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If there was a ranking of international bureaucracies, the World Bank would be my favorite (or, to be more accurate, least unfavorite). Yes, it sometimes produces bad studies, but it also is the source of good research on topics such as government spending, Social Security reform, tax complexity, financial regulation, and economic liberty. And the rankings in Doing Business are a very helpful way of measuring and comparing regulatory burdens (which is why leftists are so hostile to the project). Moreover, it’s hard to dislike an organization that has a mission of fighting poverty (even if it sometimes thinks redistribution is the right strategy).

The United Nations would be next on the list. The good news is that it has many well-meaning people. The bad news is that is has some very misguided projects. But since it isn’t very effective, I confess that it doesn’t command much of my attention.

At the bottom would be either the International Monetary Fund (IMF) or the Organization for Economic Cooperation and Development (OECD).

The IMF is notorious for supporting bailouts and advocating tax increases. Depending on my mood, it’s either the “Dr. Kevorkian of economic policy” or the “dumpster fire of the global economy.” Yes, I try to be fair and will acknowledge occasional good research (on taxation, government spending, financial regulation, spending caps, etc), but there’s no question that the net impact of the IMF is negative.

The OECD also is on the wrong side when looking at the big picture. Once again, I’ll admit that there are occasional good studies (on spending caps, tax policy, government spending, etc). But those glimmers of good news are overwhelmed by a statist agenda on a wide range of policies. Most recently, the Paris-based bureaucracy proposed more taxes and more spending for the American economy. And if you’re interested in other examples, I’ve attached a list of examples at the bottom of this column.

But the main purpose of this column is to review a new publication from the OECD. As part of its so-called “Bridging the Gap” project, the bureaucrats in Paris just issued a new report that reads as if it was taken from the campaign speeches of Bernie Sanders and Jeremy Corbyn.

Here are some of the lowlights, starting with a misguided fixation on inequality.

Fiscal redistribution through taxes and transfers plays a crucial role in containing the impact of market income inequality on disposable income… Policies aimed at promoting growth should consider how growth will have an impact on many other outcomes, and how to ensure that those policies avoid the “grow first, distribute later” assumption that has characterised the economic paradigm until recently. It is now clear that growth strategies need to consider from the outset the way in which their benefits will be distributed to different income groups. … Inequalities tear at the fabric of our societies. Inequality of incomes translates seamlessly into inequality of opportunities for children, including education, health and jobs, and lower future prospects to flourish individually and collectively. …inequalities are reaching a tipping point

I’m tempted to joke that the bureaucrats want a “distribute first, grow never” approach, but let’s focus on the fact that the real goal should be reducing poverty rather than reducing inequality.

If I’m poor, I want an opportunity to increase my income. And if there’s a policy that will help give me that opportunity, it doesn’t matter if that policy enables Bill Gates to increase his income at a faster rate.

That’s why there’s no substitute for economic growth if you really want to help the less fortunate.

But the not-so-subtle message of the OECD report is that poor people are poor because rich people are rich. The bureaucrats are concerned with how to re-slice the pie rather than how to expand the size of the pie.

The really troubling material is in the final chapter, but I can’t resist commenting on a few items that appeared earlier in the report.

Such as the fact that the bureaucrats were not happy when unemployment benefits in the United States were curtailed.

…redistribution helped cushion increases in market income inequality, but its role has since tended to fall in a majority of OECD countries in the most recent years…it reflects the phasing out of fiscal stimulus, as in the United States, where the extension of unemployment benefit duration carried out in 2008-09 was rolled back in 2011.

Too bad nobody told the authors that the job market improved in America when subsidies for joblessness were cut back.

But that kind of mistake is predictable since the OECD puts such a high value on coercive redistribution.

I’m also not surprised that the bureaucrats are upset that tax competition has resulted in lower tax rates.

Globalisation has increased the difficulty for governments in taxing mobile capital income. Increased levels of capital mobility have led to certain reductions in statutory income tax rates…, which has reduced the progressivity of tax systems… The distributional effects of these reductions in statutory tax rates, especially the reduction in top personal income tax rates, has been a contributing factor to the rise in inequalities.

And the OECD even regurgitated its bizarre hypothesis that inequality reduces growth.

Widespread increases in income inequality are a source of concern…for their potential impact on economic performance. …recent OECD work estimates that rising inequality between 1985 and 2005 might have contributed to knocking more than 4 percentage points off growth between 1990-2010.

The final chapter, though, is where the OECD unveils its Bernie Sanders/Jeremy Corbyn agenda. I guess young people might say that the bureaucrats were “letting their statism freak flag fly.”

Governments have a vital role to play…targeted social investment, redistributive fiscal policy and comprehensive labour market support…fiscal policy is the key mechanism for redistributing market incomes and it is important that it is set up to prioritise support for vulnerable population groups at all points in the economic cycle.

And what are some of these policies?

The OECD wants to expand the welfare state, even though such policies already have caused fiscal crises in many nations.

