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It’s that time of year. Those of us who wait until the last minute are rushing to get tax returns filed (or extensions submitted).

So it’s also a good time to remind ourselves that there is a better way.

Economists look at the tax system and focus on the warts that undermine growth.

Other people focus on the immorality of the tax code.

Most of these problems have existed for decades and are familiar to people who have the misfortune of working for tax reform.

But every so often, policy wonks like me get surprised because we find out that things are even worse than we thought.

For instance, here are some excerpts from a very disturbing article in The Hill about the IRS’s we-don’t-care attitude about fraudulent use of Social Security numbers.

…illegal immigrants…use other people’s social security numbers (SSNs) to get jobs and then file their taxes with their IRS-issued Individual Taxpayer Identification Numbers (ITINs). Although the tax returns contain false W-2 information, the IRS continues to process them, and the agency does not notify the people whose SSNs were used. …Koskinen said that in such cases “it’s in everybody’s interest to have them pay the taxes they owe.” …Rep. Dave Brat (R-Va.)…told The Hill on Friday that he was “shocked” and “horrified” by Koskinen’s response. …House Freedom Caucus Chairman Jim Jordan (R-Ohio)…said Friday that Koskinen’s comments about illegal immigrants’ tax returns are “just one more example of why Koskinen is doing such a poor job and should be impeached.”

As a quick aside, I’d be very curious to get some confirmation about Commissioner Koskinen’s assertion that illegals are net taxpayers. I wouldn’t be surprised to learn instead that they are a net drain because of “earned income tax credit,” which is a form of redistribution that gets laundered through the tax code.

But setting that aside, it’s completely outrageous that the IRS doesn’t let taxpayers know that their Social Security numbers have been stolen.

Congressman Jordan (and George Will) are right. There should be consequences for a government official who treats taxpayers with contempt.

Though Koskinen does deserve some credit for honesty about tax reform, as reported by the Washington Free Beacon.

IRS Commissioner John Koskinen told lawmakers on Wednesday that implementing a flat tax would be simpler than the current tax system and would save the agency a lot of money. …Rep. Blaine Luetkemeyer (R., Mo.) asked Koskinen whether a flat tax policy would save the agency money. …”clearly if you had a two-page form or a one-page form where you got rid of all the deductions and everything else and people just paid…a flat tax…it would be simpler for taxpayers and it would be much simpler for us,” Koskinen said. …Luetkemeyer asked Koskinen for more specifics about how much of the IRS’ current budget of $11.2 billion could be saved if a flat tax were implemented. “…it would be a lot,” Koskinen said. “It’d clearly be a sea change, a difference in the way the place operates.”

To call the flat tax “a sea change” is an understatement. As explained in this video, research from the Tax Foundation shows that the compliance burden of the tax code would fall by more than 90 percent.

And the economy would grow much faster since a key principle of the flat tax is that revenue should be collected in the least-damaging manner.

Though if you’re worried that a flat tax is too timid and you would prefer no broad-based tax for Washington, Mark Perry of the American Enterprise Institute shared this wonderful image.

Which is why October 3, 1913 may be the worst day in American history.

Some people claim that it would be impossible to have a modern society without an income tax.

Well, the Cayman Islands, Bermuda, and Monaco are very modern, and all those jurisdictions enjoy great prosperity in large part because there is no income tax.

And we could enjoy the same freedom and prosperity in the United States. But only if we reduced the size of the public sector.

In other words, we could free ourselves of the income tax if we could somehow get rid of all the programs that were created once the income tax gave politicians a big new source of tax revenue.

The challenge is convincing politicians to give up their ability to buy votes with other people’s money.

Incidentally, this is why we should be stalwart in our opposition to the value-added tax. The experience with the income tax shows that politicians will expand the burden of government spending if they obtain any significant new source of revenue.

Let’s close with a somewhat amusing look at how tax compliance works in India. Here are some blurbs from a story in the Wall Street Journal.

For five years, real-estate developer Prahul Sawant ignored government orders to pay his taxes. Then the drummers showed up, beating their instruments and demanding he cough up the cash. Neighbors leaned out windows and gawked. Within hours, a red-faced Mr. Sawant had written a $945 check to settle his long-standing arrears. Shame is the name of the game as India’s local governments try new tools to collect taxes from reluctant citizens. …Thane’s municipal commissioner, Sanjeev Jaiswal, is resorting to public embarrassment of tax scofflaws. …Since the drummers started work early this year in this suburb of Indian commercial capital Mumbai, property-tax revenue has jumped 20%, said Mr. Jaiswal.

It’s also safer for the tax bureaucrats to rely on drummers.

