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Posts Tagged ‘Tax Increase’

Much of my work on fiscal policy is focused on educating audiences about the long-run benefits of small government and modest taxation.

But what about the short-run issue of how to deal with a fiscal crisis? I have periodically weighed in on this topic, citing research from places like the European Central Bank and International Monetary Fund to show that spending restraint is the right approach.

And I’ve also highlighted the success of the Baltic nations, all of which responded to the recent crisis with genuine spending cuts (and I very much enjoyed exposing Paul Krugman’s erroneous attack on Estonia).

Today, let’s look at Cyprus. That Mediterranean nation got in trouble because of an unsustainable long-run increase in the burden of government spending. Combined with the fallout caused by an insolvent banking system, Cyprus suffered a deep crisis earlier this decade.

Unlike many other European nations, however, Cyprus decided to deal with its over-spending problem by tightening belts in the public sector rather than the private sector.

This approach has been very successful according to a report from the Associated Press.

…emerging from a three-year, multi-billion euro rescue program, Cyprus boasts one of the highest economic growth rates among the 19 eurozone countries — an annual rate of 2.7 percent in the first quarter. Finance Minister Harris Georgiades says Cyprus turned its economy around by aggressively slashing costs but also by avoiding piling on new taxes that would weigh ordinary folks down and put a serious damper on growth. “We didn’t raise taxes that would burden an already strained economy,” he told The Associated Press in an interview. “We found spending cuts that weren’t detrimental to economic activity.”

Cutting spending and avoiding tax hike? This is catnip for Dan Mitchell!

But did Cyprus actually cut spending, and by how much?

That’s not an easy question to answer because the two main English-language data sources don’t match.

According to the IMF data, outlays were sliced to €8.1 billion in 2014, down from a peak of €8.5 in 2011. Though the IMF indicates that those numbers are preliminary.

The European Commission database shows a bigger drop, with outlays of €7.0 billion in 2015 compared to €8.3 billion in 2011 (also an outlay spike in 2014, presumably because of a bank bailout).

The bottom line is that, while it’s unclear which numbers are most accurate, Cyprus has experienced a multi-year period of spending restraint.

And having the burden of government grow slower than the private sector always has been and always will be the best gauge of good fiscal policy.

By contrast, there’s no evidence that tax increases are a route to fiscal probity.

Indeed, the endless parade of tax hikes in Greece shows that such an approach greatly impedes economic recovery.

Though not everybody in Cyprus supports prudent policy.

Critics have accused the government of working its fiscal gymnastics on the backs of the poor — essentially chopping salaries for public sector workers. Pambis Kyritsis, head of the left-wing PEO trade union, said the government’s “neo-liberal” policies coupled with the creditors’ harsh terms have widened the chasm between the have and have-nots to huge proportions. …Georgiades turned Kyritsis argument around to reinforce his point that there shouldn’t be any let-up in the government’s reform program and fiscal discipline.

In the European context, “liberal” or “neo-liberal” means pro-market and small government (akin to “classical liberal” or “libertarian” in the United States).

Semantics aside, it will be interesting to see whether Finance Minister Georgiades is correct about maintaining spending discipline as the economy rebounds.

As the above table indicates, there are several examples of nations getting good results by limiting the growth of government spending. But there are very few examples of long-run success since very few nations have politicians with the fortitude to control outlays if the economy is growing and generating an uptick in tax revenue (which is why states like California periodically get in trouble).

This is why the best long-run answer is some sort of constitutional spending cap, similar to what exists in Switzerland or Hong Kong.

The bottom line if that spending restraint is good short-run policy and good long-run policy. Though I doubt Hillary Clinton will learn the right lesson.

P.S. Cyprus also is a reasonably good role model for how to deal with a banking crisis.

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My favorite Margaret Thatcher moment might be when she pointed out there’s no such thing as public money, only taxpayer money.

Or perhaps when she exposed leftists for being so fixated on class warfare that they would be willing to hurt the poor if they could hurt the rich even more.

That being said, I wouldn’t be surprised if most people instead chose Thatcher’s famous line about socialism and running out of other people’s money.

Which is a great line that cleverly pinpoints the ultimate consequence of statism. Just think Greece or Venezuela.

But what can we say about starting point rather than end point? Why do people get seduced by socialism in the first place?

For part of the answer, let’s turn to the famous quote from George Bernard Shaw about how “A government which robs Peter to pay Paul can always count on the support of Paul.”

Very insightful, I hope you’ll agree.