The size of means-tested programmes is relatively small in many countries and there is room for expansion, by either making those programmes more generous or by extending their coverage.

The bureaucrats also want more double taxation on income that is saved and invested.

…enhancing tax progressivity via savings tax reform. Income from savings is taxed progressively, though at lower rates than labour and with a lot of variation in taxation across asset types. …There is therefore scope to increase the fairness and the neutrality of the taxation of capital income…removing tax expenditures…strengthening progressivity of tax bases. …tax expenditures such as tax deductions for private pension contributions…are regressive since higher income taxpayers tend to save… Removing such tax expenditures could simultaneously reduce inequality and make the tax system more efficient.

There’s also an embrace of punitive property taxes.

Increased taxation of residential property could increase both growth and strengthen progressivity. …if designed well can fall mostly on high-wealth, high-income households.

Amazingly, the OECD even wants more onerous death taxes, even though such policies have a very negative impact on capital formation.

Strengthening inheritance and gift taxes can support inclusive growth. … Inheritance taxes can…help achieve intergenerational equity goals. …In order to be effective, inheritance taxes must also be combined with taxes on gifts and wealth transfers during the taxpayers’ lifetime, as well as with measures to address avoidance and evasion.

The bureaucrats want more subsidies for joblessness.

Sufficiently generous unemployment benefits and social-assistance systems with a wide coverage are also a key.

And they even endorse an idea that is so economically absurd that it was rejected by President Obama’s main economic adviser.

Promoting gender equality in access to employment and job quality is a key component of inclusive growth. …gender pay gaps remaining at about 15% across the OECD, on average, with little change in recent years.

Here’s another passage urging a bigger welfare state.

Compensatory policies that redistribute income also have a role to play in…lowering post-redistribution inequality. …strong and well-designed social safety nets programmes are all the more needed.

And here’s a specific policy for more housing subsidies.

Access to affordable housing is a challenge for inclusion, and solutions include not only better housing policies but also better urban planning and governance of land use. …Explicit policies to support access to housing include housing allowances, social housing arrangements and different kinds of financial support towards homeownership.

As you can see, that’s an impressive collection of statist policies, even for the OECD.

P.S. I wrote last year that some folks on the left enjoy very lavish incomes while crusading about inequality. The same is true of the OECD, where bureaucrats not only are lavishly compensated (a general rule for international organizations), but they also enjoy tax-free incomes while urging higher taxes on the rest of us.

P.P.S. Here are additional examples of very dodgy research from the OECD.

P.P.P.S. Don’t forget that the OECD’s statist agenda is financed by your tax dollars.

Since I’m a fiscal wonk, it’s sometimes tempting to overstate the importance of good tax policy. So I’m always reminding myself that all sorts of other factors matter for a jurisdiction’s competitiveness and success, including regulation and government effectiveness (and, for national governments, policies such as trade and monetary policy).

That being said, taxes are very important. In some cases, you could almost say tax policy is suicidally important.

Here’s some of what the Wall Street Journal reported earlier this week.

Hartford, Connecticut…is edging closer to joining a small club of American municipalities: those that have sought bankruptcy protection. …The city must pay nearly $180 million on debt service, health care, pensions and other fixed costs in the coming fiscal year beginning July 1. That is more than half of the city’s budget, excluding education.

This sounds like a run-of-the-mill story about a city (like Detroit) that has spent itself into fiscal trouble, mostly because of a bloated and over-compensated bureaucracy.

But tax policy is the story behind the story. Here’s the headline that caught my attention.

As I’ve written before, this is the “Fox Butterfield” version of financial reporting (he’s the New York Times reporter who was widely mocked for repeatedly expressing puzzlement that crime rates fell when crooks were locked up).

Simply stated, it would be more accurate to state (just as it was in Detroit) that the city is in trouble “because of” high property taxes, not “despite” those onerous levies.

Imagine being a homeowner or business with this type of burden.

Since 2000, Hartford has increased its property-tax, or millage, rate seven times. The rate is now more than 50% higher than it was in 1998. At the current level, a Hartford resident who owns a home with an assessed value of $300,000 currently pays an annual tax bill of $22,287, at rate of 7.43%. A West Hartford homeowner with a similar house pays $11,853 at a rate of 3.95%.

Wow, you get to pay twice as much tax on your home simply for the “privilege” of subsidizing an inefficient and incompetent city bureaucracy (not to mention the problem of excessive state taxes).

No wonder some major taxpayers are escaping, leaving the city (and state) even more vulnerable.

…the impending departure of one of its biggest employers, Aetna Inc. …Aetna and the other four biggest taxpayers in the city contribute nearly one-fifth of the city’s $280 million of property-tax revenue. Property-tax receipts make up nearly half of the city’s general-fund revenues.

To make matters worse, the city exempts a lot of property owners, which is one of the reasons for higher tax burdens on those that don’t get favored treatment.