Tax collectors in Vitawa-Kalwa are glad the drummers, and some security officers, are touring the neighborhood with them. “When the staff show up to collect tax alone, people get angry and beat them up,” said S.R. Patole, the assistant commissioner, who is responsible for revenue in the area.

And if drummers don’t work, the municipal commissioner has a back-up plan.

Mr. Jaiswal…plans to deploy groups of transgender women, known in India as hijras, to perform mocking dances to shame tax delinquents. Hijras are widely believed to be able to impose hexes.

I’ll have to add this story to my collection of “great moments in tax enforcement.”

For what it’s worth, I’m on the side of the taxpayers because of the Indian government’s legendary ability to waste money.

P.S. If you’re a late filer and need some humor to get through the day, here’s my collection of IRS-related jokes: A new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

Since Pope Francis is very critical of capitalism, I suppose it’s fitting that he had a special meeting with America’s crazy-Uncle-in-the-attic, Bernie Sanders.

With my sixth-grade sense of humor, I confess that my initial instinct (perhaps motivated by the famous line from Animal House about “a wimp and a blimp“) was to write about “the Pope and the dope,” but I’m going to be somewhat mature and instead share some excerpts from a very good column by Charles Lane, an editorial writer for the Washington Post.

Here’s some of what he wrote before Senator Sanders’ departure.

Democratic socialist presidential candidate Sen. Bernie Sanders (I-Vt.) will depart soon for the Vatican… In keeping with Pope Francis’s call for a “moral economy,” Sanders has said he’ll discuss “how we address the massive levels of wealth and income inequality that exist around the world, how we deal with unemployment, how we deal with poverty and how we create an economy that works for all people rather than the few.”

While inequality should be a non-issue (assuming income is earned honestly), it is very desirable to reduce poverty and boost wealth for the less fortunate. As such, Lane suggests that the Vermont Senator read some of the research from World Bank economist Branko Milanovic.

…real income went up between 70 percent and 80 percent for those around the world who were already earning at or near the global median, including some 200 million Chinese, 90 million Indians and 30 million people each in Indonesia, Egypt and Brazil. Those in the bottom third of the global income distribution registered real income gains between 40 percent and 70 percent, Milanovic reports. The share of the world’s population living on $1.25 or less per day — what the World Bank defines as “absolute poverty” — fell from 44 percent to 23 percent.

And here are the most important passages.

Was all this progress because of big government? Nope, people were lifted out of poverty because the power of government was reduced.

Did this historic progress, with its overwhelmingly beneficial consequences for millions of the world’s humblest inhabitants, occur because everyone finally adopted “democratic socialism”? …To the contrary: The big story after 1988 is the collapse of communism and the spread of market institutions, albeit imperfect ones, to India, China and Latin America. This was a process mightily abetted by freer flows of international trade and private capital… The extension of capitalism fueled economic growth, which Milanovic correctly calls “the most powerful tool for reducing global poverty and inequality.” And he’s no supply-sider, but instead a left-leaning critic of modern economic orthodoxy — as his new book, “Global Inequality,” makes clear.

The final sentence is worth highlighting. Mr. Milanovic is not a libertarian firebrand. And since Charles Lane is an editorial writer at the Washington Post, it’s safe to assume that he isn’t an advocate of small government either.

For what it’s worth, they’re probably both supporters of something akin to the Nordic Model, which allows for a large welfare state and high tax rates, but otherwise is very sympathetic to free markets (i.e., open trade, light regulation, stable money, strong property rights, etc).

In other words, if we created a scale or a spectrum, there would be a big difference between the crazy left and the rational left. And the socialists and totalitarians would be in their own category.

The flags of the Nordic nations represent the rational left. I’ve put the Greek flag next to Bernie Sanders to represent the crazy left.

I actually had a hard time coming up with an example of a genuine socialist (i.e., government ownership of the means of production) who wasn’t also a totalitarian, but eventually settled on Clement Attlee, the United Kingdom’s misguided post-WWII Prime Minister who nationalized industries.

And Hitler and Stalin obviously are representatives of the totalitarian left.

I’ve placed Obama and Clinton on the spectrum based on what I think they actually believe, not what they say. So even though Hillary and Bernie are singing from the same nutty song sheet, I suspect she’s exaggerating her leftism and he’s downplaying his.

P.S. Returning to our original focus about which policies actually help the poor, Bono also understands that there’s no substitute for free markets.

P.P.S. My goal, of course, is to help rational leftists understand that free markets are just one ingredient in the recipe for prosperity. We also should have small government.

Maybe future events will require a reassessment, but right now the biggest danger to the western world isn’t terrorism. Nor is it climate change. Or Zika. Or even Donald Trump.

The real threat is demographic change.

America’s population profile already has changed, but the future shift will be even more dramatic.