Though it’s an observation on all governments, not just socialist regimes.

So I’m going to propose a new quote: “Socialism is fun so long as someone else is paying for it.”

And the reason I concocted that quote is because it’s a perfect description of many of the people supporting Bernie Sanders.

According to a poll conducted by Vox, they want freebies from the government so long as they aren’t the ones paying for them.

When we polled voters, we found most Sanders supporters aren’t willing to pay more than an additional $1,000 in taxes for his biggest proposals. That’s well short of how much more the average taxpayer would pay under his tax plan. …In other words, even Sanders supporters are saying they don’t want to pay as much to the federal government for health care as they are paying right now in the private sector. …The kicker for all of this? Some analysts believe Sanders’s plan will cost twice as much as his campaign estimates. …Sanders supporters are far and away the most likely to want free public college tuition. Still, 14 percent said they don’t want to pay additional taxes for it — and another half said they would only pay up to $1,000 a year…the majority of Sanders supporters in our poll (much less all voters) aren’t willing to pay enough to actually support those nationalized services.

As you can see from this chart, they want government to pick up all their medical expenses, but they’re only willing to pay $1,000 or less.

Gee, what profound and deep thinkers.

Maybe we should ask them if they also want private jets if they only have to pay $1,000. And Hollywood mansions as well.

The pie-in-the-sky fantasies of Bernie and his supporters are so extreme that even the statists at the Washington Post have editorialized against his proposals.

Mr. Sanders’s offerings to the American people are, quite simply, too good to be true, and much less feasible, politically or administratively, than he lets on. More expensive, as well. …Despite the substantial tax increases associated with Mr. Sanders’s policies, they would not be fully paid for — not even close. To the contrary, the tax hikes would be sufficient to cover just 46 percent of the spending increases, resulting in additional budget deficits of $18 trillion over 10 years. A deficit increase of that magnitude would cause an additional $3 trillion in interest payments over the same period — unless, of course, Mr. Sanders has another $18 trillion in tax increases or spending cuts up his sleeve.

The editorial writers at the Post, like so many people in Washington, make the mistake of fixating on the symptom of red ink instead of the underlying disease of excessive spending.

Would they actually favor his crazy ideas if he produced $18 trillion of additional tax hikes over the next 10 years?

Returning to the topic of whether Bernie voters actually would be willing to pay more tax, I recently appeared on Fox Business News to discuss the odd phenomenon of workers in the high-tech industry giving contributions to the anti-capitalist Senator from Vermont.

I confess that I don’t really know what would motivate someone to support Bernie Sanders, but I did share some thoughts.

  • Republicans in recent decades have been big spenders, so libertarian-minded voters in Silicon Valley may have decided to base their votes on social issues.
  • The high-tech industry may simply be sending “protection money” to leftist politicians, though that’s probably a motive only for senior executives.
  • It’s rather ironic that the left goes after companies like WalMart and Exxon when firms like Google and Apple have much bigger profit margins.

Don’t forget, by the way, that the only difference between Bernie and Hillary is how fast we travel on the road to Greece.

P.S. Unfortunately, I haven’t accumulated much Bernie humor, though the Sandersized version of Monopoly is quite clever.

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In my presentations about how to deal with budgetary deterioration and fiscal crisis, I often share with audiences a list of nations that have achieved very positive results with spending restraint.

The middle column shows how these countries limited the growth of government spending for multi-year periods.

The next column of numbers reveals how multi-year spending restraint leads to significant reductions in the amount of economic output that is diverted to the government.

And when you address the underlying problem of excessive government spending, you automatically ameliorate the symptom of red ink, as shown in the final column of numbers.

At this point, I usually ask the audience whether they’ve ever seen a similar table that purports to show nations that have obtained similarly good results with tax increases.

The answer is no, of course, though it’s not really a fair question to people who don’t study fiscal policy.

More important, I ask the same question when I have debates with my statist friends from left-wing organizations. They generally try to change the subject. Some of them bluster about “fairness.” And a few of them think Sweden is an acceptable answer until I point out that it became rich when government was small but began to lose ground once a large welfare state was imposed beginning in the 1960s (as explained in this video).

But Sweden wouldn’t be a good answer even if its economy hadn’t slowed down. That’s because the question is how to climb out of a fiscal hole. In which case Sweden actually provides evidence for my position!

To understand why tax increases aren’t the right way to deal with a fiscal mess, let’s look at Greece. From the moment the crisis began, Greek politicians started raising taxes. And they haven’t stopped, with many of the tax hikes being cheered by international bureaucracies.