Half of the city’s properties are excluded from paying taxes because they are government entities, hospitals and universities. …In Baltimore, about 32% of the property is tax exempt, and in Philadelphia it’s 27%.

Excuse me if I don’t shed a tear of sympathy for Hartford’s politicians. The city is in dire straits because of a perverse combination of excessive taxation and special tax favors. Combined, of course, with lavish remuneration for a gilded bureaucracy.

That’s the worst of all worlds. It’s Detroit all over again. Or you could call it the local-government version of Illinois.

Needless to say, I don’t want my tax dollars involved in any sort of bailout.

P.S. Though it would be amusing if Hartford politicians thought this bailout application form was real rather than satire.

There are a lot of positive things to be said about Norway.

In other words, Norway is a typical Nordic nation, with open markets, light regulation, free trade, and honest government. That’s the good news.

The bad news, at least from my perspective, is that Norway also is a typical Nordic nation in that it has a big welfare state.

But unlike the other Nordic nations, Norway also has a lot of oil. And, just like Alaska, it’s very easy to finance a big public sector when a government has access to a huge amount of petroleum-related revenue.

So does this make the country special? Is Norway a welfare-state Nirvana? In some sense, the answer is yes. As I’ve noted before, if a country wants a big welfare state, it makes a lot of sense to have very market-oriented policy in other areas to compensate. And if the country also happens to be rich with oil, that’s presumably not a bad combination.

But I would argue, of course, that Norway would be in better shape if the fiscal burden of government wasn’t so onerous.

And there’s growing evidence to validate my concerns. Bloomberg reports that falling oil prices are exposing problems with Norway’s extravagant welfare state.

More than a fifth of its working age population relied on unemployment or sick-leave benefits throughout 2016, according to a study by the Norwegian Labor and Welfare Administration, or NAV. With welfare payments up 3 percent in 2016, the growing dependence will likely make it harder for Norway to wean itself off oil and gas production. While the discovery of petroleum 50 years ago…helped make the world’s most generous welfare system possible — declining resources…means that the country will need to find other legs to stand on to keep up its standard of living.

Norway isn’t in any immediate danger, but I wonder whether it can still prosper when the oil runs out.

Simply stated, the welfare state may have eroded the country’s work ethic (something that’s also a problem in America).

That’s something that the stewards of the system readily admit. The agency’s acronym has even become a verb, to NAV, which means `being on benefits.’ “To uphold the Norwegian welfare system we need more people at work and not on passive benefits,” said Sigrun Vageng, the head of NAV, in an emailed answered to questions.

The problem of dependency has even spread to the richer parts of the country.

…dependency on state handouts now runs deeper. It also spread to the nation’s richest regions after the plunge in oil prices… Welfare payments in Rogaland, the regional center of the oil industry and home to Statoil ASA, rose a whopping 13 percent last year. Some 19 percent received benefits on average each month in Rogaland. In Oslo, it was 15 percent.

And once there are too many people riding in the wagon of government dependency, it’s not easy to rejuvenate a nation’s social capital.

…with an increasing share of its working age population on welfare benefits instead of paying taxes, the desired changes could prove a difficult task for whoever is in power. And many are also pulling out of the workforce altogether. The percentage of people of working age in employment fell to 70.6 percent in 2016, a 21-year low… “This comes as a big cost for the society, both through lost tax revenues and the direct expenses from social benefit payments,” said Jeanette Strom Fjaere, an economist at DNB.

On the bright side, Norway has set aside lots of oil money.

Norway…has over the past 20 years built up a sovereign wealth fund.

In other words, Norway is the opposite of Venezuela. It hasn’t squandered its oil wealth on bigger government.

On the dark side, it has reached the point where its sovereign wealth fund is shrinking rather than growing.

…the government last year started withdrawing cash for the first time.

Some people say this is similar to America’s Social Security system, which has a Trust Fund that is now being depleted. I reject that analogy for the simple reason that Norway’s fund is filled with real assets. The Social Security Trust Fund, by contrast, is nothing but a pile of IOUs (as even the Clinton Administration acknowledged).

But I’m digressing. Let’s close by observing that development economists sometimes write about a “resource curse” that exists when politicians feel they can impose lots of bad policy because it is easy to generate revenue by selling natural resources.

Some argue that Norway, with its commitment to the rule of law and markets, is the exception to the rule. Yes, its welfare state is excessive, but not because of oil. Indeed, there’s more welfare spending as a share of GDP in Denmark, Sweden, and Finland.

Though don’t forget that Norway’s GDP is boosted by all the oil wealth, so I’m guessing per-capita welfare outlays are higher than in neighboring countries (an important distinction, as illustrated by this data on government health spending).

So perhaps a version of the resource curse will hit Norway. But it won’t be because of a Venezuelan-style kleptocracy. Instead, it will be because the welfare state lures too many people into dependency. And when the oil money runs out, fixing that problem will be very difficult.

I’m agnostic about President’s Trump’s budget. It has some good proposals to save money and control the burden of government spending, but after he got rolled by the big spenders earlier this year, I wonder if he’s serious about tackling wasteful government.