But demographics changes are neither good nor bad. The real problem, as I pointed out last month, is when you combine an aging population with poorly designed entitlement programs.

…even a small welfare state becomes a problem when a nation has a population cylinder. Simply stated, there aren’t enough people to pull the wagon and there are too many people riding in the wagon.

That’s a recipe for a crisis.

Here are some sobering details from a story in Business Insider.

The world is about to see a mind-blowing demographic situation that will be a first in human history: There are about to be more elderly people than young children. …And these two age groups will continue to grow in opposite directions: The proportion of the population ages 65 and up will continue to increase, while the proportion of the population ages 5 and under will continue decreasing. In fact, according to the Census Bureau, by 2050 those ages 65 and up will make up an estimated 15.6% of the global population — more than double that of children ages 5 and under, who will make up an estimated 7.2%. “This unique demographic phenomenon of the ‘crossing’ is unprecedented,” the report’s authors said.

Here’s the chart that accompanied the story.

And as you look at the numbers, keep in mind that entitlement programs mean that a growing population of old people means more spending, while a shrinking number of children means fewer future taxpayers to finance that spending.

Let’s now look at a nation that is the “canary in the coal mine” for why changing demographics is a recipe for fiscal crisis.

A story from The Week highlights the grim demographic outlook for Japan.

Japan is us, and we’re Japan. …Japan has a…serious problem on its hands: The country is literally dying. According to current projections, by 2060 the country will have shrunk by a third, and people over 65 years old will account for 40 percent of the population. Already, the country is selling more adult diapers than infant diapers. To say this is unsustainable is a euphemism. The country is quite simply dying. …Demography is not destiny, exactly, but it is close to it. …the impending collapse can no longer be denied, as is the case in Japan and Germany. …The extinction of a people and culture is always a global tragedy. It’s time for Japan — and the West — to wake up.

A wake-up call is needed. It’s not just Japan. The entire developed world faces a demographic problem.

The good news is that there is an understanding that something needs to change.

The not-so-good news is that many of the responses are misguided. Cheered on by the OECD, Japan has been boosting the value-added tax in hopes of financing an ever-expanding burden of government spending.

That won’t end well.

And I’m not overly enthralled by some of the other proposals.

Why not just pay people to have children? …If you lower the price of something, you will get more of it. Over the past two decades, Japan has spent trillions of dollars on mostly wasteful pork-barrel spending projects. It seems to me that the country would be better off today if that money had been spent on bonuses for second and third children instead.

For what it’s worth, I agree that giving money to parents would have been better than the various Keynesian spending binges (some of which are downright nuts) that have taken place in Japan.

But I’m not confident that child subsidies are an effective or desirable long-run solution to the nation’s demographic situation.

The one option that would work is to reform entitlement programs. Hong Kong’s demographic outlook is even more challenging than Japan’s, yet it is in much better long-run shape because it has a more sensible approach to entitlements, including a private Social Security system.

P.S. Every so often, a celebrity from the entertainment world has an epiphany about greedy and corrupt government. It definitely happened for Jon Lovitz, Will Smith, and Rob Schneider. And it might be happening for George Lopez.

Newsbusters has the details.

In a recent radio interview for BigBoyTV, comedian George Lopez let us all know that he’s endorsing Senator Bernie Sanders, while paradoxically, making it known he doesn’t want to pay any more taxes.

Here’s what he specifically said.

I endorsed Bernie Sanders. But really just to… I mean it’s cool. I can’t pay any more taxes, it’s ridiculous. But, so, we’ll figure it out.

Huh?!? He’s getting pillaged by the tax code yet he’s supporting a candidate who wants giant tax hikes. I guess his epiphany needs more clarity.

P.P.S. I admit these examples are all sarcastic, but Obama could have a Hollywood career after leaving office.

As I’ve repeatedly explained, governments generally get in fiscal trouble because politicians can’t resist spending lots of money when the economy is buoyant and therefore generating lots of tax revenue.

And this is why I’m a huge fan of spending caps. If outlays can’t grow faster than, say, 3 percent annually, that make it difficult for politicians to enact unsustainable spending commitments (as we’ve seen in Greece, Alberta, Puerto Rico, California, and Alaska) in years when there is extra revenue.

Now I have a new example, and it’s extra painful because the politicians literally want me to pay for their profligacy.

Here’s part of what was recently written in the Washington Post about the supposed budget hardships in my home county of Fairfax in Virginia.

