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Posts Tagged ‘Class warfare’

New Jersey is a fiscal disaster area.

It’s in last place in the Tax Foundation’s index that measures a state’s business tax climate.

It’s tied for last place in the Mercatus Center’s ranking of state fiscal conditions.

And it ranks in the bottom-10 in measures of state economic freedom and measures of unfunded liabilities for bureaucrat pensions.

All of this led me, last October, to warn that the state was suffering from fiscal decay.

Then, two months ago, James Freeman of the Wall Street Journal wrote about how New Jersey’s uncompetitive fiscal system was encouraging highly productive taxpayers to leave the state.

The Garden State already has the third largest overall tax burden and the country’s highest property tax collections per capita. Now that federal reform has limited the deduction for state and local taxes, the price of government is surging again among high-income earners in New Jersey and other blue states. Taxpayers are searching for the exits. …says Jeffrey Sica, founder of Circle Squared, an alternative investments firm. “We structure real estate deals for family offices and high-net-worth individuals and at a record pace those family offices and individuals are leaving the TriState for lower-tax states. Probably a dozen this year at least,”…In the decade ending in 2016, real economic growth in New Jersey clocked in at a compound annual percentage rate of 0.1, just slightly higher than John Blutarsky’s GPA and less than a tenth of the national average for economic growth. The Tax Foundation ranks New Jersey dead last among the 50 states for its business tax climate. …Steven Malanga calls Mr. Murphy’s plan “the U-Haul Budget” for the new incentives it gives New Jersey residents to flee.

You would think that New Jersey politicians would try to stop the bleeding, particularly given the impact of federal tax reform.

But that assumes logic, common sense, and a willingness to put the interests of people above the interests of government. Unfortunately, all of those traits are in short supply in the Garden State, so instead the politicians decided to throw gasoline on the fire with another big tax hike.

The Wall Street Journal opines today on the new agreement from Trenton.

Governor Phil Murphy and State Senate leader Steve Sweeney have been fighting over whether to raise tax rates on individuals or businesses, and over the weekend they decided to raise taxes on both. Messrs. Murphy and Sweeney agreed to raise the state’s income tax on residents making more than $5 million to 10.75% from 8.97% and the corporate rate on companies with more than $1 million in income to 11.5% from 9%. This will give New Jersey the fourth highest marginal income tax rate on individuals and the second highest corporate rate after Iowa.

New Jersey is pursuing class warfare, but the politicians don’t seem to realize that the geese with the golden eggs can fly away.

The two Democrats claim this will do no harm because about 0.04% of New Jersey taxpayers will get smacked. But those taxpayers account for 12.5% of state income-tax revenue and their investment income is highly mobile. The state treasurer said in 2016 that a mere 100 filers pay more than 5.5% of all state receipts. Billionaire David Tepper escaped from New Jersey for Florida in 2015, and other hedge fund managers could follow. Between 2012 and 2016 a net $11.9 billion of income left New Jersey, according to the IRS. The flight risk will increase with the new limit of $10,000 on deducting state and local taxes on federal tax returns. …About two-thirds of New Jersey’s $3.5 billion income outflow last year went to Florida, which doesn’t have an income tax. …The fair question is why any rational person or business that can move would stay in New Jersey.

That’s not merely a fair question, it’s a description of what’s already happening. And it’s going to accelerate – in New Jersey and other uncompetitive states – when additional soak-the-rich schemes are imposed (unless politicians figure out a way to put fences and guard towers at the border).

A few months ago, I conducted a poll on which state would be the first to suffer a fiscal collapse. For understandable reasons, Illinois was the easy “winner.” But I won’t be surprised if there are a bunch of new votes for New Jersey. Simply stated, the state is committing fiscal suicide.

P.S. What’s amazing (and depressing) is that New Jersey was like New Hampshire as recently as the 1960s, with no state sales tax and no state income tax.

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Though it gets strong competition from the International Monetary Fund, the Organization for Economic Cooperation and Development wins the prize for being the worst international bureaucracy.

The Paris-based organization is infamous for pushing a statist agenda on a wide range of issues, including class-warfare taxation, energy taxation, business taxation, value-added taxes, Keynesian spendinggreen energy, and government-run healthcare.

