Feeds:
Posts
Comments

Posts Tagged ‘Higher Taxes’

It’s not easy to identify the worst international bureaucracy.

Some days, I’m tempted to pick the Organization for Economic Cooperation and Development. After all, the Paris-based bureaucracy is infamous for pushing bigger government and higher taxes.

Other days, I want to select the International Monetary Fund, which leverages its bailout authority to relentlessly coerce governments into imposing higher taxes to finance bigger budgets.

At least for today, I’m going to argue that the IMF wins the dubious prize of being the worst.

That’s because the bureaucracy is doubling down on its ideological zeal for bigger government. Here are some excerpts from a speech earlier this week by the organization’s top bureaucrat, Christine Lagarde (who, incidentally, receives a lavish tax-free salary).

Our issue today is international corporate taxation. …I believe we need new rules in this area. …reasons why a new approach is urgent. …the three-decade long decline in corporate tax rates, undermines faith in the fairness of the overall tax system. …New IMF research published two weeks ago analyzes various options in…better addressing profit-shifting and tax competition.

Ms. Lagarde wants to boost the tax burden on business, and she complained about the fact that corporate tax rates have come down in recent decades.

What she cleverly didn’t acknowledge, though, is that the IMF’s own research shows that lower rates have not resulted in less revenue.

But you have to give Lagarde and her minions credit. They act on their beliefs.

The IMF has been pushing for big tax increases in Bahrain.

The International Monetary Fund (IMF) has called on the Bahrain government to take further action to shore up its shaky financial position, saying a large package of revenue and expenditure measures – including new taxes – is “urgently needed”. …the IMF set out a number of policy ideas – including the controversial tax proposal – in a statement… Bikas Joshi, the official who led the IMF team that visited Bahrain…went on to say that a “large fiscal adjustment is a priority” for the country…he said. “The implementation of a value-added tax, as planned, would be important. Additional revenue measures—including consideration of a corporate income tax—would be welcome.”

The IMF has been warning against tax cuts and instead pushing for tax increases in Ireland.

The International Monetary Fund (IMF) has urged the Government not to cut taxes in the upcoming budget, warning it risked “over-stimulating” Ireland’s fast-growing economy. …The fund recommended boosting housing supply through State-backed social housing projects… It recommended the Government pursues a small budget surplus in 2019… To achieve this, it advised broadening the tax base. One way this could be done was by increasing the tax on diesel… In addition, the IMF recommended getting rid of various tax exemptions and preferential rates such as the lower 9 per cent VAT rate for the hospitality sector.

The IMF has urged so many taxes that it created a backlash in Jordan.

Thousands of Jordanians heeded a strike call…to protest at major, IMF-guided tax rises they say will worsen an erosion in living standards. …warning the government that sweeping tax amendments…would impoverish employees already hit by unprecedented tax hikes implemented earlier this year. …tens of thousands of public and private sector employees accused the government of caving in to International Monetary Fund (IMF) demands and squeezing a middle class… The amendments, which would double the income tax base, are a key condition of a three-year IMF economic program that aims to generate more state revenue… Jordan earlier…raised taxes on hundreds of food and consumer items.

The examples are part of a pattern. I’ve also written about the IMF pimping for higher taxes in big countries, in small countries, and even entire continents.

Needless to say, the IMF also agitates for tax increases in the United States.

And it’s even specifically targeted poor nations for tax increases! Maybe now you’ll understand why I joked about nations not allowing IMF bureaucrats to visit.

I want to close today’s column by returning to Lagarde’s speech because there was another part of her speech that belies belief. She actually wants people to think that higher taxes and bigger government are a recipe for more growth.

…the current situation is especially harmful to low-income countries, depriving them of much-needed revenue to help them achieve higher economic growth.

Yes, your eyes are not deceiving you. The IMF’s top bureaucrat made the absurdly anti-empirical argument that higher taxes are good for growth.