Virginia’s largest municipality is fraying around the edges. A population that is growing older, poorer and more diverse is sharpening the need for basic services…even as a sluggish local economy maintains a chokehold on the revenue stream. Since the 2008 recession, local officials have whittled away at programs to the tune of $300 million. …Since 2008, the county has eliminated 700 jobs. Libraries operate on shorter schedules and with fewer books, class sizes have swelled past 32 students in some schools… County agencies are stretching out vehicle maintenance — including for school buses and fire engines — and officials say aging athletic courts and deteriorating playgrounds await nearly $20 million in repairs. …The county slashed $3.8 million in summer school funding in 2015 and is trying to use $374,000 less in paper this year.

But all this budget “slashing” apparently isn’t enough to balance the budget.

…there is no fat left to trim. Instead, they are searching for ways to raise taxes… The county is searching for new revenue to cover some of what officials estimate are hundreds of millions of dollars worth of unmet needs. …“We’ve been punting for seven years now,” said John C. Cook (R-Braddock), a county supervisor. “There’s really nothing easy left to cut.” …the County Board of Supervisors will decide whether to raise residential property taxes by as much as four cents — to $1.13 per $100 of assessed value.

Gee, sounds like the government has “cut spending to the bone” and imposed “savage austerity,” which means higher taxes are the only option, right?

Not exactly, Professor Don Boudreaux of George Mason University digs through the data and exposes the truth.

What budget cuts?  In fiscal year 2016 Fairfax County’s government will spend $7.13 billion dollars – the highest inflation-adjusted annual expenditure in County history.  And this real expenditure is the highest in County history even on a per-capita basis.  …Fairfax County’s government today spends, per county resident, 168 percent more real dollars than it spent in 1975, 144 percent more than in 1986, 30 percent more than in 2001, and 1.6 percent more than in 2008 – the year that your reporter suggests marks the beginning of Fairfax County’s budget austerity. …it is emphatically not true that the Fairfax leviathan has cut its spending or suffered budget cuts.  Quite the opposite.

Don included a table of data, which I’ve put into a chart.

Let me know if you can find where spending was “slashed.”

Remember, this is inflation-adjusted spending, and also per-capita-adjusted spending, which means we can do apples-to-apples comparisons.

And the comparison that really matters is that the local government is now spending more than twice as much as it did 30 years ago.

  • Are the schools more than twice as good? No.
  • Are the roads more than twice as good? No.
  • Are the parks more than twice as good? No.

So where did all the money go? Beats me, though I’m going to take a wild guess that the country bureaucracy is now far bigger and getting paid much more.

In other words, the same theorem of government that explains the behavior of Washington also applies at the local level.

P.S. Let’s close with a very appropriate joke about the type of people who create fiscal crises.

A father told his 3 sons when he sent them to the university: “I feel it’s my duty to provide you with the best possible education, and you do not owe me anything for that. However, I want you to appreciate it. As a token, please each put $1,000 into my coffin when I die.”

And so it happened. His sons became a doctor, a lawyer, and a financial planner, each very successful financially. When their father’s time had come and they saw their father in the coffin, they remembered his wish.

First, it was the doctor who put 10 $100 bills onto the chest of the deceased.

Then, came the financial planner, who also put $1,000 there.

Finally, it was the heartbroken lawyer’s turn.He dipped into his pocket, took out his checkbook, wrote a check for $3,000, put it into his father’s coffin, and took the $2,000 cash.

He later went on to become a member of Congress…

If you want more jokes about politicians, click here.

I recently wrote about gun control, noting how there’s less murder in demographically similar U.S. states than there is in matching Canadian provinces.

This is one of the reasons why I’m optimistic about protecting the Second Amendment. The empirical evidence is so strong that law-abiding people are safer in well-armed societies.

But let’s see how the rest of the world is faring on this issue.

Let’s start with a story from Switzerland, a nation that has a very strong tradition of gun rights.

Switzerland is becoming safer. Police recently flagged up that crime rates fell by 7% in 2015, reaching a seven-year low. In 2014, homicide was actually at its lowest level in 30 years. …A survey by swissinfo.ch shows gun permit applications were up almost everywhere in Switzerland in 2015.

Hmmm…, more guns and less crime. The person who slapped the headline on the story seems to think it’s a mystery why that relationship exists.

But anybody capable of passing my IQ test for criminals and liberals understands that the title should be changed to “Lower crime because Swiss have more guns” or something like that.

The article also includes a section on Switzerland’s gun culture.

Switzerland has one of the highest gun ownership rates in the world because of its militia army. The defence ministry estimates that some two million guns are in private hands in a population of 8.3 million. An estimated 750,000 of those guns have been recorded in a local register. Under the militia system soldiers keep their army-issue weapons at home. Voters in recent years have rejected tighter gun controls. In 2011, voters rejected a proposal to restrict access to guns by banning the purchase of automatic weapons and introducing a licensing system for the use of firearms.