Nonetheless, I’m the libertarian version of Sisyphus. Except instead of trying to roll a boulder up a hill, I have the much harder task of trying to convince the crowd in Washington to shrink the size and scope of the federal government.

So I’ve written in favor of some of Trump’s proposals.

  • Shutting down the wasteful National Endowment for the Arts.
  • Defunding National Public Radio and the Corporation for Public Broadcasting.
  • Terminating the scandal-plagued Community Development Block Grant program.
  • Block-granting Medicaid and reducing central government funding and control.
  • Curtailing foreign aid payments that enable bad policy in poor nations.

Today, let’s add to this list by looking at what’s being proposed to control spending on food stamps.

Here are the key details from the Trump budget.

The Budget provides a path toward welfare reform, particularly to encourage those individuals dependent on the Government to return to the workforce. In doing so, this Budget includes Supplemental Nutrition Assistance Program (SNAP) reforms that tighten eligibility and encourage work… SNAP—formerly Food Stamps—has grown significantly in the past decade. …despite improvements in unemployment since the recession ended, SNAP participation remains persistently high. The Budget proposes a series of reforms to SNAP that close eligibility loopholes, target benefits to the neediest households, and require able-bodied adults to work. Combined, these reforms will reduce SNAP expenditures while maintaining the basic assistance low-income families need to weather hard times. The Budget also proposes SNAP reforms that will re-balance the State-Federal partnership in providing benefits by establishing a State match for benefit costs. The Budget assumes a gradual phase-in of the match, beginning with a national average of 10 percent in 2020 and increasing to an average of 25 percent by 2023.

This is not the approach I prefer. It would be better to create a block grant that slowly phases out over a number of years (as part of an overall plan to get the federal government out of the redistribution racket).

Nonetheless, the Trump proposal would save money for taxpayers. Here are the projected savings from the budget.

To put those numbers in context, the Congressional Budget Office projects that food stamp outlays will be about $70 billion per year if current policy is left in place.

Folks on the left are predictably warning that any restrictions on the program will cause poor people to go hungry.

Yet it seems that many of these people are happy to give up their food stamps in order to avoid productive activity. I’ve already discussed examples from Maine, Wisconsin, and Kansas. Now let’s look at a news report from Alabama.

Thirteen previously exempted Alabama counties saw an 85 percent drop in food stamp participation after work requirements were put in place on Jan. 1, according to the Alabama Department of Human Resources. …there were 5,538 adults ages 18-50 without dependents receiving food stamps as of Jan. 1, 2017. That number dropped to 831 – a decline of about 85 percent – by May 1, 2017. …Statewide, the number of able-bodied adults receiving food stamps has fallen by almost 35,000 people since Jan. 1, 2016. …Nationwide, there are about 44 million people receiving SNAP benefits at a cost of about $71 billion. The Trump administration has vowed to cut the food stamp rolls over the next decade, including ensuring that able-bodied adults recipients are working.

The same thing is happening in Arkansas.

Food stamp enrollment dropped by 25,000 people in Arkansas in 2016, after the state reinstated work requirements limited individuals to three months of benefits unless they found or trained for a job… Arkansas stopped granting waivers to work requirements January 1, 2016, and by April, 9,000 people were off of food stamps, also called Supplemental Nutrition Assistance Program (SNAP) benefits. Another 15,000 more lost their benefits between April and November… J.R. Davis, a spokesman for Hutchinson’s office, told Arkansas Online. “If you’re receiving these SNAP benefits, you can continue to receive those SNAP benefits, but you have to work if you’re between 18 and 49 — that’s a conservative philosophy that the governor believes.”

By the way, recipients often don’t need to actually work to satisfy the work requirements. They can simply be enrolled in some sort of job-training program, many of which are run by the government at no direct cost to participants.

Yet a huge proportion of these able-bodied adults would rather give up food stamps than participate. Maybe I’m heartless, but this suggests that they are not actually dependent on handouts.

Let’s close by augmenting our list of con artists (the Octo-mom, college kids, etc) who mooch off the food stamp program. As reported by the Daily Caller, one of Mayor de Blasio’s cronies in New York City pretended to be poor so he could steal money from taxpayers.

A religious leader and big-time fundraiser for Democratic New York City Mayor Bill de Blasio has been charged with welfare fraud for getting around $30,000 in food stamps. Yitzchok “Isaac” Sofer, a Hasidic religious leader, hosted a fundraiser for de Blasio’s 2013 mayoral campaign at the same time he was receiving food stamps illegally. …FBI…agents found that Sofer has been on food stamps since the beginning of 2010, and received more than $30,000 in benefits from the Supplemental Nutrition Assistance Program (SNAP) since 2012, according to court documents… On his food stamp application in 2012, Sofer claimed to make $250 a week, or about $13,000 a year…in 2012, however, he listed his income for 2011 at $100,000, and assets at more than $600,000, according to the criminal complaint. Sofer still has ties with de Blasio’s office.