Even though that’s directly contrary to evidence on the factors that enabled North America and Western Europe to become rich.

Sadly, this is now a common rhetorical tactic by international bureaucracies. The OECD does the same thing, as does the United Nations.

I guess they all think if they repeat nonsense often enough, people will somehow conclude up is down and black is white.

For what it’s worth, I’ll wait for them to name a single country that ever became rich by imposing higher taxes and bigger government.

P.S. There are some good economists working in the research division of the IMF, and they periodically publish good research on topics such as spending caps, debt, decentralization, the size of government, demographics, government spending, and taxation. Too bad the bureaucrats working on policy never read those studies.

P.P.S. My favorite IMF study was the one that accidentally provided very compelling evidence against the value-added tax.

P.P.P.S. My least favorite IMF studies were the ones that actually suggested that it would be desirable if everyone had lower living standards so long as rich people disproportionately suffered. Disgusting.

Read Full Post »

I wrote a couple of weeks ago about how New York is committing slow-motion fiscal suicide.

The politicians in Illinois must have noticed because they now want (another “hold my beer” moment?) to accelerate the already-happening collapse of their state.

The new governor, J.B. Pritzker, wants to undo the state’s 4.95 percent flat tax, which is the only decent feature of the Illinois tax system.

And he has a plan to impose a so-called progressive tax with a top rate of 7.95.

Here are some excerpts from the Chicago Tribune‘s report., starting with the actual plan.

Democratic Gov. J.B. Pritzker embarked on a new and potentially bruising political campaign Thursday by seeking to win public approval of a graduated-rate income tax that he contended would raise $3.4 billion by increasing taxes for the wealthy…for his long-discussed plan to replace the state’s constitutionally mandated flat-rate income tax. Currently, all Illinois residents are taxed at 4.95 percent… Pritzker’s proposal is largely reliant on raising taxes significantly on residents making more than $250,000 a year, with those earning $1 million and up taxed at 7.95 percent of their total income. …The corporate tax rate would increase from the current 7 percent to 7.95 percent, matching the top personal rate. …The governor’s proposal would give Illinois the second-highest top marginal tax rate among its neighboring states.

And here’s what would need to happen for the change to occur.

Before Pritzker’s plan can be implemented, three-fifths majorities in each chamber of the legislature must approve a constitutional amendment doing away with the flat tax requirement. The measure would then require voter approval, which couldn’t happen until at least November 2020. …Democrats hold enough seats in both chambers of the legislature to approve the constitutional amendment without any GOP votes. Whether they’ll be willing to do so remains in question. Democratic leaders welcomed Pritzker’s proposal… voters in 2014 endorsed the idea by a wide margin in an advisory referendum.

The sensible people on the Chicago Tribune‘s editorial board are not very impressed, to put it mildly.

…how much will taxes increase under a rate structure Pritzker proposed? You might want to cover your eyes. About $3.4 billion annually… That extraction of dollars from taxpayers’ pockets would be in addition to roughly $5 billion raised annually in new revenue under the 2017 income tax hike. …How did Springfield’s collection of all that new money work out for state government and taxpayers? Here’s how: Illinois remains deeply in debt, continues to borrow to pay bills, faces an insurmountable unfunded pension liability and is losing taxpayers who are fed up with paying more. The flight of Illinoisans to other states is intensifying with 2018’s loss of 45,116 net residents, the worst of five years of consistent, dropping population. …Illinois needs to be adding more taxpayers and businesses, not subtracting them. When politicians raise taxes, they aren’t adding. A switch to a graduated tax would eliminate one of Illinois’ only fishing lures to attract taxpayers and jobs: its constitutionally protected flat income tax. …Pritzker’s proposal, like each tax hike before it, was introduced with no meaningful reform on the spending side of the ledger. This is all about collecting more money. …In fact, the tax hike would come amid promises of spending new billions.

And here’s a quirk that is sure to backfire.