Ah, those sensible Swiss voters. Not only are they against tax hikes and regulatory intervention, but they also reject licensing and support the right to purchase automatic weapons.

Now let’s travel Down Under and see what happens when a government takes the wrong approach to guns.

Hillary Clinton says “Australia is a good example”… The man Clinton wants to succeed, Barack Obama, noted, “Australia … imposed very severe, tough gun laws.  And they haven’t had a mass shooting since.” …Maybe it’s time to tell the president and his likely successor that the policies they so admire have been largely flouted… Clinton and Obama tout a 1996 “gun buyback” that was actually a compensated confiscation of self-loading rifles, self-loading shotguns, and pump-action shotguns in response to the Port Arthur mass shooting. The seizure took around 650,000 firearms out of civilian hands and tightened the rules on legal acquisition and ownership of weapons going forward. …What the law couldn’t do—what prohibitions can never accomplish—was eliminate demand for what was forbidden. …The Sporting Shooters’ Association of Australia estimates compliance with the “buyback” at 19 percent. Other researchers agree. In a white paper on the results of gun control efforts around the world, Franz Csaszar, a professor of criminology at the University of Vienna, Austria, gives examples of large-scale non-compliance with the ban. He points out, “In Australia it is estimated that only about 20% of all banned self-loading rifles have been given up to the authorities.”

There is one group benefiting from the attempted gun ban. Criminal gangs are big winners.

“Australians may be more at risk from gun crime than ever before with the country’s underground market for firearms ballooning in the past decade,” the report added. “[T]he national ban on semi-automatic weapons following the Port Arthur massacre had spawned criminal demand for handguns.” …Once you enable organized crime, there are no boundaries. Australia’s criminal gangs supply not just pistols, but weapons up to and including rocket launchers—some of which may have ended up in terrorist hands. …like American bootleggers who supplemented smuggled booze with bathtub gin, Australia’s organized criminal outfits have learned the joy of DIY production. …Australia will have to live with the rise in organized crime for years to come.

Such a disappointment that Australia, which is a role model on some issues, is so anti-civil rights when it comes to guns.

Now let’s travel to France, where there are at least one person doesn’t think it’s a good idea to let terrorists be the only ones with guns.

The leader of the rock band playing the Bataclan in Paris the night ISIS terrorists killed 90 in the concert hall three months ago ripped French gun control laws and urged “everybody” to get a gun. “I can’t let the bad guys win,” said Jesse Hughes of Eagles of Death Metal. …Speaking in a sometimes tearful interview to iTele, Hughes added, “Did your French gun control stop a single fu—– person from dying at the Bataclan? And if anyone can answer yes, I’d like to hear it, because I don’t think so.”

Amen. It’s downright bizarre that European politicians think it’s a good idea for citizens to be disarmed while crazies get to stock up on weapons.

Now let’s turn to America, where New Jersey (again) is a national embarrassment.

A New Jersey actor faces 10 years in prison for firing a prop pellet gun while filming an independent film. Carlo Goias, who uses the stage name Carlo Bellario, was charged with firing the fake gun without a state gun permit as part of the Garden State’s insanely strict gun laws. In New Jersey, all guns require a state permit, even non-lethal airsoft guns like the one Goias was using. …just seeing Goias pretending to fire from a car window prompted neighborhood residents to call the police. “I pretended to shoot out the window; they were going to dub in the sound later,” Goias told the Associated Press. “We get back, and within a couple of minutes we’re surrounded by cop cars.” …being sent away for 10 years over a fake gun is a reminder of just how absurd New Jersey’s gun laws still are.

Speaking of gun control, here’s radio shock jock Howard Stern making mostly sensible comments on the right to keep and bear arms.

It’s a bit disappointing that he supports a national gun registry, but I assume that’s because he doesn’t realize that the left supports registration primarily as a predicate for gun confiscation.

But he atones for that error by mocking leftists who have personal (and well-armed) security guards. Gee, I wonder if we might have an example of such a person.

And it’s also good that Howard mentions that most cops support gun rights, something that we see in the polling data.

P.S. Click here and here for some good gun control humor.

P.P.S. And click here for some entertaining videos mocking gun control.

P.P.P.S. Even some leftists have seen the light on gun rights, as you can see here, here, and here.

If you follow the contest between Hillary Clinton and Bernie Sanders, most of the tax discussion is about who has the best plan to squeeze the rich with ever-higher tax rates.

For those motivated by spite and envy, Bernie Sanders “wins” that debate since he wants bigger increases in the tax rates on investors, entrepreneurs, business owners, and other upper-income taxpayers.