Sounds like he’s a wonderful human being. Let’s call him Exhibit A for the decline of social capital in the United States (though certain fast food restaurants might be an even more ominous sign of eroding cultural norms).

P.S. Even if Trump isn’t sincere about wanting to control food stamp spending, I guess I shouldn’t be too depressed. After all, at least he’s not proposing to make the problem worse. By contrast, the Obama Administration actually bribed states to lure more people into food stamp dependency. And, if you can believe it, Obama’s Agriculture Secretary argued that food stamps stimulate the economy.

P.P.S. Speaking of states, here are the states with the most and least food stamp dependency, and here is a ranking of states looking at the ratio of recipients compared to the eligible population.

Defenders of civil liberties have won big victories against gun control in the United States.

The fight certainly isn’t over, to be sure, but most Americans have some degree of freedom to own guns, carry guns, and protect themselves with guns.

By contrast, the situation in Europe tends to be grim. Many nations strictly limit the freedom of people to keep and bear arms. As you might expect, the “sensible Swiss” are an exception, and nations such as Monaco, Austria, and the Nordics are semi-reasonable.

But it’s just about impossible to own a gun in countries such as the United Kingdom, France, Germany, and Italy. Even groups that are targeted by Islamic fanatics, such as Jews, aren’t allowed to defend themselves.

And that is good news for terrorists. They can plot murder and mayhem with considerable confidence that they won’t meet armed resistance until police show up (just as mass killers in the USA seek out gun-free zones for their evil attacks).

But that passive approach may be changing in some European nations.

According to a column in the Washington Post, the President of the Czech Republic believes an armed citizenry is a safe citizenry.

A couple of months ago, Czech President Milos Zeman made an unusual request: He urged citizens to arm themselves against a possible “super-Holocaust” carried out by Muslim terrorists.

The column notes that he’s almost certainly over-stating the risks.

…there are fewer than 4,000 Muslims in this country of 10 million people.

But some citizens decided it’s better to be safe than sorry.

…gun purchases spiked.

Now the government is seeking to make it easier for citizens to use those guns for self-defense.

…the country’s interior ministry is pushing a constitutional change that would let citizens use guns against terrorists. Proponents say this could save lives if an attack occurs and police are delayed or unable to make their way to the scene. …Parliament must approve the proposal.

The good news is that the Czech Republic already has fairly good laws. At least by European standards.

The Czech Republic already has some of the most lenient gun policies in Europe. It’s home to about 800,000 registered firearms and 300,000 people with gun licenses. Obtaining a weapon is relatively easy: Residents must be 21, pass a gun knowledge check and have no criminal record. By law, Czechs can use their weapons to protect their property or when in danger, although they need to prove they faced a real threat.

Hopefully there are lots of unregistered firearms as well.

Though I’m unsure what the Interior Ministry is proposing with regards to gun use against terrorists. Why would the law need to be changed if Czechs already are allowed to use weapons for self-defense?

In any event, the bad news is that the meddling bureaucrats in Brussels are trying to make it more difficult for law-abiding people to protect themselves.

…much of Europe…has long supported much more stringent gun-control measures.  In the wake of the 2015 terror attacks in Paris, France pushed the European Union to enact even tougher policies. The European Commission’s initial proposal called for a complete ban on the sale of weapons like Kalashnikovs or AR-15s that are intended primarily for military use. Ammunition magazines would be limited to 20 rounds or less. …the EU passed a compromise last month… The final measure bans the sale of most military-style rifles and requires all potential buyers to go through a psychological check before they can buy a weapon. …it’s not yet clear if gun owners will have to turn in newly illegal weapons.

How typical of the French. They want to make it more difficult for law-abiding people to have guns, an approach that presumably won’t have much – if any – impact on terrorists who presumably can get weapons illegally.

And the EU once again ignores its own federalist rhetoric on subsidiarity to push for statist continent-wide policy.

Moreover, Kalashnikovs and AR-15s are no more dangerous or deadly than other rifles, so targeting guns that “are intended primarily for military use” is irrelevant nonsense.

The bottom line is that more gun control in Europe won’t help the fight against terrorism. Instead, it simply means citizens don’t have the right to defend themselves.

So I’m glad the Czechs are trying to do the right thing, in spite of the paternalistic left-wing ideologues elsewhere in Europe. And I hope there will be lots of civil disobedience as more gun control policies emanate from Brussels.

P.S. If you enjoy sarcasm, here’s a clever video showing how leftists think about gun control. And here’s another one.

P.P.S. If you enjoy when leftists accidentally make the argument against gun control, you’ll enjoy the exploding cigars by Trevor Noah and the New York Times.

The federal income tax is corrosive and destructive. It’s almost as if a group of malicious people decided to deliberately design a system that imposes maximum damage while also allowing the most corruption.

The economic damage is not only the result of high tax rates and pervasive double taxation, but also because of loopholes that exist to bribe people into making economically unwise decisions.