For filers who report income of more than $1 million annually, the 7.95 percent rate would not be marginalized; meaning, it would be applied to every dollar, not just income of more than $1 million. Line up the Allied moving vans for business owners and other high-income families who’ve had a bellyful of one of America’s highest state and local tax burdens.

The Tax Foundation analyzed this part of Pritzker’s plan.

This creates a significant tax cliff, where a person making $1,000,000 pays $70,935 in taxes, while someone earning one dollar more pays $79,500, a difference of $8,565 on a single dollar of income.

That’s quite a marginal tax rate. I suspect even French politicians (as well as Cam Newton) might agree that’s too high.

Though I’m sure that tax lawyers and accountants will applaud since they’ll doubtlessly get a lot of new business from taxpayers who want to avoid that cliff (assuming, of course, that some entrepreneurs, investors, and business owners actually decide to remain in Illinois).

While the tax cliff is awful policy, it’s actually relatively minor compared to the importance of this table in the Tax Foundation report. It shows how the state’s already-low competitiveness ranking will dramatically decline if Pritzker’s class-warfare plan is adopted.

The Illinois Policy Institute has also analyzed the plan.

Unsurprisingly, there will be fewer jobs in the state, with the losses projected to reach catastrophic levels if the new tax scheme is adjusted to finance all of the Pritzker’s new spending.

And when tax rates go up – and they will if states like Connecticut, New Jersey, and California are any indication – that will mean very bad news for middle class taxpayers.

The governor is claiming they will be protected. But once the politicians get the power to tax one person at a higher rate, it’s just a matter of time before they tax everyone at higher rates.

Here’s IPI’s look at projected tax rates based on three different scenarios.

The bottom line is that the middle class will suffer most, thanks to fewer jobs and higher taxes.

Rich taxpayer will be hurt as well, but they have the most escape options, whether they move out of the state or rely on tax avoidance strategies.

Let’s close with a few observations about the state’s core problem of too much spending.

Steve Cortes, writing for Real Clear Politics, outlines the problems in his home state.

…one class of people has found a way to prosper: public employees. …over 94,000 total public employees and retirees in Illinois command $100,000+ salaries from taxpayers…former Chicago Mayor Richard M. Daley, who earned a $140,000 pension for his eight years of service in the Illinois legislature. …Such public-sector extravagance has fiscally transformed Illinois into America’s Greece – only without all the sunshine, ouzo, and amazing ruins.

So nobody should be surprised to learn that the burden of state spending has been growing at an unsustainable rate.

Indeed, over the past 20 years, state spending has ballooned from $34 billion to $86 billion according to the Census Bureau. At the risk of understatement, the politicians in Springfield have not been obeying my Golden Rule.

And today’s miserable fiscal situation will get even worse in the near future since Illinois is ranked near the bottom when it comes to setting aside money for lavish bureaucrat pensions and other retirement goodies.

Indeed, paying off the state’s energized bureaucrat lobby almost certainly is the main motive for Pritzker’s tax hike. As as happened in the past, this tax hike is designed to finance bigger government.

Yet that tax hike won’t work.

Massive out-migration already is wreaking havoc with the state’s finances. And if Pritzker gets his tax hike, the exodus will become even more dramatic.

P.S. Keep in mind, incidentally, that all this bad news for Illinois will almost certainly become worse news thanks to the recent tax reform. Restricting the state and local tax deduction means a much smaller implicit federal subsidy for high-tax states.

P.P.S. I created a poll last year and asked people which state will be the first to suffer a fiscal collapse. Illinois already has a big lead, and I won’t be surprised if that lead expands if Pritzker is able to kill the flat tax.

Read Full Post »

According to Freedom in the 50 States, which we reviewed a couple of days ago, New Jersey is in the bottom 10 and has been moving in the wrong direction.

This dismal ranking is not an anomaly. New Jersey also is in the bottom 10 of states according to Economic Freedom of North America, and the Garden State is dead last according the State Business Tax Climate Index and State Fiscal Condition.