And it relies on dodgy, dishonest, and misleading data when pushing big-government policies regarding povertypay equityinequality, and comparative economics.

But what gets me most agitated is the OECD’s attempt, beginning in the late 1990s, to prop up decrepit welfare states by undermining tax competition.

I elaborated on my concerns in this interview last June.

To make matters worse, American taxpayers finance the lion’s share of the OECD’s statist agenda. Eliminating subsidies for the OECD arguably would be the budget cut with the greatest value per dollar saved.

Which is the point of some new research from the Heritage Foundation. James Roberts and Adam Michel make a strong case that the OECD is using handouts from American taxpayers to push policy that are contrary to U.S. interests.

The Organization for Economic Cooperation and Development (OECD)…has transformed itself into a dunning agency for European mega-welfare states that are straining to fund the generous but unsustainable pension, health care, and other government programs they have over-promised to their constituents. One need only undertake a cursory examination of research over the past five years to see that tax-related work by the OECD’s Centre for Tax Policy and Administration and by other OECD directorates (for example, on carbon taxes) has been focused almost entirely on studies that buttress political arguments for higher taxes and implementation of more intrusive ways to collect them. …high-taxing European members of the OECD have pushed the organization toward an almost obsessive research focus on international tax avoidance and evasion. These manifest through its base erosion and profit shifting (BEPS) project, and a proposed protocol amending the Multilateral Convention on Mutual Assistance in Tax Matters. …The BEPS project also complements a disproportionate OECD focus on income inequality…that, in the eyes of OECD’s international civil servants, could be addressed best by international wealth redistribution schemes… The Trump Administration should consider whether U.S. taxpayers should continue to subsidize an organization that increasingly acts contrary to the expressed wishes of a significant number of Americans, who voted into office in 2016 a government with a mandate to cut government spending and reduce taxes. It could decide to withdraw the United States completely from the OECD.

I normally would exclaim “amen” at this point, except the folks at Heritage are being far too nice, writing that the White House “should consider” whether to subsidize the OECD and noting that the U.S. “could” withdraw from the Paris-based bureaucracy.

I’m in no mood for diplomatic niceties when dealing with an organization that is pervasively hostile to economic liberty. The OECD is beyond salvage. If Republicans had any brains (yes, I realize that the GOP is known as “the stupid party” for good reason), handouts would have ended last decade.

I’ll close with an example of the OECD’s perfidy.

From the moment the bureaucracy’s anti-tax competition project began about 20 years ago, I explained that the OECD was seeking to destroy financial privacy so that uncompetitive governments could track capital and impose high tax rates on income that is saved and invested. In effect, the battle over “tax havens” and “tax competition” were a proxy for whether there should be more double taxation and more extra-territorial taxation.

OECD bureaucrats and others scoffed at such assertions and said the project was simply about closing off options for tax evasion so that nations could afford to lower tax rates.

I viewed that explanation as laughably dishonest. After all, did oil-producing nations create OPEC so they could reduce petroleum prices?

Were my suspicions warranted? Well, see what the bureaucrats just wrote.

…opportunities may exist…to increase progressivity in the…taxation of capital income as a result of major changes to the international tax environment. …the recent move towards the automatic exchange of financial account information between tax administrations is likely to make it harder…for taxpayers to evade tax by hiding income and wealth offshore… This may present a particular opportunity for countries that previously moved away from progressive taxation of capital income (due to concerns regarding such tax evasion) to reintroduce a degree of progressivity.

In other words, now that the OECD has succeeded in greatly weakening financial privacy, the bureaucrats openly admit that the real goal was to make it possible for uncompetitive welfare states to impose higher tax burdens on saving and investment. I’m shocked, shocked.

Here’s my video on the OECD. It was released in 2010, but nothing has changed other than there’s even more evidence against the parasitical bureaucracy.

P.S. To add more insult to all the injury, the tax-loving bureaucrats at the OECD get tax-free salaries. Must be nice to be exempt from the bad policies they support.

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I wrote last July about how greedy politicians in Seattle, Washington, were trying to impose a local income tax.

That effort has been stymied since there’s anti-income-tax language in the state constitution (Washington is one of nine states without that punitive levy), but that doesn’t mean the city’s tax-and-spend crowd has given up.

There’s a proposal for a new scheme to impose a “head tax” on successful companies.