These include itemized deductions for mortgages and charitable contributions, as well as the fringe benefits exclusion and the exemption for municipal bond interest. And there are many other corrupt favors sprinkled through a metastasizing tax code.

But there’s a strong case to be made that the worst loophole is the deduction for state and local taxes. Why? For the simple reason that it encourages, enables, and subsidizes bad policy.

Here’s how it works. State and local lawmakers can increase income taxes or property taxes and be partially insulated from political blowback because their taxpayers can deduct those taxes on their federal return.

And it’s a back-door way of giving a special break to upper-income taxpayers because the deduction is more valuable to people in higher tax brackets.

Let’s look at an example that’s currently in the news. Democrats in the Illinois state legislature want a big increase in the personal income tax. If they succeed and boost taxes by an average of $1000, high-income taxpayers who take advantage of the deduction may only suffer a loss of as little as $600 since their federal tax bill may fall by almost $400.

For politicians, this is an ideal racket. They can promise various interest groups $1000 of goodies while reducing take-home pay by a lesser amount.

Let’s review some recent commentary on this topic.

The Wall Street Journal opined on the issue last weekend.

Chuck Schumer aspires to raise taxes on every rich person in America, save one protected class: coastal progressives. …Like many other Democrats, he’s apoplectic about a plan to end the state and local tax deduction. …One goal of tax reform is to reduce unproductive tax loopholes, and ending the state and local deduction would generate revenue to finance lower rates: The deduction is worth about $100 billion a year… About 88% of the benefits in 2014 flowed to taxpayers who earn more than $100,000, while 1% went to those who earn less than $50,000. California alone reaps nearly 20% of the benefit…and a mere six states get more than half. …The folks underwriting this windfall are in Alaska, South Dakota, Wyoming and other places without a state income tax. …Eliminating the deduction would be a powerful incentive for Governors to cut state taxes on residents who are suddenly exposed to their full liability. …killing the state and local deduction would pay a double dividend: The first is creating a more equitable tax code with a broader base and lower rates. The second is spurring reform in states that are long overdue for a better tax climate.

Writing earlier this year for National Review, Kevin Williamson was characteristically blunt.

It’s time for…blue-state…tax increases that would fall most heavily on upper-income Americans in high-tax progressive states such as California and New York. …eliminate the deduction for state income taxes, a provision that takes some of the sting out of living in a high-tax jurisdiction such as New York City (which has both state and local income taxes) or California, home to the nation’s highest state-tax burden. Do not hold your breath waiting for the inequality warriors to congratulate Republicans for proposing these significant tax increases on the rich. …allowing for the deduction of state taxes against federal tax liabilities creates a subsidy and an incentive for higher state taxes. California in essence is able to capture money that would be federal revenue and use it for its own ends, an option that is not practically available to low-tax (and no-income-tax) states such as Nevada and Florida. It makes sense to allow the states to compete on taxes and services, but the federal tax code biases that competition in favor of high-tax jurisdictions.

And Bob McManus adds his two cents in an article for the Manhattan Institute’s City Journal.

Voters in all heavy-tax, high-spending states have no one to blame for their situation save themselves. At a minimum, it seems clear that deductibility—by softening the impact of federal taxation—encourages outsize state and local spending. States that take advantage of deductibility—mostly in the Northeast and on the West Coast—are in effect subsidized by states that have kept tighter control on their spending. …New York’s top-of-the-charts spending puts the state at the pinnacle…with New Yorkers paying a national high of 12.7 percent of income in state and local levies. Local property taxes in New York are astronomical and not coming down any time soon. …deductibility has powerful friends—among them the public-employee unions… New York and the nation would benefit if deductibility was jettisoned. …end the incentive for the tax-and-spend practices that have been so economically corrosive to big-spending Blue states.

Let’s close with the should-be-obvious point that the goal isn’t to repeal the state and local tax deduction in order to give politicians in Washington more money to spend. Instead, every penny of that revenue should be used to finance pro-growth tax reforms.

That creates a win-win situation of better tax policy in Washington, while also creating pressure for better tax policy at the state and local level.

For what it’s worth, both Trump and House Republicans are proposing to get rid of the deduction.

P.S. I mentioned at the start of this column that it would not be unreasonable to think that the tax code was deliberately designed to maximize economic damage. But even a curmudgeon like me doesn’t think that’s actually the case. Instead, our awful tax system is the result of 104 years of “public choice.”

P.P.S. Itemized deductions and other loopholes create distortions by allowing people to understate their income if they engage in approved behaviors. There are also provisions of the tax code – such as depreciation and worldwide taxation – that force taxpayers to overstate their income.

Back in 2015, I basically applauded the Congressional Budget Office for its analysis of what would happen if Obamacare was repealed. The agency’s number crunchers didn’t get it exactly right, but they actually took important steps and produced numbers showing how the law was hurting taxpayers and the economy.