For those of us who don’t earn enough to be affected by changes in the top tax rates, this may not seem to be a relevant discussion. Some of us like the idea of higher tax rates on our well-to-do neighbors because we expect to get a slice of the loot and we think it’s morally okay to use government to take other people’s money. Others of us don’t like those higher rates because we don’t resent success and we also worry about the likely impact on incentives to create jobs and wealth.

But all of us are making a mistake if we think that the policy proposals from Bernie and Hillary won’t mean higher taxes on ordinary Americans.

Here are three basic proposition to help explain why lower-income and middle-income taxpayers are the ones who face the biggest threat.

  1. Hillary and Bernie want government to be much bigger, because of both built-in expansions of entitlements and a plethora of new handouts and subsidies.
  2. There’s not much ability to squeeze more money from the “rich” and America already has the developed world’s most “progressive” tax system.
  3. The only practical way to finance bigger government is with big tax hikes on the middle class, both with higher income taxes and a value-added tax.

There’s not really any controversy about the first proposition. We know the two Democratic candidates are opposed to genuine entitlement reform, so that means the burden of government spending automatically will climb in coming decades. And we also know that Hillary and Bernie also want to create new programs and additional spending commitments, with the only real difference being that Bernie wants government to expand at a faster rate.

So let’s look at my second proposition, which may strike some people as implausible, particularly the assertion that America has the most “progressive” tax system. After all, don’t European nations impose higher tax rates on the “rich” than the United States?

Yes and no, but first let’s deal with the issue of whether the rich are a never-ending spigot of tax revenue. The most important thing to understand is that there’s a huge difference between tax rates and tax revenue. If you don’t believe me, simply look at the IRS data from the 1980s, which shows that upper-income taxpayers paid far more to Uncle Sam at a 28 percent tax rate in 1988 than they paid at a 70 percent tax rate in 1980.

And keep in mind that there are incredibly simple – and totally legal – steps that well-to-do taxpayers can take to dramatically lower their tax exposure.

The bottom line is that high tax rates penalize productive behavior and encourage inefficient tax planning, the net effect being that higher tax rates won’t translate into higher revenue.

Moreover, as shown by a different set of IRS data, the American tax system already is heavily biased against the so-called rich. Even when compared with other countries. There are some nations that impose higher top tax rates than America, to be sure, but that’s only part of the story. The “progressivity” of a tax system is based on what share of the burden is paid by the rich.

And if you look at this data from the Tax Foundation, particularly the two measures of progressivity in columns 1 and 3, you can see that the United States gets a greater share of taxes from the rich than any other developed nation.

By the way, the data is from the middle of last decade, so the numbers are probably different today. But since we’ve taken more people off the tax rolls in the past 10 years in America while also increasing tax rates on upper-income households, I would be shocked if the United States didn’t still have the most “progressive” tax code.

In any event, the most important takeaway from the Tax Foundation data is that America has the most “progressive” tax system not because we impose the highest tax rates on the rich, but rather for the simple reason that the tax burden on lower-income and middle-income taxpayers is comparatively mild.

In other words, the tax burden on the rich in America is not particularly unusual. Some nations impose higher tax rates and some countries impose lower tax rates. But because other taxpayers in the U.S. pay very low effective tax rates, that’s why the overall tax code in the United States is so tilted against the rich.

Which brings us to the third proposition about the middle class being the main target of Hillary and Bernie.

Simply stated, the only practical way of financing bigger government is by raising the tax burden on lower-income and middle-income Americans. As already explained, there’s not much leeway to generate more tax revenue from the “rich.”

In other words, the rest of us have a bulls-eye painted on our backs. Our tax burden is relatively low by world standards and there are simple and effective ways that politicians could grab more of our income.

Let’s look at some of the details. The folks at the Pew Research Group crunched the data for 39 developed nations to compare tax burdens for various types of middle-income households. As you can see, taxpayers in the United States are relatively fortunate, particularly if they have kids.

Here are some excerpts from the article.

…most research has concluded that, at least among developed nations, the U.S. is on the low end of the range.  We looked at 2014 data from the Organization for Economic Cooperation and Development’s database of benefits, taxes and wages, which has standardized data from 39 countries going back to 2001 and allows comparisons across different family types. …We calculated this for four different family types: a single employed person with no children; two married couples with two children, one with both parents working and the other with one worker; and a single working parent. In all cases, the U.S. was below the 39-nation average – in some cases, well below. …Much of the difference in relative tax burdens among different countries is due to the taxes that fund social-insurance programs, such as Social Security and Medicare in the U.S. These taxes tend to be higher in other developed nations than they are in the U.S.

And here’s the most shocking part of the article. The aforementioned data only considers income taxes and payroll taxes.

…the OECD data don’t include…other national taxes, such as…value-added taxes.