The top three percent of the high grossing businesses in Seattle will carry the load of Seattle’s proposed employee head tax. Backers are calling it the “Progressive Tax on Business.” The tax will apply only to those companies with $20 million or more annually in taxable gross receipts as measured under the City’s Business and Occupation tax. The city estimates that will be 500 businesses. …the tax is based on total revenues and not net-income. …Councilmember Mike Obrien has been pushing to a head tax for two years and doesn’t believe businesses will leave Seattle because of it.

I suppose this might be a good opportunity to point out that this tax is bad for growth and that it will encourage out-migration from the city.

Or perhaps I could make a wonky point about how this tax is related to the income tax in the same way a gross receipts tax is related to a sales tax.

But I’m motivated instead to focus on the very heartening response to this tax grab by both business and labor.

Here’s how the city’s leading employer is responding.

Amazon is…making its opposition known to a proposed Seattle tax by bringing a halt to all planning on a massive project scheduled for construction in Downtown Seattle, and may tweak its plans to occupy a new downtown skyscraper. “I can confirm that pending the outcome of the head tax vote by City Council, Amazon has paused all construction planning on our Block 18 project in downtown Seattle and is evaluating options to sub-lease all space in our recently leased Rainier Square building,” says Amazon Vice President Drew Herdener. …Jon Scholes, president of the Downtown Seattle Association, said the City Council should take heed of Amazon’s decision.

But some of the class-warfare politicians are oblivious to real-world concerns.

Two supporters of the tax, City Council members Kshama Sawant and Mike O’Brien, seemed unmoved by Amazon’s decision. “I understand Amazon doesn’t like it. I’m sure they would love to go to a city that has no taxes. And maybe they will find that place,” O’Brien said. …Added Sawant, “Amazon is perfectly capable of paying that, double, even four times that.” She also called Amazon’s tactic “extortion.”

I don’t know if Sawant is an idiot or a demagogue. What’s she’s basically arguing is that if a victim runs away from a mugger, the victim is an extortionist.

Wow, that’s a novel (and French) way of looking at the world.

That being said, there’s probably nothing surprising about the business community resisting a tax on business. So here’s the part of the story that really warms my heart.

Private-sector workers also are protesting.

Construction workers shouted down Seattle City Councilmember Kshama Sawant on Thursday as she attempted to speak in favor of Seattle ‘s proposed new “head tax” at an open-air news conference. The construction workers shouted “No head tax!” each time Sawant tried to speak in favor of the measure… The conference, held outside Amazon’s Spheres, was intended to show support for the head tax and opposition to Amazon’s announcement of a construction pause on a massive downtown construction project. But the group of about 20 construction workers showed up and drowned out Sawant’s message. …construction workers…praised Amazon for providing well-paying jobs to thousands of Seattle-area residents.

Unsurprisingly, Ms. Sawant doesn’t care about workers. She simply wants the money so she can buy votes.

Amazon would pay more than $20 million of that total under the proposal. …Sawant maintains that Amazon could easily afford to pay that amount.

Let’s close with some good news. Seattle isn’t normally considered a hotbed of free market thinking (though a disproportionate share of my readers are in the state of Washington).

So I’m guessing Ms. Sawant and her greedy colleagues probably are not very happy about this (admittedly unscientific) polling data.

This is very encouraging. Hopefully it’s a sign of the good things that can happen with private workers (unionized or not) and private employers join forces to protect themselves from politicians.

It will be interesting to see how the City Council responds. If they move forward with this tax grab, Seattle truly will be in the running to the Greece of America.

And if that trend continues, don’t be surprised if Amazon’s soon-to-be-announced second headquarters eventually morphs into its primary headquarters (hopefully without any cronyism).

P.S. It goes without saying (but I’ll say it anyhow) that the state of Washington should never, ever, allow a state income tax.

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I’ve been in Prague the past few days for a meeting of the European Resource Bank. I spoke today about a relatively unknown international bureaucracy called the European Bank for Reconstruction and Development and I warned that it is going through a process of OECD-ization, which is simply my way of saying it is pursuing bad policy.

I’ll write about that issue in the near future, but today’s topic is based on a presentation from Michael Jäger of the Barvarian Taxpayers Association. He shared some depressing data on how the German government imposed a surtax for the ostensibly limited purpose of helping the finance the reunification of West Germany and East Germany.