Now we have a new set of Obamacare numbers from CBO based on the partial repeal bill approved by the House of Representatives. The good news is that the bureaucrats show substantial fiscal benefits. There would be a significant reduction in the burden of spending and taxation.

But the CBO did not show very favorable numbers in other areas, most notably when it said that 23 million additional people would be uninsured if the legislation was enacted.

Part of the problem is that Republicans aren’t actually repealing Obamacare. Many of the regulations that drive up the cost of health insurance are left in place.

My colleague at Cato, Michael Cannon, explains why this is a big mistake.

Rather than do what their supporters sent them to Washington to do – repeal ObamaCare and replace it with free-market reforms – House Republicans are pushing a bill that will increase health-insurance premiums, make health insurance worse for the sick… ObamaCare’s core provisions are the “community rating” price controls and other regulations that (supposedly) end discrimination against patients with preexisting conditions. …Community rating is the reason former president Bill Clinton called ObamaCare “the craziest thing in the world” where Americans “wind up with their premiums doubled and their coverage cut in half.” Community rating is why women age 55 to 64 have seen the highest premium increases under ObamaCare. It is the principal reason ObamaCare has caused overall premiums to double in just four years. Community rating literally penalizes quality coverage for the sick… ObamaCare is community rating. The AHCA does not repeal community rating. Therefore, the AHCA does not repeal ObamaCare.

It would be ideal if Republicans fully repealed Obamacare.

Heck, they should also address the other programs and policies that have messed up America’s healthcare system and caused a third-party payer crisis.

That means further reforms to Medicaid, as well as Medicare and the tax code’s exclusion of fringe benefits.

But maybe that’s hoping for too much since many Republicans are squeamish about supporting even a watered-down proposal to modify Obamacare.

That being said, there are some reasonable complaints that CBO overstated the impact of the GOP bill.

Doug Badger and Grace Marie Turner, for instance, were not impressed by CBO’s methodology.

The Congressional Budget Office (CBO) launched its latest mistaken Obamacare-related estimate this week, predicting that a House-passed bill to repeal and replace the embattled law would lead to 23 million more uninsured people by 2026. …the agency’s errors are not only massive – one of their predictions of 2016 exchange-based enrollment missed by 140%… Undaunted by failure and unschooled by experience, CBO soldiers on, fearlessly predicting that millions will flock to the exchanges any day now.  …CBO measures the House-passed bill against this imaginary baseline and finds it wanting. …One reason CBO gets it so wrong so consistently is its fervent belief that the individual mandate has motivated millions to enroll in coverage.  …CBO’s belief in the power of the individual mandate is misplaced. …The IRS reports that in the 2015 tax year, 6.5 million uninsured filers paid the tax penalty, 12.7 million got an exemption and additional 4.2 million people simply ignored the penalty.  They left line 61 on their form 1040 blank, refusing to tell the government whether or not they had insurance.  …In all, that is a total of 23.4 million uninsured people – out of an estimated 28.8 million uninsured – who either paid, avoided or ignored the penalty.  That hardly suggests that the mandate has worked.

The Wall Street Journal also was quite critical of the CBO analysis.

…the budget scorekeepers claim the House bill could degrade the quality of insurance. This editorializing could use some scrutiny. Without government supervision of insurance minutiae and a mandate to buy coverage or pay a penalty, CBO asserts, “a few million” people will turn to insurance that falls short of the “widely accepted definition” of “a comprehensive major medical policy.” They might select certain forms of coverage that Obama Care banned, like “mini-med” plans with low costs and low benefits. Or they might select indemnity plans that pay a fixed-dollar amount per day for illness or hospitalization, or dental-only or vision-only single-service plans. CBO decided to classify these people as “uninsured,” though without identifying who accepts ObamaCare’s definition of standardized health benefits and why they deserve to substitute their judgment for the choices of individual consumers. …But the strangest part of CBO’s preoccupation with “high-cost medical events” is that the analysts never once mention catastrophic coverage—not once. These types of plans didn’t cover routine medical expenses but they did protect consumers against, well, a high-cost medical event like an accident or the diagnosis of a serious illness. Those plans answered what most people want most out of insurance—financial security and a guarantee that they won’t be bankrupted by cancer or a distracted bus driver. …under the House reform Americans won’t have any problem insuring against a bad health event, even if CBO won’t admit it. …CBO has become a fear factory because it prefers having government decide for everybody.

Drawing on his first-hand knowledge, Dr. Marc Siegel wrote on the issue for Fox News.

…23 million…will lose their health insurance by 2026 if the American Health Care Act, the bill the House passed to replace ObamaCare, is passed in the Senate and signed by President Trump. This number is concerning — until you look at it and the CBO’s handling of the health care bills more closely. …First, the CBO was wildly inaccurate when it came to ObamaCare, predicting that 23 million people would be getting policies via the exchanges by 2016. The actual number ended up being only 10.4 million… Second, many who chose to buy insurance on the exchanges did so only because they wanted to avoid paying the penalty, not because they needed or wanted the insurance. Many didn’t buy insurance until they got sick.