This is a huge omission. The average VAT in Europe is now 21 percent, so the actual tax burden on taxpayers in other nations is actually much higher than shown in the chart prepared by Pew.

Let’s look at the scorecard.

  • Non-rich Europeans pay higher income tax rates.
  • Non-rich Europeans pay higher payroll taxes.
  • Non-rich Europeans pay the value-added tax.

And because all these taxes on lower-income and middle-income people are the only effective and realistic way to finance European-sized government, this is the future Hillary and Bernie want for America. Even though they won’t admit it.

P.S. I can’t resist pointing out that the countries most admired by Bernie Sanders, Denmark and Sweden, both have tax systems that are far less “progressive” than the United States according to the Tax Foundation data. And the reason for that relative lack of progressivity is because of a giant fiscal burden on lower-income and middle-income taxpayers. And that’s what will happen in the United States if entitlements aren’t reformed.

P.P.S. Since I’m a fan of the flat tax, does that mean I like the countries with lower scores in column 3 of the Tax Foundation table? Yes and no. A lower score obviously means that a nation’s tax code isn’t biased against successful taxpayers, but it’s also important to look at the overall size of the public sector. Sweden’s tax system isn’t very progressive, for instance, but everyone pays a lot because of a bloated government. It’s far better to be in Switzerland, which has the right combination of a modest-sized government and a non-discriminatory tax regime.

I recently wrote a primer on the issue of tax evasion, which is illegal. I made the elementary point that low tax rates and a simple tax code are the best (and only good) way of promoting high levels of tax compliance.

Now let’s shift to the related topic of tax avoidance, which is legal. Unlike evasion, there’s no civil disobedience and no breaking of laws with tax avoidance. It simply means that taxpayers are taking advantage of provisions in the tax code that help protect income from the government.

And we all do it.

All these things I do to lower my taxes are legal.

As Judge Learned Hand correctly opined, nobody has any obligation to deliberately overpay the government.

Tax avoidance also is moral. Tax codes are corrupt and governments waste money, so anything that reduces the flow of revenue to the public sector is helpful.

With that in mind, I want to offer a hearty defense of Mr. Cameron from the United Kingdom. But I’m not referring to David Cameron, the current Prime Minister. Instead, I want to defend Ian Cameron, his late father.

The Financial Times has a summary of what Cameron’s father did to protect against punitive taxation.

Mr Cameron’s father, Ian, was one of the founder investors. Blairmore was incorporated in Panama but based in the Bahamas. The idea was for investors to avoid an extra layer of tax because investors came from lots of jurisdictions and some, at least, would have faced double taxation if the fund had been based in a mainstream jurisdiction — firstly by the country where the fund operated, and then by the investor’s own country when he or she received his profits. …In 1982, when Blairmore was set up, offshore funds were more tax-efficient than UK funds, on which investors had to pay tax annually. …It is also possible that investors avoided paying stamp duty — a tax on the transfer of documents, including share certificates — by using bearer shares, which were exempt from the duty.

I also want to defend David Cameron’s mother, who is still alive and engaging in tax avoidance, as noted by a column in the U.K.-based Times.

He also admitted receiving a lump sum of £200,000 from his mother in 2011, eight months after his father died in September 2010. The handout, which came on top of a £300,00 legacy, could allow Mr Cameron to avoid an £80,000 inheritance tax bill if his mother lives until 2018.

This is perfectly appropriate and legitimate tax planning, and also completely moral and economically beneficial since death taxes shouldn’t exist.

Now let’s consider why David Cameron’s parents decided to engage in tax avoidance. To understand his father’s motives, let’s look at the history of British tax rates, as reported by the Institute for Fiscal Studies in a survey of the U.K. tax system released last November.

In 1978–79, there was a starting rate of 25%, a basic rate of 33% and higher rates ranging from 40% to 83%. In addition, an investment income surcharge of 15% was applied to those with very high investment income, resulting in a maximum income tax rate of 98%.

In other words, David Cameron’s father had to deal with a tax code that basically stole all his money above a certain threshold. Much of his income was earned when the top rate was 98 percent. And when he set up his offshore structures, even after Thatcher’s early reforms, his top tax rate could have been as high as 75 percent.

I frequent use “confiscatory” when talking about tax systems that grab, say, 50 percent of the additional income being earned by taxpayers, but I’m simply expressing outrage at excessive taxation. In the case of 1970’s-era England, even a leftist presumably would agree that word applies to a system that seizes 75 percent-98 percent of a taxpayer’s income (though some British statists nonetheless will applaud because they think all income belongs to the government and some American leftists also will applaud because of spite).