In a perverse way, I admire New Jersey’s politicians. They’re not satisfied with the state’s low scores. They want to become even less competitive. If that’s even possible.

As I noted in the interview, the latest proposal for a “rain tax” isn’t necessarily objectionable if examined in isolation.

But in the context of New Jersey’s fiscal deterioration, it’s almost as if politicians are writing another passage in a very long suicide note for the state.

Consider what happened recently with the gas tax, as explained by the Wall Street Journal.

…a silver lining used to be the Garden State’s relatively low gasoline tax of 14.5 cents a gallon—second lowest in the U.S. No more, and therein lies a tale of why taxing the rich to finance government is an illusion. In October 2016, then-Gov. Chris Christie signed a bill raising the gas tax by 22.6 cents to 37.1 cents a gallon…the bill also included a clause that automatically raises the gas tax if it doesn’t produce the expected revenue each year. This is a self-fulfilling economic prophesy. A higher gas tax causes people to drive less, which in turn has meant that revenues have fallen short of the expected $2 billion target. So on Oct. 1 the gas tax will rise another 4.3 cents to 41.4 cents per gallon, which will be the ninth highest in the U.S. …This will be the state’s third tax increase in four months, following June’s increase in income and corporate tax rates. …The larger lesson is that sooner or later the middle class always gets the bill for bigger government. Higher income and corporate taxes drive the affluent out of the state, which means less revenue. That leaves the middle class to pay in higher sales, property and now gasoline taxes.

Needless to say, New Jersey’s taxaholic lawmakers want even more revenue.

Here are some excerpts from a report by Politico.

Gov. Phil Murphy said Wednesday he may propose new tax increases when he unveils his budget in March, saying he’s worried that the state has not done enough to achieve what he called “tax fairness.” …The governor…had sought some $1.7 billion in new taxes… Murphy was met with fierce resistance from fellow Democrats in the Legislature… Murphy ultimately agreed to…$1.6 billion in annual revenue. …Murphy, speaking at a church in Newark where he delivered a speech on his first-year accomplishments, said he needs to leave his options open as he starts to prepare a budget… “I would say everything is on the table. Period, full stop,” he added when pressed again about the idea of new tax increases.

If all this sound worrisome, that’s because it is.

But it gets even worse. As I warned at the end of the interview, the 2017 tax law restricts the ability of federal taxpayers to deduct taxes paid to state and local governments.

And that means the full burden of those taxes is now much more explicit, which means more and more taxpayers in high tax rates are going to “vote with their feet” and move to states with less onerous fiscal regimes.

In other words, New Jersey politicians are making their tax system worse at precisely the moment that the geese with the golden eggs have more incentive to fly away.

Insane.

P.S. Given this grim news, I’m surprised that fewer than 9 percent of people picked New Jersey to be the first state that will suffer fiscal collapse.

P.P.S. What’s really remarkable – albeit in a very sad and tragic sense – is that New Jersey in my lifetime used to be like New Hampshire, with no state income tax and no state sales tax.

P.P.P.S. There is a Jersey with good tax policy, but it’s far away from the American version.

Read Full Post »

I did not like Bill Clinton’s 1993 class-warfare tax hike, and I also opposed Barack Obama’s 2012 fiscal-cliff tax increase on the so-called rich.

But those were incremental measures.

Today’s leftist politicians have much more grandiose schemes, such as 70 percent tax rates, wealth taxes, and extortionary death taxes.

And even those proposals may not be enough.

In a column for the New York Times, Farhad Manjoo actually suggests that billionaires should be taxed out of existence. Literally, not just figuratively.