This is a never-ending story.

With new chapters being written all the time. Here’s a report from Reuters on the latest “reform” package from Greece. As you might suspect, it’s basically a bunch of tax hikes. Here’s what the politicians approved on social insurance taxes.

Sets social security contributions at 20 percent of employees’ net monthly income – with 13.3 percent burdening employers and 6.7 percent employees. Reforms the social security contribution base from notional to actual incomes for the self-employed, including farmers and lawyers, forcing them to make a contribution to pension funds which is phased in over a five-year period to 20 percent of their income.

There are also income tax increases.

Lowers the income tax-free threshold, or personal allowance, to an average of around 8,800 euros a year from around 9,500; makes income bands narrower, increases tax coefficients. Lowest tax band is now 22 percent on a gross income of 20,000 a year compared to 22 percent for 25,000 euros which existed previously. The upper tax band, of 45 percent, is now imposed on gross incomes exceeding 40,000 as opposed to 42 percent on income above 42,000 under the previous arrangement. Includes EU farming subsidies on taxable income.

And there are further income tax hikes as part of the “solidarity” levy, which is basically another income tax.

Solidarity Levy…on net incomes ranges from the lowest 2.2 percent on incomes from 12,000 to 20,000 a year, to 5.0 percent up to 30,000, and 6.5 percent up to 40,000. The highest band is 10 percent on incomes above 220,000. By comparison, the highest band in that category was 8.0 percent before the new reform was pushed through, on earnings exceeding half a million euros.

And there also will be more double taxation.

Dividends Tax: Increases to 15 percent from 10 percent.

You would think this big package of tax hikes might satisfy the crowd in Athens for a year or two.

But that would be a very bad assumption. Amazingly, the politicians in Greece already are looking for additional victims, as reported by ABC News.

Already, a new bill is being prepared, calling for higher taxes on a range of products, from tobacco to beer to broadband Internet connections. This bill is expected to pass later in the month.

And they’re not exactly apologetic about their tax-aholic actions.

Prime Minister Alexis Tsipras and his ministers defended their plans, saying…that taxes were better than spending cuts. …Labor Minister George Katrougalos, who introduced the bill, said that…the bill’s provisions showed the way forward for social policy in a Europe dominated by pro-market “neoliberals.”

Sadly, Mr. Katrougalos may be correct. I won’t be surprised if the rest of Europe follows Greece off the cliff.

Though he’s smoking crack if he thinks the rest of the continent is dominated by neoliberals (i.e., classical liberals or libertarians).

Not that we’ve established that Greece has been trying to solve its fiscal mess with tax hikes, let’s look at the results.

Has debt been reduced? Hardly, though to be fair it seems to have stabilized.

In any event, we haven’t seen the big reductions in debt that are associated with spending restraint

And what about the economy? Here, the news is uniformly grim, doubtlessly in large part because of all the tax hikes.

It’s rather ironic this chart is based on periodic IMF forecasts since that bureaucracy is infamous for advocating endless tax hikes.

One wonders if the IMF bureaucrats will eventually learn some lessons?

I’m not holding my breath, just like I’m not optimistic that Greek politicians will address the real problem in their country of excessive dependency caused by a bloated public sector.

But maybe the rest of us (other than Hillary and Bernie) can learn what not to do.

P.S. For more information, here’s my five-picture explanation of the Greek mess.

P.P.S. And if you want to know why I’m so dour about Greece’s future, how can you expect good policy from a nation that subsidizes pedophiles and requires stool samples to set up online companies?

P.P.P.S. To offset the grim message of today’s column, let’s close with my collection of Greek-related humor.

This cartoon is quite  good, but this this one is my favorite. And the final cartoon in this post also has a Greek theme.

We also have a couple of videos. The first one features a video about…well, I’m not sure, but we’ll call it a European romantic comedy and the second one features a Greek comic pontificating about Germany.

Last but not least, here are some very un-PC maps of how various peoples – including the Greeks – view different European nations.

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We can learn a lot of economic lessons from Europe.

Today, we’re going to focus on another lesson, which is that higher taxes lead to more red ink. And let’s hope Hillary Clinton is paying attention.

I’ve already made the argument, using European fiscal data to show that big increases in the tax burden over the past several decades have resulted in much higher levels of government debt.

But let’s now augment that argument by considering what’s happened in recent years.

There’s been a big fiscal crisis in Europe, which has forced governments to engage in austerity.

But the type of austerity matters. A lot.

Here’s some of what I wrote back in 2014.