But limited apparently means forever.

You’ll notice two things in the chart he shared..

  • First, the German government has been the big winner from this new levy, collecting €214 billion euros over the past 15 years and spending less than €157 billion euros. In other words, the politicians now have a lot of extra loot to spend elsewhere.
  • Second, revenues continue to rise even though the ostensible purpose of the tax is disappearing. Herr Jäger is pressuring the German government to eliminate the tax, but Frau Merkel apparently has little interest in reducing the nation’s tax burden.

To save non-German speakers from having to translate, the dark blue bars are “federal allocations to new states” and the light blue bars are “revenues from the solidarity surcharge.”

The big lesson to learn from this data is that temporary taxes are like temporary programs. They will last forever unless politicians somehow can br pressured to reduce their grip on the economy.

And that’s not easy, though I told some participants in the conference that it could be done. The United States government actually repealed a temporary telephone tax that was imposed to help finance the Spanish-American War.

That’s the good news.

The bad news is that the tax wasn’t repealed until last decade, more than 100 years after that war ended. I’m not joking.

Another painful lesson is that taxes on the rich often wind up penalizing other people. The Spanish-American War telephone tax was supposed to hit rich people since they were the ones who first utilized telephone technology.

But then the rest of us eventually got telephones as well, and we also had to pay the tax.

Just as the income tax was first imposed on just a tiny handful of very wealthy people, but it eventually morphed into a malignant tax code that now bedevils tens of millions of households with modest incomes.

Something to keep in mind when the crowd in Washington says we should have a value-added tax. Based on what’s happened in Europe, I guarantee it would just be a matter of time before that tax became more onerous to finance an ever-expanding burden of government spending.

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Politicians routinely assert that they want more economic growth. That’s a laudable sentiment, although I doubt their sincerity for the simple reason that these are the same people who frequently impose policies that discourage productive economic activity.

Growth occurs when there’s an increase in the quantity and/or quality of labor and capital. These so-called factors of production determine how efficiently we produce and how much we produce.

Which is why there should be low taxes on labor and capital.

And it’s also a good idea for these factors of production to be taxed at the same rate so government policy isn’t tilting the playing field.

Unfortunately, we don’t have low taxes and we also don’t have neutral taxes.

Indeed, Timothy Egan argues in the New York Times that these two factors of production are not taxed equally. I agree.

Except Egan completely bungles the analysis and preposterously claims that labor is taxed at a higher rate.

Dear Government: Enclosed please find my 2017 tax form, and a check for the amount I owe, just ahead of the deadline. …you’re still punishing me for working — taxing wages and business income at a much higher rate than the money I make doing nothing, like holding stocks. Plus, you’re still taxing Warren Buffett at a lower rate than his secretary, despite his plea for fairness.

Wow, he manages to cram a lot of inaccuracy into a couple of sentences.

In reality, the current tax code is very biased against saving and investment.

Here’s some of what I wrote when I debunked Warren Buffett’s deeply flawed claim about relative tax burdens back in 2011.

…dividends and capital gains are both forms of double taxation. …if he wants honest effective tax rate numbers, he needs to show the…corporate tax rate. …Moreover, …Buffett completely ignores the impact of the death tax

For years, I’ve been recycling a chart showing how the American tax code mistreats saving and investment. But that chart became outdated by the fiscal cliff deal, then became even more inaccurate because of Obamacare tax hikes, and most recently became even more inaccurate thanks to the Trump tax plan.

So here’s an up-to-date version.

And for purposes of today’s issue, the top side and left side of the flowchart combine to show how labor income is taxed and the top side and right side of the flowchart combine to show how capital is taxed.

The problem with Egan’s analysis is that he compares taxes on labor income (as high as 37 percent) with the 23.8 percent rate on dividends and/or capital gains. Yet that’s either incredibly sloppy or grievously dishonest because that income also gets hit by the corporate income tax.

And it’s worth pointing out that stocks and other financial assets are purchased with after-tax dollars (captured by the top portion of the chart).

P.S. Adding payroll taxes to the flowchart doesn’t change anything. There would be an additional levy at the top of the chart, leading to a lower level of after-tax earning. So the net result is simply that people have less money to either spend or invest.