…if we aimed, through public and social policy, simply to discourage people from attaining and possessing more than a billion in lucre, just about everyone would be better off. …Bernie Sanders and Elizabeth Warren are floating new taxes aimed at the superrich, including special rates for billionaires. Representative Alexandria Ocasio-Cortez, who also favors higher taxes on the wealthy, has been making a moral case against the existence of billionaires. …the question is getting so much attention because the answer is obvious: Nope. Billionaires should not exist… Abolishing billionaires might not sound like a practical idea, but if you think about it as a long-term goal in light of today’s deepest economic ills, it feels anything but radical. …Billionaire abolishment could take many forms. It could mean preventing people from keeping more than a billion in booty, but more likely it would mean higher marginal taxes on income, wealth and estates for billionaires and people on the way to becoming billionaires. …But abolishment does not involve only economic policy. It might also take the form of social and political opprobrium. …Why should anyone have a billion dollars, why should anyone be proud to brandish their billions, when there is so much suffering in the world? …When American capitalism sends us its billionaires, it’s not sending its best. It’s sending us people who have lots of problems, and they’re bringing those problems with them. They’re bringing inequality. They’re bringing injustice.

Wow, I’m not even sure how to respond to this demonization of success. Should I focus on the vicious populism? The economic ignorance?

Maybe I should joke about how Mr. Manjoo wants to turn David Azerrad’s satire into reality?

Fortunately, I don’t have to come up with a response. I can simply rely on Allister Heath of the U.K.-based Daily Telegraph.

He explains, in his latest column, that these crazy ideas are a real threat.

Hard-Left ideas are uber-trendy: they are making a catastrophic comeback in the world’s most powerful universities, capturing many young minds, and are now being proposed by a new generation of supposedly modern politicians around the world. …pro-capitalist arguments…are met with derision by this new generation of intellectuals. Higher taxes bad for the economy? Hilarious! Nationalisation doesn’t work? Laughable! Venezuela? Nothing to do with actual socialism, all America’s fault. It’s a dialogue of the deaf… The old Left used to argue (falsely) that entrepreneurs, investors and executives aren’t really put off by high tax, which means that rates can be jacked up safely, raising lots to “redistribute”, without discouraging work and investment. The new Left has turned the argument on its head. It now admits the “rich” would work less if they were highly taxed – but claim this would be a good thing, as it would make society less unequal… As Harvard’s Greg Mankiw puts it, the Left now believes that “we can no longer afford the rich”.

If such policies were ever enacted, the results would be catastrophic.

The impact would be Venezuelan-style: it would lead to a collapse in GDP… Only the richest are being targeted at first: but everybody will suffer when the economy tanks, and such taxes are always eventually extended to the prosperous middle classes. …We could thus be on the cusp of a new socialist era, where even zero GDP growth will be seen as a good year. …we are on the brink of a new war on wealth.

Here’s what worries me.

Allister’s warning about terrible economic consequences is accurate, but I’m not sure that matters.

When I talk to hard-core leftists, I usually make the following three points.

In the past, leftists would disagree. Maybe they would claim government could make investments. Or perhaps they would assert that government could somehow compel employers to pay higher wages.

But it’s now quite common for my leftist friends to simply assert that lower living standards are an acceptable result. For all intents and purposes, hurting the rich is more important than helping the poor.

You may think I’m joking, or that only a small handful of crazies actually want this outcome.

But the establishment left also advocates for lower living standards. The International Monetary Fund has financed and publicized research that explicitly embraces the twisted notion that it would be ideal to reduce everyone’s living standards so long as rich people suffered the bigger declines.

Margaret Thatcher is spinning in her grave.

Read Full Post »

When I ask friends on the left to answer my two-question challenge about prosperity and the size of government, they sometimes will flip the script and demand that I answer their version of the same question.

Name a jurisdiction that became rich with small government, they ask!

I’ve always viewed that as a grossly ineffective debating tactic because I have so many good responses. For instance, I often point to Hong Kong and Singapore as modern-era examples of poor places that became rich places thanks to free markets and small government.

But my favorite examples are from North America and Western Europe. If you look at the historical data, nations in the western world evolved from agricultural poverty to middle-class prosperity in the 1800s and early 1900s when the burden of the public sector was minuscule.