…austerity is a catch-all phrase that includes bad policy (higher taxes) and good policy (spending restraint). But with a few notable exceptions, European nations have been choosing the wrong kind of austerity (even though Paul Krugman doesn’t seem to know the difference).

And when I claim politicians in Europe have chosen the wrong kind of austerity, that’s not hyperbole.

As of 2012, there were €9 of tax hikes for every €1 of supposed spending cuts according to one estimate. That’s even worse than some of the terrible budget deals we’ve seen in Washington.

At this point, a clever statist will accuse me of sour grapes and state that I’m simply unhappy that politicians opted for policies I don’t like.

I’ll admit to being unhappy, but my real complaint is that higher tax burdens don’t work.

And you don’t have to believe me. We have some new evidence from an international bureaucracy based in Europe.

In a working paper for the European Central Bank, Maria Grazia Attinasi and Luca Metelli crunch the numbers to determine if and when “austerity” works in Europe.

…many Euro area countries have adopted fiscal consolidation measures in an attempt to reduce fiscal imbalances…in most cases, fiscal consolidation did not result, at least in the short run, in a reduction in the debt-to-GDP ratio…calls for a more temperate approach to fiscal consolidation have increased on the ground that the drag of fiscal restraint on economic growth could lead to an increase rather than a decrease in the debt-to-GDP ratio, as such fiscal consolidation may turn out to be self-defeating. …The aim of this paper is to investigate the effects of fiscal consolidation on the general government debt-to-GDP ratio in order to assess whether and under which conditions self defeating effects are likely to materialise and whether they tend to be short-lived or more persistent over time.

Now let’s look at the results of their research.

It turns out that austerity does work, but only if it’s the right kind. The authors find that spending cuts are successful and higher tax burdens backfire.

The main finding of our analysis is that…In the case of revenue-based consolidations the increase in the debt-to-GDP ratio tends to be larger and to last longer than in the case of spending-based consolidations. The composition also matters for the long term effects of fiscal consolidations. Spending-based consolidations tend to generate a durable reduction of the debt-to-GDP ratio compared to the pre-shock level, whereas revenue-based consolidations do not produce any lasting improvement in the sustainability prospects as the debt-to-GDP ratio tends to revert to the pre-shock level. …strategy is more likely to succeed when the consolidation strategy relies on a durable reduction of spending, whereas revenue-based consolidations do not appear to bring about a durable improvement in debt sustainability.

Unfortunately, European politicians generally have chosen the wrong approach.

This is an important policy lesson also in view of the fact that revenue-based consolidations tend to be the preferred form of austerity, at least in the short run, given also the political costs that a durable reduction in government spending entail.

Here are a few important observations from the study’s conclusion.

…the findings of our analysis are in line with those of the literature on successful consolidation, namely that the composition of fiscal consolidation matters and that a durable reduction in the debt-to-GDP ratio is more likely to be achieved if consolidation is implemented on the expenditure side, rather than on the revenue side. In particular, when fiscal consolidation is implemented via an increase in taxation, the debt-to-GDP ratio reverts back to its pre-shock level only in the long run, thus failing to generate an improvement in the debt ratio, and producing what we call a self-defeating fiscal consolidation. …fiscally stressed countries benefit from an immediate reduction in the level of debt when reducing spending.

In other words, restraining the growth of spending is the best way to reduce red ink. Heck, it’s the only way.

When debating my leftists friends, I frequently share this table showing nations that have obtained very good results with multi-year periods of spending restraint.

My examples are from all over the world and cover all sorts of economic conditions. And the results repetitively show that when you deal with the underlying problem of too much government, you automatically improve the symptom of red ink.

I then ask my statist pals to show me a similar table of data for countries that have achieved good results with higher taxes.

I’m still waiting for an answer.

Which is why the only good austerity is spending restraint.

P.S. Paul Krugman is remarkably sloppy and inaccurate when writing about austerity. Check out his errors when commenting on the United Kingdom, Germany, and Estonia.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here are some excerpts from the article.

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

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

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

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

Let’s look at the scorecard.

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

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

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

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

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Even though it’s theoretically possible to design a desirable budget deal that includes a tax increase, I’m a big advocate of the no-tax-hike pledge for the simple reason that – in the real world – support for genuine spending restraint and real entitlement reform evaporates once politicians think higher revenues are an option.

Heck, bumping into the Loch Ness Monster while riding my unicorn is more likely than an acceptable budget deal including tax hikes.