The Oklahoman panned the CBO’s calculations.

IN the real world, people who don’t have insurance coverage cannot lose it. Yet…the CBO estimates 14 million fewer people will have coverage in 2018 if the House bill is enacted than would be the case if the ACA is left intact, and 23 million fewer by 2026. …In 2016, there were roughly 10 million people obtaining insurance through an Obamacare exchange. The CBO estimated that number would suddenly surge to 18 million by 2018 if the law was left intact, but that far fewer people would be covered if the House reforms became law. Put simply, the CBO estimated that millions of people who don’t have insurance through an exchange today would “lose” coverage they would otherwise obtain next year. That’s doubtful. …At one point, the office estimated 22 million people would receive insurance through an Obamacare exchange by 2016. As already noted, the actual figure was less than half that. One major reason for the CBO being so far off the mark is that federal forecasters believed Obamacare’s individual mandate would cause people to buy insurance, regardless of cost. That hasn’t proven true. …In a nutshell, the CBO predicts reform would cause millions to lose coverage they don’t now have, and that millions more would eagerly reject the coverage they do have because it’s such a bad deal. Those aren’t conclusions that bolster the case for Obamacare.

And here are passages from another WSJ editorial.

CBO says 14 million fewer people on net would be insured in 2018 relative to the ObamaCare status quo, rising to 23 million in 2026. The political left has defined this as “losing coverage.” But 14 million would roll off Medicaid as the program shifted to block grants, which is a mere 17% drop in enrollment after the ObamaCare expansion. The safety net would work better if it prioritized the poor and disabled with a somewhat lower number of able-bodied, working-age adults. The balance of beneficiaries “losing coverage” would not enroll in insurance, CBO says, “because the penalty for not having insurance would be eliminated.” In other words, without the threat of government to buy insurance or else pay a penalty, some people will conclude that ObamaCare coverage isn’t worth the price even with subsidies. …CBO’s projections about ObamaCare enrollment…were consistently too high and discredited by reality year after year. CBO is also generally wrong in the opposite direction about market-based reforms, such as the 2003 Medicare drug benefit whose costs the CBO badly overestimated.

Here are excerpts from Seth Chandler’s Forbes column.

My complaints about the CBO largely revolve around its dogged refusal to adjust its computations to the ever-more-apparent failings of the Affordable Care Act. When the CBO says that 23 million fewer people will have insurance coverage under the AHCA than under the ACA — a statistic that politics have converted into a mantra —  that figure is predicated on an ACA that no longer exists. It is based on the continuing assumption that the ACA will have 18 million people enrolled on its exchanges in 2018 and that this situation will persist until 2026. I know no one on any side of the political spectrum who believes this to be true. The ACA has about 11 million people currently enrolled on its exchanges in 2017 and, with premiums going up, some insurers withdrawing from various markets, and the executive branch fuzzing up whether the individual mandate will actually be enforced. The consensus is that ACA enrollment will stay the same or go down, not increase 60%.

And here’s some of what Drew Gonshorowski wrote for the Daily Signal.

…reducing premium levels by rolling back regulations could actually have the effect of making plans more desirable for individuals looking to pay less. The CBO lacks any real discussion of these positive effects. …The CBO’s score on Medicaid…reflects that it assumes more states would likely have expanded in the future under the Affordable Care Act. Thus, its projection that 14 million fewer people would be insured due to not having Medicaid under the American Health Care Act might be overstated… CBO…assumes the Affordable Care Act will enroll 7 to 8 million more people in the individual market, when in reality it does not appear this will be the case

Last but not least, my former colleague Robert Moffit expressed concerns in a column for USA Today. The part that caught my eye was that CBO has a less-than-stellar track record on Obamacare projections.

The GOP should be skeptical of CBO’s coverage estimates. It has been an abysmal performance. For example, CBO projected initially that 21 million persons would enroll in exchange plans in 2016. The actual enrollment: 11.5 million.

The bottom line is that CBO overstated the benefits of Obamacare, at least as measured by the number of people who would sign up for the program.

The bureaucrats were way off.

Yet CBO continues to use those inaccurate numbers, creating a make-believe baseline that is then used to estimate a large number of uninsured people if the Republican bill is enacted.

This is sort of like the “baseline math” that is used to measure supposed spending cuts when the budget actually is getting bigger.

P.S. You may be wondering why Republicans don’t fully repeal Obamacare so that they can get credit for falling premiums. Part of the problem is that they are using “reconciliation” legislation that supposedly is limited to fiscal matters. In other words, you can’t repeal red tape and regulation. At least according to some observers. I think that’s silly since such interventions drive up the cost of health care, which obviously has an impact on the budget. Also, Republicans are a bit squeamish about reducing subsidies for various groups, whether explicit (like the Medicaid expansion) or implicit (like community rating). In other words, the Second Theorem of Government applies.

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