It’s true that all of those nations, after they became prosperous, then chose to adopt welfare states of various sizes. That was an unfortunate development (though somewhat offset by trade liberalization and other pro-market policies), but at least they got rich before making that mistake.

After providing all these examples, I then tell my friends that it is their turn. Please, I ask, give me just one example of a nation that adopted big government and then became rich?

I’ve never received a good answer.

And this is why I’m so disappointed (but not surprised) that the Organization for Economic Cooperation and Development has a project to increase the fiscal burden in poor nations.

The Paris-based OECD actually asserts that higher taxes and more spending will lead to more prosperity. I’m not joking.

The OECD has a unique role to play in supporting developing countries to generate domestic revenues to finance their sustainable development. …While the ratio of tax to Gross Domestic Product (GDP) in OECD countries averaged 33% in 2008, in developing countries it was only around half this level, indicating that there was great potential yet to be exploited. …a growing focus on taxation as a development priority…as it is clearly the primary source of financing for development. …to unlock the potential of countries…the design and delivery of “modernised, progressive tax systems, improved tax policy and more efficient tax collection” were high on the list of must-dos.

I’m sure that poor people in developing nations will be delighted to learn that their politicians are conspiring with the OECD to “exploit” them with “progressive” and “efficient” tax regimes.

And I’m both amused and disgusted that the OECD report has creative euphemisms for higher taxes, such as “domestic resource mobilization” and “capacity building.”

But the section on how taxes supposedly are good for growth is downright unbelievable.

Taxation enables governments to invest in development, relieve poverty and deliver public services to underpin long-term growth. Strong tax systems not only raise crucial revenues: they also promote inclusiveness… Above and beyond the direct benefits to developing countries themselves, international co-operation in the area of taxation is essential in today’s globalised world. …Such actions can realise the potential of taxation to help drive development on a global scale.

You won’t be surprised to learn that the OECD does not provide any empirical evidence to back up this rhetoric.

The bureaucrats don’t even provide a single anecdote or example. Nothing. Zilch. Nada.

Instead, we’re supposed to believe that there’s a mysterious alchemy that somehow leads transforms higher taxes and bigger government into greater prosperity.

By the way, the OECD isn’t the only international bureaucracy pushing this message. I had the surreal experience of being a credentialed observer at a United Nations conference where seemingly every other participant was on the other side. And the International Monetary Fund is also guilty of this peculiar form of economic malpractice.

This video from the Center for Freedom and Prosperity examines whether big government is the right way to boost prosperity in poor nations.

P.S. I don’t know whether to characterize this as irony or hypocrisy, but OECD bureaucrats don’t pay tax on their lavish remuneration. Perhaps this explains why they are so oblivious to the real-world consequences of higher tax burdens.

P.P.S. I feel sorry for the professional economists at the OECD, who often produce very good studies. It must be embarrassing for them when the political appointees push bad policies.

P.P.P.S. Needless to say, I’m not happy that American taxpayers are financing the OECD’s statist agenda.

Read Full Post »

I’ve periodically opined about why politicians should not try to control people’s behavior with discriminatory taxes, such as the ones being imposed on soda.

And I’ve cited some examples of how these taxes backfire.

If the following headlines are any indication, we can add Philadelphia to that list.

For instances, this story from the Philadelphia Inquirer.

Or this story from the local CBS affiliate.

These examples reinforce my view that it is not a good idea to let meddling politicians impose more taxes in an effort to control people’s behavior.

Some of my left-leaning friends periodically remind me, however, that there’s a difference between anecdotes and evidence. There’s a lot of truth to that cautionary observation.

To be sure, I could simply respond by saying a pattern is evident when a couple of anecdotes turns into dozens of anecdotes. And when dozens become hundreds, surely it’s possible to say the pattern shows causality.