Though I confess that my anti-tax resolve sometimes gets a bit wobbly when I think about unsavory tax breaks such as the ethanol credit, the state and local tax deduction, and the healthcare exclusion. I have to remind myself that while these provisions are very odious, they should be repealed as part of tax reform rather than as part of some deal that gives politicians more money to waste.

Now there’s another example of a tax that is very tempting, and it comes from my home state of Connecticut.

When I was growing up, the Nutmeg State didn’t have an income tax and it was a refuge for overtaxed New Yorkers. But then an income tax was imposed in 1991. And ever since politicians got their hands on this new source of revenue, the burden of spending has skyrocketed and Connecticut has become a fiscal dystopia.

So you would think I’d be reflexively hostile to additional tax hikes by the politicians in Hartford. And I should be, but I’m perversely intrigued by a new levy they’re considering. The Wall Street Journal opines on the proposal.

…most Yale University professors are proud to be progressives. Well, they are now getting the chance to live their convictions as Connecticut Democrats attempt to soak Yale’s rich endowment. Democrats in Hartford have proposed taxing the unspent earnings of university endowments with more than $10 billion in assets. Only Yale’s $25.6 billion endowment—the country’s second largest after Harvard—fits the tax bill. Yale’s tax-exempt investments earned $2.6 billion last year, eight times more than the University of Connecticut’s $384 million endowment. Oh, the inequality! …Hartford is already taxing anything that moves. Last year Democrats raised the top individual tax rate to 6.99% and extended a 20% corporate surtax. The tax hikes precipitated General Electric’s decision in January to move its headquarters to Boston. Between 2010 and 2015, Connecticut lost 105,000 residents to other states. For the last five years, it has recorded zero real GDP growth.

Nobody should be double taxed on income that is saved and invested, so my mind tells me that the right approach is to give all taxpayers the treatment now reserved for places like Yale.

But my heart tells me the opposite because it’s galling that Yale is dominated by statists who presumably want higher taxes on the rest of us, so maybe it’s time they swallow some of their own bitter medicine.

But the way, it’s not just state politicians that are salivating to pillage Yale. It’s now being reported that city politicians want a slice of the action.

The mayor of New Haven is backing a push to revisit an 1834 Connecticut statute affecting taxes for Yale University, saying new guidelines are needed to assess liability for the institution… “Since taxing real estate and other property is the only form of municipal taxation allowed by state law, more modern guidelines as to what’s taxable and what’s tax exempt are essential,” New Haven Mayor Toni Harp said this week in testimony supporting the legislation. …The Ivy League university has strongly objected to proposal.

Gee, I wonder if Yale also “strongly objected” to the various big tax hikes that have savaged the state’s investors, entrepreneurs, and small businesses? Or is their battlefield conversion against tax hikes solely a selfish gesture.

Needless to say, I’m sure it’s the latter, which is why part of me is thinking it would be rough justice if the jackals in state and local government descended on Yale.

That being said, I certainly don’t like the idea of these profligate politicians getting their greedy hands on even more money. So if they do impose taxes on Yale, I hope the university will consider a very thoughtful invitation from the Governor of Florida.

Gov. Rick Scott…issued a statement calling on the Ivy League institution to pick up stakes and move on down to sunny Florida. “We would welcome a world-renowned university like Yale to our state and I can commit that we will not raise taxes on their endowment,” Governor Scott said

Hmmm…. Better weather and no state income tax. Sounds like a good deal to me.

And since Florida doesn’t double tax anybody, Yale’s leftist professors could sleep easier at night since they no longer would be hypocrites who work at a school that enjoys tax-free status on its investments while neighbors are being taxed.

P.S. I should add Yale’s anti-tax leftists to my collection of statist hypocrites.

P.P.S. I might be willing to accept a tax hike if it somehow could be designed so that it only applied to advocates of higher taxes.

P.P.P.S. While some tax distortions are destructive, some are simply bizarre.

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Hillary Clinton and Bernie Sanders are basically two peas in a pod on economic policy. The only difference is that Sanders wants America to become Greece at a faster rate.

Folks on the left may get excited by whether we travel 60 mph in the wrong direction or 90 mph in the wrong direction, but this seems like a Hobson’s choice for those of us who would prefer that America become more like Hong Kong or Singapore.

Consider the issue of taxation. Clinton and Sanders both agree that they want to raise tax rates on investors, entrepreneurs, small business owners, and other “rich” taxpayers. The only difference is how high and how quickly.

Scott Winship of the Manhattan Institute has a must-read column on this topic in today’s Wall Street Journal.