By the way, let’s not forget that David Cameron’s father was presumably also aware that there was lots of double taxation in the United Kingdom because of other levies such as the corporate income tax, death tax, and capital gains tax. So I shudder to think about the effective marginal tax rate that may have applied to him and other taxpayers in the absence of tax planning (maybe they paid more than 100 percent, like the thousands of unfortunate French taxpayers victimized by that nation’s wretched tax system).

The bottom line if that I’m very sympathetic to Cameron’s father, who was simply doing what was best for his family and what was best for the economy.

But I’m not exactly bubbling over with sympathy for the Prime Minister, who appears to be a puerile and shallow hypocrite. I’ve previously shared examples of his government browbeating taxpayers who don’t choose to needlessly give extra money to the government.

And now he’s caught is his own web of demagoguery.

Writing in the U.K.-based Sunday Times, Dominic Lawson has an appropriately jaundiced perspective.

Jimmy Carr must be laughing. In June 2012 the comedian was revealed by The Times as one of a number of showbiz folk to have invested in a scheme that had the effect of minimising the tax paid on their (typically volatile) income. Somehow unable to resist commenting on this story, David Cameron…told journalists that Carr’s behaviour had been “morally wrong”. …In other words: the people are angry and the prime minister wants to be with the pitchfork-waving crowd, not on the other side of the barricades. …now the PM is himself the subject of a whipped-up storm of fury… That is why, in my column of June 24, 2012 (“Cameron’s the clown in this Carr sketch”), there appeared these words: “The prime minister could not resist accusing Carr of ‘morally wrong’ behaviour, a piece of headline-grabbing he will have cause to regret.” …As a result, Cameron has now felt forced to become the first prime minister to make his tax details open to the electorate. It’s a sort of ritual humiliation, but one that will in no way appease those who regard the very idea of personal wealth as immoral. He should never have pandered to them.

Janet Daly of the U.K.-based Telegraph is similarly unimpressed with Cameron’s shallow posturing.

…there is a great mass of voters…who are very susceptible to the impression that Mr Cameron is a rich man who may possibly be a hypocrite when he denounces the tax-avoiding wealthy. …The Prime Minister and his Chancellor had put themselves in the forefront of the assault on “the rich”. This was the modern Conservative party…a major rhetorical revolution that took dangerous liberties with the vocabulary of what was being discussed. The Government began to obscure the difference between tax evasion, which is a crime, and tax avoidance…George Osborne invented a new category of sin called “aggressive tax avoidance”. This was a far nastier, more elaborate form of financial planning… Some kinds of tax avoidance are OK but other kinds are not, and the difference between them is, well, basically a matter of what kind of person you are – which is for the Government to decide. …Mr Cameron says…he has done nothing illegal or unusual… Nor, apparently, have most of the people whose private finances have been revealed to the world in the Panama Papers. …free societies should not create moral “crimes” that can put people beyond the pale when they have done nothing illegal. Mr Cameron may be about to conclude that himself.

By the way, Cameron and his people are not very good liars. Here are some more excerpts from the Times column I cited above, which explained how his mother is transferring assets to David in ways that will avoid the awful death tax.

Government sources pushed back yesterday against claims that the arrangement was a tax dodge. …“Every year hundreds of thousands of parents give money to their children,” a No 10 source said. “To suggest that by giving money to the prime minister there is somehow a tax dodge is extraordinary.” A No 10 spokesman said: “This is in no way linked to tax avoidance and it would be wrong to suggest otherwise.”

This is bollocks, as the English would say. If there was no desire to avoid an unfair and pernicious tax, Cameron’s mother could have left him that money upon her death.

Instead, she made a gift for purposes of hopefully keeping any extra money if her family rather than letting the government grab it. David Cameron should proudly embrace this modest bit of tax avoidance.

It’s definitely what I would do if I ever get to the point where I had enough money to worry about the death tax. Sadly, I don’t expect that to happen because it’s not easy for policy wonks to earn large amounts of money.

But if I ever find a big pot of money that will be around after my death, I know that I’ll want my children and the Cato Institute to be the beneficiaries, not a bunch of greedy and wasteful politicians (sorry to be redundant).

Heck, I’d leave my money to my cats before giving it to the corrupt crowd in Washington.

P.S. Rich leftists often say they want to pay higher taxes, yet they change their tune when presented with the opportunity to voluntarily give more of their money to Washington.

P.P.S. Since I quoted Judge Learned Hand on tax avoidance, I’m almost certain to get feedback from my leftist friends about the quote by Oliver Wendell Holmes about taxes being the price we pay for civilization. Allow me to preempt them by noting that Justice Holmes made that remark when the federal government consumed about 5 percent of our economy. As I wrote in 2013, “I’ll gladly pay for that amount of civilization.”

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