That being said, it is good to have rigorous, statistics-based analysis if we really want to convince skeptics.

So let’s look at the results of some new academic research from scholars at Stanford, Northwestern, and the University of Minnesota. We’ll start with the abstract, which nicely summarizes their findings about the impact of Philadelphia’s big soda tax.

We analyze the impact of a tax on sweetened beverages, often referred to as a “soda tax,” using a unique data-set of prices, quantities sold and nutritional information across several thousand taxed and untaxed beverages for a large set of stores in Philadelphia and its surrounding area. We find that the tax is passed through at a rate of 75-115%, leading to a 30-40% price increase. Demand in the taxed area decreases dramatically by 42% in response to the tax. There is no significant substitution to untaxed beverages (water and natural juices), but cross-shopping at stores outside of Philadelphia completely o↵sets the reduction in sales within the taxed area. As a consequence, we find no significant reduction in calorie and sugar intake.

Here are some of their conclusions.

We draw several lessons about the effectiveness of local sweetened-beverage taxes from these analyses. First, the tax was ineffective at reducing consumption of unhealthy products. Second, in terms of revenue generation, the tax was only partly effective due to consumers substituting to stores outside of Philadelphia. Third, low income households are less likely to engage in cross-shopping, and instead are more likely to continue to purchase taxed products at a higher price at stores in Philadelphia. The lower propensity for low income households to avoid the tax through cross-shopping leads to a relatively larger tax burden for those households. In summary, the tax does not lead to a shift in consumption towards healthier products, it affects low income households more severely, and it is limited in its ability to raise revenue.

If you’re wondering why consumers responded so strongly, here’s a chart from the study showing the price difference after the tax was imposed.

The bottom numbers in Figure 3 show that some sales still occurred in the city, but a persistent gap between city sales and suburban sales appeared.

And here’s what happened to sales inside the city (taxed) and outside the city (untaxed).

Wow. This data makes me wonder if suburban sellers will start contributing to the Philadelphia politicians who have generated this windfall?

Others have noticed how the tax is hurting rather than helping.

The Wall Street Journal opined about the failure of Philly’s soda tax.

When Philadelphia became the first major U.S. city to pass a soda tax in 2016, Mayor Jim Kenney said it would improve public health while funding universal pre-K. Two years in, the policy hasn’t delivered on that elite ideological goal. But the tax has come at the expense of working people… On Jan. 2, Brown’s Super Stores announced the closure of a ShopRite on Haverford Avenue. The supermarket is close to the city limit, and customers discovered they could avoid the soda tax by shopping outside Philly. …the once-profitable store began losing about $1 million a year. …That means fewer opportunities for workers with a criminal record. Mr. Brown’s supermarkets employ more than 600 of them, with the majority in Philadelphia. Some of the ex-cons have become his most-valued employees.

And Kyle Smith explained in National Review how the tax backfired.

Philadelphia’s outlandish soda tax is what Democratic-party politics looks like when it lets its freak flag fly. So many classic elements are there: (failed) social engineering and “think of the children!” on one side, paid for with a punitive tax on poor people and destroyed businesses, which means destroyed jobs, which in turn means lives upended. …Now that beer is, in some cases, cheaper than soda in Philadelphia, alcohol sales are up sharply. …the total loss attributable to the tax in sales of all items was $300,000 a month per store. Other, untaxed drinks also suffered sales declines within the city, suggesting people were simply saving up their shopping trips for when they left town.

I don’t feel compelled to add much to what’s been cited.

Though I will cite a headline from the Seattle Times to reinforce one of the points in the academic study about consumers bearing the cost of the tax rather than the soda companies.

And my one modest contribution to all this analysis is this comparison of the winners and loser from Philadelphia’s new tax.

For what it’s worth, similar comparisons could be developed for just about every action by every government. Academics call this “public choice” while ordinary people realize it’s just common sense.