P.P.S. Warren Buffett periodically – and inaccurately – asserts that his tax rate in higher than his secretary’s tax rate. Yet his theoretical support for higher tax burdens crashes into the reality of his professional tax-minimization behavior.

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Writing a column every day is a recipe for making an occasional mistake.

Sometimes the errors are minor, such as when I put Tucson in New Mexico rather than Arizona.

And sometimes they are less trivial, such as when I mischaracterized subsidies for the Postal Service or when I incorrectly criticized the Committee for a Responsible Federal Budget.

In an event, I always try to acknowledge and fix my mistakes.

And that’s why I want to write today about Oxfam. Early last year, I wrote a column criticizing the group’s statist orientation, asserting in my title that the group was a leftist joke instead of a real charity.

Time to correct the record. But I want to begin by noting that my title was only partly wrong. Oxfam is very much a left-wing organization. In prior columns, I’ve shared critiques of the group’s statist ideology from Tim Carney, Marian Tupy, and Tony Travers.

And before I get to the part about fixing my mistake, I want to augment this list by sharing the views of two more experts. We’ll start with some excerpts from a column in the Wall Street Journal by David Henderson.

Oxfam recently published a 76-page report, “Reward Work, Not Wealth,” that advocates taxing the rich to reduce inequality and help the poor. …There are two ways to close the gap. The first is to concentrate on making the poor better off. Mostly that has happened, thanks to liberalized international trade and reduced costs for shipping goods. Just as Walmart and Amazon have cut costs for Americans, the introduction of container shipping crushed transportation costs for the world. The second way to reduce inequality is to make the rich worse off.

Needless to say, Oxfam prefer the approach that gives more power and money to government.

Any guess which method Oxfam’s report emphasizes? “Governments should use regulation and taxation to radically reduce levels of extreme wealth,” the authors conclude. …The document’s title, “Reward Work, Not Wealth,” is strange: Wealth is one of the main rewards for productive work. High taxes on wealth and the wealthy reduce the incentive to produce.

And Oxfam, to its credit, understands that confiscatory taxes will require a global tax cartel.

…the report…effectively advocates…the creation of a tax cartel. Since capital is extremely mobile and will go where it is lightly taxed—witness the corporate “inversions” of American companies—the report suggests “a new generation of international tax reforms.” Negotiating tax rates would take place under the aegis of “a new global tax body that ensures all countries participate on an equal footing.”

Reading Henderson’s column, we have additional confirmation that Oxfam is a run-of-the-mill statist organization that myopically believes in class warfare.

So you might think the group is no different that other leftists groups such as the United Nations or the Organization for Economic Cooperation and Development. Or no different than politicians such as Barack Obama or Hillary Clinton.

But Oxfam also has a reputation for beclowning itself with shoddy analysis.

Johan Norberg mocked the group’s ideology-over-results approach when he noted that Oxfam is distressed about an era of “neoliberalism” in the world (meaning, in this case, the European definition of pro-market classical liberalism), yet that’s also the period of time when the poor enjoyed huge gains.

For what it’s worth, I wrote a study 17 years ago debunking some of Oxfam’s sloppy work.

And here’s some of what Tim Worstall just wrote for the U.K.’s Adam Smith Institute.

Buried in Oxfam’s latest report about how disastrously unequal the world is we’ve got an assumption which is so breathtakingly foolish as to kill off any belief in the sense or sensibility of the organisation’s mindset. They’re trying to insist that the minimum wage in a place should be very much higher than GDP per capita in that same place. …the garment trade in Bangladesh…minimum wage there is…5,000 taka a month, or £50. …Yes, a low sum and most assuredly we’d all like it to be much higher. But Oxfam’s claim is that this should be a living wage of more like £250 a month (perhaps $250). Something which simply cannot happen. GDP per capita in Bangladesh is some $1,500 a year or so. We cannot have a minimum wage twice that. This would be the same claim as insisting that the UK minimum wage should be $80,000 a year (say, £60,000). …It’s a demand based upon the most aggressively stupid misunderstanding of what ails Bangladesh, isn’t it? ……to get this so wrong seriously calls into doubt Oxfam’s right to anything more than a contemptuous sneer. …Sorry folks, but Oxfam is deluded.

Tim concludes with some very wise words.

Bangladesh’s problem is not global inequality, the thing Oxfam is whining about, it’s Bangladesh’s poverty. …The cure for poverty is economic growth, the very thing which has reduced that global absolute poverty from 40% of all humans to under 10% in just these past three decades of that very neoliberal globalisation.

Now it’s finally time for my correction. When I wrote last year that Oxfam was “not a real charity,” I was merely implying that the group was a bad charity since it advocated policies that hurt poor people.

But thanks to new revelations about Oxfam’s involvement in horrific sex-crimes scandals, I’ve learned it doesn’t deserved to be called a charity of any kind. Check out these excerpts from a CNN report.

Oxfam’s deputy chief executive has resigned amid a growing sex crimes scandal involving the organization’s aid workers in Haiti and Chad. …Oxfam announced the resignation after a meeting with UK government officials Monday, at which it had fought to keep millions of pounds in public funding. …Oxfam received about £32 million (about $44 million) from the government last financial year, according to public records.

And the money from British taxpayers is just the tip of the iceberg.

Here’s a shocking bit of information from the conclusion of  David Henderson’s column.

Oxfam’s annual budget exceeds $1 billion, and it gets almost half of that from governments and the United Nations. So maybe it’s time for a new name. Oxgov.

Almost half of its budget from taxpayers?!? At best, that makes them a government contractor rather than a charity.

I’ll conclude with two points.

  • First, I think Oxfam should lose public funding. But not because some of its employees engaged in sexual predation. Yes, that’s bad, but I certainly don’t think sex abuse was ever part of the organization’s mission. Instead, it should lose funding because taxpayer money should not go to leftist organizations that advocate for bigger government (the same argument I use, by the way, when urging an end to OECD handouts).
  • Second, instead of telling people that “Oxfam is a letist joke rather than a real charity,” I’ll have to changes the second part of the sentence. Maybe “Oxfam is a leftist joke and it mooches from taxpayers.” I’m not sure that rolls off the tongue gracefully, so I’m open to other suggestions.

P.S. You probably won’t be surprised to learn that the International Monetary Fund partners with Oxfam. I guess the old saying is right that birds of feather flock together.

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The left’s fixation on reducing inequality is misguided. If they really care about the poor, they instead should focus on reducing poverty.

And that means pushing for more growth. We know from U.S. evidence and global evidence that better economic performance is the effective way to boost living standards for the less fortunate (I also recommend a look at the data from China).

Unfortunately, many folks on the left pursue policies that undermine prosperity and actually exacerbate inequality. I put together some examples back in 2015, and now it’s time to expand that list.

A report from the left-leaning Brookings Institution looks at how regulations protect – and enrich – the top 1 percent.

The real cause of elite inequality is the lack of open access and market competition in elite investment and labor markets. To bring the elite down to size, we need to make them compete. …people working in the securities industry (which includes investment banks and hedge funds) earn 26 percent more, regardless of skill. Those working in legal services get a 23 percent pay raise. These are among the two industries with the highest levels of “gratuitous pay”—pay in excess of skill… Using microdata from the Census Bureau, I find that the “gratuitous pay” premium in certain industries has increased dramatically since 1980. …The accredited investor…rules contribute to inequality by giving the richest investors privileged access to the best investment strategies. …If the law was changed to allow mutual funds to offer hedge fund portfolios, hundreds of billions of dollars would be transferred annually from super-rich hedge fund managers and investment bankers to ordinary investors, and even low-income workers with retirement plans. …politicians and intellectuals often champion market competition—but what they mean by that is competition among low-paid service workers, production workers, or computer programmers who face competition from trade and immigration, while elite professionals sit behind a protectionist wall. …For lawyers, doctors, and dentists— three of the most over-represented occupations in the top 1 percent—state-level lobbying from professional associations has blocked efforts to expand the supply of qualified workers who could do many of the “professional” job tasks for less pay.

Matt Ridley, a columnist fo the U.K.-based Times, writes about the pernicious impact of cronyism, licensing, and industrial policy.

The history of industrial strategies is littered with attempts to pick winners that ended up picking losers. Worse, it is government intervention, not laissez faire, that has done most to increase inequality and to entrench wealth and privilege. For example, the planning system restricts the supply of land for housebuilding, raising property prices to the enormous benefit of the haves (yes, that includes me) at the expense of the have-nots. …Why are salaries so high in financial services? Because there are huge barriers to entry erected by government, which hands incumbent firms enormous quasi-monopoly advantages and thereby shelters them from upstart competition. …Why are lawyers so rich? Because there is a government-licensed cartel restricting the supply of them. …Our current “industrial strategy” for energy — to subsidise offshore wind, solar, biomass and nuclear — is responsible for the fact that domestic electricity prices are the seventh highest… Domestic electricity bills are a higher proportion of household budgets for the poor than for the rich, so this policy is regressive; doubly so, because the wind and solar subsidies mostly go to the rich. 

Let’s consider health policy. Folks on the left favor the healthcare exclusion in the tax code because government supposedly should play a role in encouraging health insurance. What’s the impact of this policy? Well, let’s peruse a Robert Samuelson column on health policy and inequality, which is based on a study from the Mercatus Center.

…add health care to the causes of growing wage inequality in America. There’s a largely unknown paradox at work. Companies that try to provide roughly equal health insurance plans for their workers — as many do — end up making wage and salary inequality worse. …It’s simple arithmetic… Paying for expensive health insurance squeezes what’s left for wage and salary raises. Economic inequality increases, because health insurance typically represents a larger share of total compensation for lower-paid than higher-paid workers. Their wages are squeezed the most. …Even though the company raised its compensation package by 5 percent for all workers, the wage and salary gap between the best- and worst- paid workers widened. Pursuing one type of equality (health coverage) inadvertently worsened another type of inequality (wages and incomes). …From 1992 to 2010, about half the increase in wage and salary inequality is explained by rising health costs.

We’ll close with a new study by an economist at the University of Michigan for the National Bureau of Economic Research.

The three major reforms that I will analyze are: (1) the state income tax introduction, (2) the introduction of withholding, bundled with the introduction of third-party reporting, and (3) the intergovernmental agreement between the federal and the state governments for coordinating auditing practices. …the introduction of the income tax raised the Atkinson inequality index by 0.015, which is about 7 percent of the sample mean, statistically significant at the 1 percent level. …The income tax introduction raised the Gini coefficient by 0.014, which is about 3 percent, significant at the 5 percent level. …All of the three reforms raised the Theil index in a statistically significant way, at least at the 5 percent level. The introduction of the income tax and of the withholding raised it by about 0.06… In other words, the fact that the only effect that these reforms had in common was raising the revenues from income tax and making the government bigger and the private sector smaller, suggest that a bigger government, at least in the recent history, had the effect of higher inequality.

Here’s a chart from Professor Troiano’s research. Note how the rich got richer at the point (“0”) the income tax was implemented.

And here’s a look at what happened to various measures of inequality. Again, pay attention to the point (“0”) where the income tax was imposed.

Writing for PJ Media, Simon Constable discusses some implications of the NBER report.

Income taxes don’t reduce income inequality. Instead they do quite the opposite, according to December-dated analysis published by the National Bureau of Economic Research. The paper looked at three major 20th century U.S. tax reforms and found that they did nothing to decrease income inequality and everything to increase it. …Why did income inequality increase when that wasn’t the goal of the reforms? …bigger government ends up retarding the private sector and reducing the size of the wealth pie. Naturally, the poorer come out worst in such a situation, while the well-heeled can get top tier advice to dodge the tax bullet. Hence, the rich get richer and the poor stay skint. …Nobody who believes in liberty, or public choice theory, will be surprised to learn that higher taxes lead to more inequality,” says Robert E. Wright, professor of political economy at Augustana University in South Dakota. The problem is that the elites in any society, including the U.S., control the government and they quite naturally take care of themselves first, he says.

The bottom line is that our statist friends claim that they’re shooting at the rich, but the poor tend to suffer the most damage.

If you want more evidence, look at what happened to income for various groups during the pro-free market era of the 1980s and 1990s compared to what’s happened so far this century.

P.S. The most twisted look at inequality was produced by the IMF, which implied that radically lower living standards would be acceptable if everyone was more equally poor.

P.P.S. The most satirical look at inequality comes from David Azerrad.

P.P.P.S. The most insightful comment on inequality comes from Johan Norberg, who reminds us that we should be upset by unfairness, not inequality.

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