have provided a “stimulus” to the sporting goods field while other industries have failed, faded, or moved off-shore.
7. In all honesty, 4 years ago I was more afraid than I have been in my life. Not afraid of the economy, but afraid of the direction our country was going. I thought, Americans have forgotten what this country is all about. My neighbors and friends, even strangers, have proved to me that my lack of confidence in the greatness and wisdom of the American people has been flat wrong!
8. When the American people wake up, no smooth talking teleprompter reader can fool them! Barack Obama has served to wake up these great Americans!
Again, I want to say: “Thank you, Barack Obama!” After all, this is exactly the kind of hope and change we desperately needed!!
9. He has saved Carter’s legacy and made Jimmy Carter happy, since Jimmy is no longer the worst we’ve ever had. Credit goes to where credit is due. I feel better now!
THANK YOU OBA
I’m really surprised that a fellow as obviously intelligent as Dan Mitchell hasn’t figured out yet that the pain and suffering and destruction and death caused by Big Government is not a bug, but it is the main feature they are shooting for. Leftists hate the human race and want us dead dead dead, after they have made us suffer as much as they can. They are the assholes of which George Orwell wrote about in “1984,” who want to grind their boots in to our faces for ever and ever and ever and ever.