He starts by speculating whether there’s a rate high enough to satisfy the greed of these two politicians.

Here is a question to ask Hillary Clinton and Bernie Sanders: What is the best tax rate to impose on high-income earners…? Perhaps they think it is 83%, a rate that economists Thomas Piketty and Emmanuel Saez hypothesized in 2014… Or maybe it is 90%, which Sen. Sanders told CNBC last May was not out of the question.

He then points out that there were very high tax rates in America between World War II and the Reagan era.

…the U.S. had such rates in the past. From 1936 to 1980, the highest federal income-tax rate was never below 70%, and the top rate exceeded 90% from 1951 to 1963. …The discussion of these rates can easily create the impression that the federal government collected far more money from “the rich” before the Reagan administration.

But rich people aren’t fatted calves awaiting slaughter. They generally are smart enough to figure out ways to avoid high tax rates. And if they’re not smart enough, they know to hire bright lawyers, lobbyists, and accountants who figure out ways to protect their income.

Which is exactly what happened.

The effective tax rates actually paid by the highest income earners during the 1950s and early ’60s were far lower than the highest marginal rates. …In the 1960s, for example, the average rate paid by the top 0.1% of tax filers—the top 10th of the top 1%—ranged from 26.5% to 29.5%, according to a 2007 study by Messrs. Piketty and Saez. Even during the 20 years after the Reagan tax cuts, the top 10th of the top 1% paid an average rate of 23.7% to 33%—essentially the same as in the 1960s.

Gee, sounds like Hauser’s Law – a limit on how much governments can tax – is true, at least for upper-income taxpayers.

And Winship provides some data showing that high tax rate are not the way to collect more revenue.

When average tax rates went up from 27.6% in 1965 to 34% in 1975, revenues went down, from 0.6% to 0.5% of the sum of GDP plus capital gains. When average tax rates declined to 23.7% over the second half of the 1970s and the ’80s, tax revenues from the top went up, reaching 0.8% of GDP plus capital gains in 1990. …in the early 1990s, Presidents George H.W. Bush and Bill Clinton raised average tax rates at the top, and revenue from the top 0.1% eventually skyrocketed. But the flood of revenue overwhelmingly reflected not the increase in rates but the stock market’s takeoff… Consider: If the higher top tax rates had caused the growth in revenue, then revenues should have fallen when Mr. Clinton cut the top tax rate on capital gains to 20% from 28% in 1997. But revenues from the top 0.1% kept pouring in.

And if you want more detail, check out the IRS data from the 1980s, which shows that rich taxpayers paid a lot more tax when the top rate was dropped from 70 percent to 28 percent.

That was a case of the Laffer Curve on steroids!

No wonder some leftists admit that spite is their real reason for supporting confiscatory tax rates on the rich, not revenue.

But what if the high tax rates are imposed on a much bigger share of the population, not just the traditional target of the “top 1 percent”?

Well, even hardcore statists who favor punitive tax policy admit that this would be a recipe for economic calamity.

Mr. Piketty said, “I firmly believe, that imposing a 70% or 80% marginal rate on large segments of the population (say, 25% of the population, or even 10%, or even a few percentage points) would lead to an economic disaster.” In other words, sayonara increased tax revenue.

Heck, even the European governments with the biggest welfare states rarely impose tax rates at those levels.

And when they do (as in the case of Hollande’s 75 percent tax rate in France), they suffer severe consequences.

Which is why the real difference in taxation between the United States and Europe isn’t the way the rich are taxed. Government is bigger in Europe because of higher tax burdens on the poor and middle class, specifically onerous value-added taxes and top income tax rates that take effect at relatively modest levels of income.

In other words, the rich already pay the lion’s share of tax in the United States. But not because we have 1970s-style tax rates, but because the tax burden is relatively modest for lower- and middle-income people.

Which brings us to Winship’s final point.

Proposals to soak the rich by raising their tax rates are unlikely to yield the revenue windfall that Mr. Sanders or Mrs. Clinton are dangling before voters. Leveling with the American people means…admitting that they will have to raise the money from tax hikes on middle-class voters.

Though he “buried the lede,” as they say in the journalism business. The most important takeaway from his column is that the redistribution agenda being advanced by Clinton and Sanders necessarily will require big tax hikes on the middle class.

Indeed, the “tax-the-rich” rhetoric they employ is simply a smokescreen to mask their real goals.

Which is why I included that argument in my video that provided five reasons why class-warfare taxation is a bad idea.

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