Read Full Post »

Maybe I’m just old-fashioned, but I don’t believe in using dodgy numbers or nonsensical analysis – even if that would help my side in a policy debate.

And it goes without saying that I also don’t like when the other side is dishonest. But I’m not talking about my left-leaning friends who have genuine (albeit misguided) views on things such as Keynesian economics or the minimum wage.

I’m talking about people who deliberately dissemble and prevaricate in hopes of advancing their policy agenda.

Consider, for instance, the new carbon tax that has been introduced by Congressmen Ted Deutch (D-FL) and Patrick Rooney (R-FL). The core features of the bill are:

  • A $15-per-ton carbon tax that increases $10 each subsequent year until it reaches $100.
  • A new entitlement program giving money to all legal American residents, including children.
  • A new tax on consumers who buy imports from nations without similar taxes on energy usage.
  • A supposed adjustment and easing of existing regulations governing carbon emissions.

There’s obviously a serious policy debate to have about both the general concept as well of the individual components of this type of legislation, and I’ve periodically added my two cents to the discussion.

But what irks me is that the sponsoring lawmakers are openly and deliberately lying about a key part of their plan. Here’s the relevant section from their talking points.

The claim about “revenue neutrality” is a stunning level of dishonesty, even by Washington standards.

At the risk of stating the obvious, if the government imposes a tax and then also creates a program to give money to people, that’s not revenue neutrality.

Was Obamacare “revenue neutral” because all the new taxes were balanced out by the handouts and subsidies that the law created for the big insurance companies?

Of course not.

And a new carbon tax doesn’t magically become “revenue neutral” because new revenues are matched by new spending.

To be sure, supporters can argue that their plan is “deficit neutral,” and that would be legitimate (even though I would argue that this wouldn’t be the case in the long run because of the adverse economic impact of new taxes and new spending).

But “revenue neutral” is a bald-faced lie.

The Daily Caller reported on this amazing example of deceptive advertising, citing the good work of Paul Blair of Americans for Tax Reform.

The bipartisan House Climate Solutions Caucus claims it is pushing a “revenue-neutral” carbon tax, but legislation proposed Thursday would hike taxes by at least $1 trillion over the next decade… Florida Reps. Ted Deutch, a Democrat, and Francis Rooney, a Republican, reintroduced a bill Thursday that would place a $15-per-ton tax on carbon emissions in 2019. The tax would rise by $10-a-year increments until it hits nearly $100 per ton. …Though Rooney claims the tax is “revenue-neutral,” the plain text of the bill does not include any reciprocal tax cuts to balance out the burden of the added tax on emissions… “Historically and for anyone engaged in tax policy, the definition of ‘revenue-neutral’ is and always has been if you increase a tax, the amount of revenue it generates must be offset by an equal tax cut elsewhere,” Blair said. …Blair said…that the “apology checks” sent as carbon dividends will be treated as new spending and do not negate a new tax burden.

By the way, just in case anyone thinks I’m imposing some weird, libertarian-ish, meaning to “revenue neutral,” you may want to look at how the left-leaning Tax Policy Center defines the term.

Revenue-neutral. A term applied to tax proposals in which provisions that raise revenues offset provisions that lose revenues so the proposal in total has no net revenue cost or increase.

I often disagree with the folks at the Tax Policy Center, but I’ve never questioned their honesty.

So when we both agree on the definition of ‘revenue neutral,” this is slam-dunk confirmation that it’s preposterously dishonest to count new spending as an offset to a tax increase.

P.S. Some of my friends and allies who supported the Fair Tax sometimes played fast and loose with the truth. That plan would have required the government to send “prebate” checks to households to partly compensate people for the new tax, yet supporters would argue that this expenditure shouldn’t count as a new entitlement program. While my first choice for tax reform is the flat tax, I certainly think a national sales tax would be a far better way to tax than the mess we have today, but that did not justify mischaracterizing the plan.

Read Full Post »

« Newer Posts - Older Posts »

%d bloggers like this: