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Posts Tagged ‘Tax Increase’

This video from the Center for Freedom and Prosperity is nearly 10 years old, so some of the numbers are outdated, but the seven reasons to reject tax increases are still very relevant.

I’m recycling the video because the battle over tax increases is becoming more heated.

Indeed, depending on what happens in November, we may be fighting against major tax-hike proposals in less than one year.

Every single candidate seeking the Democratic nomination (such as Joe Biden, Bernie Sanders, Elizabeth Warren, Michael Bloomberg, Pete Buttigieg, etc) wants Washington to have much more of our money.

And there are plenty of cheerleaders for a bigger welfare state who favor this outcome. Some of them urge class-warfare tax increases. Other admit that lower-income and middle-class people will need to be pillaged to finance bigger government.

The one unifying principle on the left, as illustrated by this column for The Week by Paul Waldman, is the belief that Americans are under-taxed.

…as an American, when it comes to taxes you’ve got it easy. …we pay much lower taxes than most of our peer countries. In the United States, our tax-to-GDP ratio is about 26 percent, far below the 34 percent average of the advanced economies in the Organisation for Economic Co-operation and Development (OECD), and drastically less than some European countries (Denmark tops the list at 46 percent). …We have chosen — whether we did it consciously or not — to create a system that makes it easier for a small number of people to get super-rich, but also makes life more cruel and difficult for everyone else. …We could all pay more, and in return get more from government than we’re getting now. We just have to decide to do it.

This is a very weak argument since a cursory investigation quickly reveals that Americans have much higher living standards than people in other developed nations.

That’s a good thing, not a “cruel and difficult” consequence, though I’m not surprised that folks on the left are impervious to real-world evidence.

However, I am surprised when otherwise sensible people throw in the towel and say it’s time to surrender on the issue of taxes.

The latest example is James Capretta of the American Enterprise Institute.

Here’s some of what he wrote on the topic.

…the GOP commitment, implied and explicit at the same time, to never, ever support a net tax increase, under any circumstance, is making sensible lawmaking far more difficult than it should be. It’s time to break free of this counterproductive constraint. …The no tax hike position got its start in the 1986 tax reform effort. Several business and policy advocacy organizations began asking members of the House and Senate, as well as candidates for seats in those chambers, to sign a pledge opposing a net increase in income tax rates. …The pledge became politically salient in 1992, when then President George H.W. Bush lost his bid for reelection. His loss is widely assumed to have been caused, at least in part, by his acceptance of a large tax hike…after having pledged never to increase taxes… Retaining the GOP’s absolutist position on taxes might be defensible if the party were advancing an agenda that demonstrated it could govern responsibly without new revenue. Unfortunately, Republicans have proved beyond all doubt that they have no such agenda. In fact, the party has gladly gone along with successive bipartisan deals that increased federal spending by hundreds of billions.

For what it’s worth, I don’t think Jim is theoretically wrong.

Heck, even I offered up three scenarios where a tax increase could be an acceptable price in order to achieve much-needed spending reforms. And I’ll even add a fourth scenario by admitting that I would trade a modest tax increase for a Swiss-style spending cap.

But every one of my options is a meaningless fantasy.

In the real world, those acceptable scenarios are not part of the discussion. Instead, two very bad things inevitably happen when tax increases are on the table.

  1. The automatic default assumption is that tax increases should be 50 percent of any budget deal. That’s bad news, but the worse news is that the other 50 percent of the budget deal isn’t even genuine spending cuts. Instead, all we get is reductions (often illusory or transitory) in previously planned increases. The net result is bigger government (and it’s even worse in Europe!). This is why every budget deal in recent history has backfired – except the one that cut taxes in 1997.
  2. Budget deals result in the worst types of tax increases for the simple reason that budget deals get judged by their impact on “distribution tables.” And since the make-believe spending cuts ostensibly will reduce benefits for lower-income and middle-class people, the crowd in Washington demands that the tax increases should target investors, entrepreneurs, business owners, and others with above-average incomes. Yet these are the tax hikes that disproportionately hinder growth.

The bottom line is that tax increases should be a no-go zone. If Washington gets more of our money, that will “feed the beast.”

At the risk of under-statement, Grover Norquist’s no-tax-hike pledge is good policy (and good politics for the GOP). Americans for Tax Reform should double down in its opposition to tax increases.

P.S. I’ve shared five previous “Fiscal Fights with Friends”:

  • In Part I, I defended the flat tax, which had been criticized by Reihan Salam
  • In Part II, I explained why I thought a comprehensive fiscal package from the American Enterprise Institute was too timid.
  • In Part III, I disagreed with Jerry Taylor’s argument for a carbon tax.
  • In Part IV, I highlighted reasons why conservatives should reject a federal program for paid parental leave.
  • In Part V, I warned that “Hauser’s Law” would not protect America from higher taxes and bigger government.

P.P.S. There’s great wisdom on tax policy from these four presidents.

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The most important referendum in 2019 was the effort to get Colorado voters to eviscerate the Taxpayer Bill of Rights. Fortunately, the people of the Centennial State comfortably rejected the effort to bust the state’s successful spending cap.

The most important referendum in 2020 will ask voters in Illinois whether they want to get rid of the state’s flat tax and give politicians the leeway to arbitrarily impose higher rates on targeted taxpayers.

I’ve written many times about how a flat tax is far less destructive than so-called progressive taxation.

And I’ve also written that Illinois’ flat tax, enshrined in the state constitution, is the only decent feature of an otherwise terrible fiscal system.

So if the politicians convince voters to get rid of the flat tax, it will hasten the state’s economic decline (if you want more information, I strongly recommend perusing the numerous reports prepared by the Illinois Policy Institute).

Today, though, I want to focus on politics rather than economics.

To be more specific, I want to expose how supporters of higher taxes are using disingenuous tactics.

For instance, the state’s governor, J.B. Pritzker, warns that he’ll have to impose big spending cuts if voters don’t approve the referendum.

Gov. J.B. Pritzker said the state’s next budget will be balanced, but said if voters don’t approve a progressive income tax in November, he would have to reduce state spending across the board in future years. …the governor said 15 percent cuts in state spending would be needed across the board. …Illinois’ most recent budget called for spending about $40 billion dollars in state money. The state spends another $40 billion of federal tax money. …Pritzker is set to deliver his budget address on Feb. 19. He said he will propose a balanced budget to begin in July without relying on revenue from the proposed progressive income tax.

For what it’s worth, I actually think it would be good news if the state was forced to reduce the burden of government spending.

But that’s actually not the case.

How do I know Pritzker is lying?

Because his own budget documents project that state revenues (highlighted in red) are going to increase by nearly 2 percent annually under current law.

In other words, he wants a tax increase so he can increase overall spending at an even faster pace.

Of course, his tax increase also will increase the pace of taxpayers fleeing the state, which is why the referendum is actually a form of slow-motion fiscal suicide.

But let’s set that aside and examine another lie. Or, to be more accurate, a delayed lie.

The politicians in Illinois already have approved legislation to impose tax increases on the state’s most successful taxpayers, though the higher rates won’t actually become law until and unless the referendum is approved.

In hopes of bribing voters to approve the referendum, supporters assert that the other 97 percent of state taxpayers will get a cut.

That’s true. Most taxpayers will get a tiny reduction compared to the current 4.95 percent tax rate.

But how long will that last? Especially considering that the state’s long-run fiscal outlook is catastrophically bad?

The bottom line is that approving the referendum is like unlocking all the cars in a crime-ridden neighborhood. The expensive models will be the immediate targets, but it’s just a matter of time before everyone’s vehicle gets hit.

Indeed, this warning has such universal application that I’m going to make it my sixth theorem.

By the way, this theorem also applies when an income tax gets imposed, as happened with the United States in 1913 (and also a lesson that New Jersey residents learned in the 1970s and Connecticut residents learned in the 1990s).

P.S. Here are my other theorems.

  • The “First Theorem” explains how Washington really operates.
  • The “Second Theorem” explains why it is so important to block the creation of new programs.
  • The “Third Theorem” explains why centralized programs inevitably waste money.
  • The “Fourth Theorem” explains that good policy can be good politics.
  • The “Fifth Theorem” explains how good ideas on paper become bad ideas in reality.

P.P.S. Pritzker is a hypocrite because he does everything he can to minimize his own tax burden while asking for the power to take more money from everyone else.

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Assuming he was able to impose his policy agenda, I think Bernie Sanders – at best – would turn America into Greece. In more pessimistic moments, I fear he would turn the U.S. into Venezuela.

The Vermont Senator and his supporters say that’s wrong and that the real goal is to make America into a Nordic-style welfare state.

Since those nations mitigate the damage of their large public sectors with very pro-market policies on regulation, trade, and property rights, that wouldn’t be the worst outcome.

Though “Crazy Bernie” is still wrong to view Denmark and Sweden as role models. Why adopt the policies of nations that have less income, lower living standards, and slower growth?

Is Finland a better alternative?

The answer is yes, according to Ishaan Tharoor’s WorldView column in the Washington Post.

Sanders and some of his Democratic competitors are clear about what they want to change in the United States. They call for the building of a robust social democratic state, including programs such as universal healthcare, funded in large part by new taxation on the ultrarich and Wall Street. …Sanders is particularly fond of the “Nordic model” — the social plans that exist in countries such as Denmark, Sweden, Norway and Finland, which deploy higher taxation to provide quality public services and keep inequality at rates lower than the United States. …Across the Atlantic, at least one leading proponent of the Nordic model welcomed its embrace by U.S. politicians. “We feel that the Nordic Model is a success story,” said Finnish Prime Minister Sanna Marin… “I feel that the American Dream can be achieved best in the Nordic countries, where every child no matter their background or the background of their families can become anything, because we have a very good education system,” she said.

I prefer the analysis of a previous Prime Minister, though it’s hard to fault Ms. Marin for extolling the virtues of her nation.

But is Bernie Sanders really talking about turning America into Finland?

Tharoor correctly notes that the Nordic nation tell a very mixed story.

Sanders’s ascent in the past five years has spurred considerable debate over what lessons should be learned from the Nordic countries he celebrates. A cast of centrist and conservative critics note, first, that these Nordic countries are more capitalist than Sanders concedes, with generous pro-business policies and their own crop of billionaires; and, second, that the welfare states in Nordic countries are largely financed by extensive taxes on middle-class wages and consumption.

The last excerpt is key.

The big welfare states in Europe – and specifically in Nordic nations such as Finland – are financed with big burdens on lower-income and middle-class taxpayers.

According to data from the Tax Foundation and OECD, middle-income Finnish taxpayers are forced to surrender about 15 percent more of their income to government.

Why such a big difference?

Because Finland has an onerous value-added tax, punitive payroll taxes, and their income tax imposes high rates on people with modest incomes.

In other words, it’s not the rich who are financing the welfare state. Yet Bernie Sanders never mentions that point.

I’ll close by simply noting that Finland (like other Nordic nations) is not a statist hellhole. As I wrote just two months ago, the nation has some very attractive policies.

Indeed, the country is almost as market-oriented as the United States according to Economic Freedom of the World (and actually ranked above America as recently as 2011).

Bernie Sanders, though, wants to copy the bad features of Finland.

He wants America to have a big welfare state, but doesn’t want Finland’s very strong rule of law or robust property rights for people in the private sector. Nor does he want Finland’s 20 percent corporate tax rate.

And I suspect he doesn’t realize that Finland just learned an important lesson about the downsides of giving people money for nothing.

Most important of all, I’m very confident he doesn’t understand why Americans of Finnish descent generate 47 percent more national income than Finns who stayed home.

P.S.S. Researchers at Finland’s central bank seem to agree with my concern about excessive government spending.

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Given their overt statism, I’ve mostly focused on the misguided policies being advocated by Bernie Sanders and Elizabeth Warren.

But that doesn’t mean Joe Biden’s platform is reasonable or moderate.

Ezra Klein of Vox unabashedly states that the former Vice President’s policies are “far to Obama’s left.”

This is an issue where folks on both ends of the spectrum agree.

In a column for the right-leaning American Spectator, George Neumayr also says Biden is not a moderate.

Biden likes to feed the mythology that he is still a moderate. …This is, after all, a pol who giddily whispered in Barack Obama’s ear that a massive government takeover of health care “was a big f—ing deal,”…and now pronouncing Obamacare only a baby step toward a more progressive future. It can’t be repeated enough that “Climate Change” Joe doesn’t give a damn about the ruinous consequences of extreme environmentalism for Rust Belt industries. His Climate Change plans read like something Al Gore might have scribbled to him in a note. …On issue after issue, Biden is taking hardline liberal stances. …“I have the most progressive record of anybody running.” …He is far more comfortable on the Ellen show than on the streets of Scranton. He has given up Amtrak for private jets, and, like his lobbyist brother and grifter son, has cashed in on his last name.

If you want policy details, the Wall Street Journal opined on his fiscal plan.

Mr. Biden has previously promised to spend $1.7 trillion over 10 years on a Green New Deal, $750 billion on health care, and $750 billion on higher education. To pay for it all, he’s set out $3.4 trillion in tax increases. This is more aggressive, for the record, than Hillary Clinton’s proposed tax increases in 2016, which totaled $1.4 trillion, per an analysis at the time from the left-of-center Tax Policy Center. In 2008 Barack Obama pledged to raise taxes on the rich while cutting them on net by $2.9 trillion. Twice as many tax increases as the last presidential nominee: That’s now the “moderate” Democratic position. …raising the top rate for residents of all states. …a huge increase on today’s top capital-gains rate of 23.8%… This would put rates on long-term capital gains at their highest since the 1970s. …Raise the corporate tax rate to 28% from 21%. This would…vault the U.S. corporate rate back to near the top in the developed world. …the bottom line is big tax increases on people, capital and businesses. There’s nothing pro-growth in the mix.

And the ever-rigorous Peter Suderman of Reason wrote about Biden’s statist agenda.

Biden released a proposal to raise a slew of new taxes, mostly on corporations and high earners. He would increase tax rates on capital gains, increase the tax rate for households earning more than $510,000 annually, double the minimum tax rate for multinational corporations, impose a minimum tax on large companies whose tax filings don’t show them paying a certain percentage of their earnings, and undo many of the tax cuts included in the 2017 tax law. …as The New York Times reports, Biden’s proposed tax hikes are more than double what Hillary Clinton called for during the 2016 campaign. …Hillary Clinton…pushed the party gently to the left. Four years later, before the campaign is even over, the party’s supposed moderates are proposing double or even quadruple the new taxes she proposed.

The former Veep isn’t just a fan of higher taxes and more spending.

He also likes nanny-state policies.

Joe Biden says he is 100% in favor of banning plastic bags in the U.S. …let’s take a quick walk through the facts about single-use plastic bags at the retail level. …the plastic bags typically handed out by retailers make up only 0.6% of visible litter. Or put another way, for every 1,000 pieces of litter, only six are plastic bags. …They make up less than 1% of landfills by weight… 90% of the plastic bags found at sea streamed in from eight rivers in Asia and two in Africa. Only about 1% of all plastic in the ocean is from America. …Thicker plastic bags have to be used at least 11 times before they yield any environmental benefits. This is much longer than their typical lifespans. …Though it might seem almost innocuous, Biden’s support for a bag ban is symptom of a greater sickness in the Democratic Party. It craves unfettered political power.

Let’s not forget, by the way, that Biden (like most politicians in Washington) is corrupt.

Here are some excerpts from a Peter Schweizer column in the New York Post.

Political figures have long used their families to route power and benefits for their own self-enrichment. …one particular politician — Joe Biden — emerges as the king of the sweetheart deal, with no less than five family members benefiting from his largesse, favorable access and powerful position for commercial gain. …Joe Biden’s younger brother, James, has been an integral part of the family political machine… HillStone announced that James Biden would be joining the firm as an executive vice president. James appeared to have little or no background in housing construction, but…the firm was starting negotiations to win a massive contract in war-torn Iraq. Six months later, the firm announced a contract to build 100,000 homes. …A group of minority partners, including James Biden, stood to split about $735 million. …With the election of his father as vice president, Hunter Biden launched businesses fused to his father’s power that led him to lucrative deals with a rogue’s gallery of governments and oligarchs around the world. …Hunter’s involvement with an entity called Burnham Financial Group…Burnham became the center of a federal investigation involving a $60 million fraud scheme against one of the poorest Indian tribes in America, the Oglala Sioux. …the firm relied on his father’s name and political status as a means of both recruiting pension money into the scheme.

I only excerpted sections about Biden’s brother and son. You should read the entire article.

And even the left-leaning U.K.-based Guardian has the same perspective on Biden’s oleaginous behavior.

Biden has a big corruption problem and it makes him a weak candidate. …I can already hear the howls: But look at Trump! Trump is 1,000 times worse! You don’t need to convince me. …But here’s the thing: nominating a candidate like Biden will make it far more difficult to defeat Trump. It will allow Trump to muddy the water, to once again pretend he is the one “draining the swamp”, running against Washington culture. …With Biden, we are basically handing Trump a whataboutism playbook. …his record represents the transactional, grossly corrupt culture in Washington that long precedes Trump.

I’ll close by simply sharing some objective data about Biden’s voting behavior when he was a Senator.

According to the National Taxpayers Union, he finished his time on Capitol Hill with eleven-consecutive “F” scores (hey, at least he was consistent!).

And he also was the only Senator who got a lifetime rating of zero from the Club for Growth.

Though if you want to be generous, his lifetime rating was actually 0.025 percent.

Regardless, that was still worse than Barack Obama, Bernie Sanders, and Elizabeth Warren.

So if Biden become President, it’s safe to assume that America will accelerate on the already-baked-in-the-cake road to Greece.

P.S. Of course, we’ll be on that path even if Biden doesn’t become President, so perhaps the moral of the story is to buy land in Australia.

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I want more people to become rich. That’s why I support free markets.

But a few already-rich people say such silly things that I wonder whether a big bank account somehow can lead to a loss of common sense.

For background information on this issue, there’s a Politico article on some of the recent statements by Bill Gates.

It appears he’s embracing the horribly unworkable notion of taxing unrealized capital gains, and he definitely wants more double taxation of capital gains, a more punitive death tax, and a higher tax rate on capital gains that are part of “carried interest” (even though that becomes irrelevant if the regular capital gains rate is being increased).

And he’s getting closer to endorsing a wealth tax, which – to be fair – would address one of my criticisms in the interview.

Bill Gates…is echoing Democrats’ calls for higher taxes on the rich. …the Microsoft co-founder and philanthropist cites a litany of ways the rich ought to be paying more. …he favors “taxing large fortunes that have been held for a long time (say, ten years or more).” …Capital gains taxes should go up too, “probably to the same level as” ordinary income, he said. The estate tax should be hiked, and loopholes used to duck it ought to be shut down. People should also pay more on “carried interest,” Gates said. He also called for higher state taxes, including the creation of an income tax in his home state of Washington.

An income tax in the state of Washington would be particularly misguided. At least if the state hopes to be competitive and not drive away wealth and entrepreneurship.

A few months ago, Gates was in the news for the same reason.

At the time, I suggested that he should simply write a check to the federal government. After all, there’s nothing to stop him – and other guilt-ridden rich people – from paying extra tax.

But he conveniently says this wouldn’t suffice. To make matters worse, Gates apparently thinks government should be bigger, that there’s more it “needs to do.”

Gates rejected the notion that the wealthy could simply volunteer to pay more. …”Additional voluntary giving will never raise enough money for everything the government needs to do.”

I guess he’s not familiar with the Rahn Curve.

In any event, Bill Gates isn’t the only rich person who feels guilty about their wealth (or strategically pretends to feel guilty in order to either virtue signal or appease the class-warfare crowd).

The New Yorker has an article on the so-called Patriotic Millionaires, a group of masochists who want more of their money confiscated by Washington.

Abigail Disney…is the granddaughter of Roy O. Disney, who founded the Disney company with his younger brother, Walt, in 1923, and her father was a longtime senior executive there. …In 2011, she joined an organization called the Patriotic Millionaires… She began to make public appearances and videos in which she promoted higher taxes on the wealthy. She told me that she realized that the luxuries she and her family enjoyed were really a way of walling themselves off from the world, which made it easier to ignore certain economic realities. …Patriotic Millionaires…now has more than two hundred members in thirty-four states…the group’s mission was initially a simple idea endorsed by a half-dozen rich people: “Please raise our taxes.”

The good news is that only a tiny fraction of the nation’s millionaires have signed up for this self-loathing organization.

To qualify for the group, members must have an annual income of at least a million dollars, or assets worth more than five million dollars. That could include many families who would describe themselves as upper middle class—who, for instance, own homes in cities with hot real-estate markets. When I asked Payne how hard it was to persuade rich people to join, she said, “I think the last time I checked there were about three hundred and seventy-five thousand taxpayers in the country who make a million dollars a year in income”—there are now almost half a million—“and we have a couple hundred members.” She laughed. “If you ever needed a back-of-the-envelope calculation of how many of America’s élite are concerned about the basic well-being of their fellow-citizens, that should give you a rough estimate.”

I’m also happy to see that the article acknowledges a very obvious criticism of Ms. Disney and her fellow travelers.

At a time when political activists are expected to live according to their values, Disney’s role as an ultra-wealthy spokesperson for the underclass makes her a target of vitriol. In late September, someone tweeted at her, “Boy do I despise virtue signaling rich liberal hypocrites living off the money earned by their far better ancestors. Bet you live in a luxury apt in NYC! Why don’t you renounce your corporate grandad’s money and give it ALL away! You never will . . . HYPOCRITE!”

And she is a hypocrite.

Just like the other guilt-ridden rich people I’ve had to debate over the years.

If you want to see hypocrisy in action, there’s a very amusing video showing rich leftists being offered the opportunity to fill out this form and pay extra tax – and therefore atone for their guilt without hurting the rest of us. Needless to say, just like Abigail Disney and Bill Gates, they’re all talk and no action.

P.S. I wasn’t fully responsive in the interview since I was also asked how higher taxes on the rich would affect the economy. I should have pointed out that class-warfare taxes are the most destructive, on a per-dollar-collected basis, because they impose heavy penalties on saving, investment, and entrepreneurship. And that’s very bad news for workers since less innovation translates into lower wages.

P.P.S. Guilt-ridden rich people also exist in Germany.

P.P.P.S. I’m especially nauseated by rich politicians who advocate for higher taxes, yet refuse to put their money where their mouths are. A partial list includes Senator Elizabeth Warren, Senator John Kerry, Bill and Hillary Clinton, Congressman Alan Grayson, Governor J.B. Pritzker, and Tom Steyer.

P.P.P.P.S. If you’re a rich leftist, you can even be a super-hypocrite and utilize tax havens to protect your money.

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I’m currently in London for discussions about public policy, particularly the potential for the right kind of free-trade pact between the United States and United Kingdom.

I deliberately picked this week for my visit so I also could be here for the British election. As a big fan of Brexit, I’m very interested in seeing whether the U.K. ultimately will escape the slowly sinking ship otherwise known as the European Union.

But the election also is an interesting test case of whether people are willing to vote for socialism. The Brits actually made this mistake already, voting for Clement Attlee back in 1945. That led to decades of relative decline, culminating in a bailout from the International Monetary Fund.

Margaret Thatcher then was elected in 1979 to reverse Attlee’s mistakes and she did a remarkable job of restoring the British economy.

But do voters understand this history?

We’ll find out on Thursday because they’ll have the opportunity to vote for the Labour Party, led by Jeremy Corbyn, who is the British version of Bernie Sanders.

And he doesn’t hide his radical vision for state control of economic life. Here’s how the Economist describes Corbyn’s agenda.

…the clear outlines of a Corbyn-led government emerged in the manifesto. Under Labour, Britain would have a larger, deeper state… Its frontiers would expand to cover everything from water supply to broadband to how much a landlord may charge a tenant. Where the state already rules, such as in education or health, the government would go deeper, with the introduction of free child-care for pre-schoolers and a “National Care Service” for the elderly. …The government would spend £75bn on building 100,000 council homes per year, paid for from a £150bn “transformation fund”, a pot of money for capital spending on public services. Rent increases would be capped at inflation. The most eye-catching proposal, a plan to nationalise BT’s broadband operations and then offer the service free of charge… Surviving policies from 2017 include a plan to nationalise utilities, alongside Royal Mail and the rail network, and a range of new rights for workers, from a higher minimum wage to restored collective-bargaining rights. All told, government spending would hit 45.1% of GDP, the highest ratio in the post-war era outside of a recession and more than in Germany… To pay for it all, very rich people and businesses would be clobbered. Corporation tax would rise to 26% (from 19% now), which Labour believes, somewhat optimistically, would raise another £24bn by 2024.

As reported by City A.M., the tax increases target a small slice of the population.

Jeremy Corbyn…is planning to introduce a new 45 per cent income tax rate for those earning more than £80,000 and 50 per cent on those with incomes of £125,000 or more. The IFS…estimates that would affect 1.6m people from the outset, rising to 1.9m people by 2023-24. Labour’s policy would add further burden to the country’s biggest tax contributors, with the top five per cent of income tax payers currently contributing half of all income tax revenues, up from 43 per cent just before the financial crisis.  But the IFS warned the amount this policy would raise was “highly uncertain”, with estimates ranging from a high of £6bn to an actual cost of around £1bn, if the policy resulted in a flight of capital from the UK. Lawyers have previously warned that high net worth individuals are poised to shift billions out of the country in the event of a Corbyn government.

Is that a smart idea?

We could debate the degree to which upper-income taxpayers will have less incentive to be productive.

But the biggest impact is probably that the geese with the golden eggs will simply fly away.

Even the left-leaning Guardian seems aware of this possibility.

The super-rich are preparing to immediately leave the UK if Jeremy Corbyn becomes prime minister, fearing they will lose billions of pounds if the Labour leader does “go after” the wealthy elite with new taxes, possible capital controls and a clampdown on private schools. Lawyers and accountants for the UK’s richest families said they had been deluged with calls from millionaire and billionaire clients asking for help and advice on moving countries, shifting their fortunes offshore and making early gifts to their children to avoid the Labour leader’s threat to tax all inheritances above £125,000. …Geoffrey Todd, a partner at the law firm Boodle Hatfield, said many of his clients had already put plans in place to transfer their wealth out of the country within minutes if Corbyn is elected. …“There will be plenty of people on the phone to their lawyers in the early hours of 13 December if Labour wins. Movements of capital to new owners and different locations are already prepared, and they are just awaiting final approval.” …On Thursday, Corbyn singled out five members of “the elite” that a Labour government would go after in order to rebalance the country. …The shadow Treasury minister Clive Lewis went further than the Labour leader, telling the BBC’s Newsnight programme: “Billionaires shouldn’t exist. It’s a travesty that there are people on this planet living on less than a dollar a day.

Some companies also are taking steps to protect shareholders.

National Grid (NG.) and SSE (SSE) are certainly not adopting a wait-and-see approach to the general election. Both companies have moved ownership of large parts of their UK operations overseas in a bid to soften the blow of potential nationalisation. With the Labour manifesto reiterating the party’s intention to bring Britain’s electricity and gas infrastructure back into public ownership, energy companies (and their shareholders) face the threat of their assets being transferred to the state at a price below market value.

The Corbyn agenda violates the laws of economics.

It also violates the laws of math. The Labour Party, for all intents and purposes, wants a big expansion of the welfare state financed by a tiny slice of the population.

That simply doesn’t work. The numbers don’t add up when Elizabeth Warren tries to do that in the United States. And an expert for the Institute for Fiscal Studies notes that it doesn’t work in the United Kingdom.

The bottom line is that Corbyn and his team are terrible.

That being said, Boris Johnson and the current crop of Tories are not exactly paragons of prudence and responsibility.

They’re proposing lots of additional spending. And, as City A.M. reports, Johnson also is being criticized for promising company-specific handouts and protectionist rules for public procurement.

In a press conference today, Johnson promised to expand Britain’s state aid regime once the UK leaves the EU. “We will back British businesses by introducing a new state aid regime which makes it faster and easier for the government to intervene to protect jobs when an industry is in trouble,” a briefing document said. Head of regulatory affairs at the Institute of Economic Affairs (IEA) Victoria Hewson said support for state aid was “veiled support for cronyism.” …A spokesperson for the Institute of Directors said: “It’s not clear how these proposals will fit with ambitions of a ‘Global Britain’. The Conservatives must be wary of opening a can of worms on state aid, it’s important to have consistent rules in place to resist the impulse of unwarranted protectionism.” Johnson also promised to introduce a buy British rule for public procurement. …IEA economics fellow Julian Jessop said: “A ‘Buy British’ policy is pure protectionism, and it comes with heavy costs.

Perhaps this is why John O’Connell of the Taxpayers Alliance has a rather pessimistic view about future tax policy. Here are excerpts of a column he wrote for CapX.

Theresa May’s government implemented a series of big state, high tax policies. Promises of no strings attached cash for the NHS; new regulations on net zero; tax cuts shelved and the creation of more quangos. After his surprise non-loss in the election, Corbyn shifted even further to the political left, doubling down on his nationalisation plans. All in all, the 2017 election result was terrible for people who believe in a small state. …A report from the Resolution Foundation found that government spending is rising once again, and likely to head back towards the heights of the 1970s over the coming years. The Conservatives’ recent spending review suggests state spending could be 41.3% of GDP by 2023, while Labour’s spending plans could take it to 43.3%. This compares to the 37.4% average throughout the noughties. Based on the manifestos, Labour are working towards a German-sized state, while the Tories’ plan looks more Dutch. Unsurprisingly we see this mirrored by the tax burden, which at 34.6% of GDP has already reached a fifty-year high. It is likely to increase further. …British taxpayers are presented with something of a Hobson’s choice: Boris Johnson will see taxes increase and spending shoot up, while Jeremy Corbyn has £1.2 trillion worth of unfunded spending rises just waiting to become unimaginable tax hikes for everyone. Whoever you vote for, you’ll get higher taxes, the question is just about how high.

Let’s close by looking at the big picture.

Here’s a chart showing the burden of government spending in the United Kingdom since 1900. I’ve augmented the chart to show the awful trend started by Attlee (in red) and then the positive impact of Thatcher (in green).

You can also see that Tony Blair and Gordon Brown did a bad job early this century, followed by a surprisingly good performance by David Cameron.

Now it appears that British voters have to choose between a slow drift in the wrong direction under Boris Johnson or a rapid leap in the wrong direction under Jeremy Corbyn.

Normally I would be rather depressed by such a choice. I’m hoping, however, that Brexit (assuming it actually happens!) will cause Boris Johnson to make smart choices even if he is otherwise tempted to make bad choices.

P.S. Unsurprisingly, Corbyn has been an apologist for thugs and dictators.

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Arthur Okun was a well-known left-of-center economist last century. He taught at Yale, was Chairman of the Council of Economic Advisors for President Lyndon Johnson, and also did a stint at Brookings.

In today’s column, I’m not going to blame him for any of LBJ’s mistakes (being a big spender, creating Medicare and Medicaid).

Instead, I’m going to praise Okun for his honesty. Is his book, Equality and Efficiency: The Big Trade Off, he openly acknowledged that higher taxes and bigger government – policies he often favored – hindered economic performance.

Sadly, some folks on the left today are not similarly honest.

A column in the New York Times by Jim Tankersley looks at the odd claim, put forth by Elizabeth Warren and others, that class-warfare taxes are good for growth.

Elizabeth Warren is leading a liberal rebellion against a long-held economic view that large tax increases slow economic growth… Generations of economists, across much of the ideological spectrum, have long held that higher taxes reduce investment, slowing economic growth. …Ms. Warren and other leading Democrats say the opposite. …that her plans to tax the rich and spend the revenue to lift the poor and the middle class would accelerate economic growth, not impede it. …That argument tries to reframe a classic debate…by suggesting there is no trade-off between increasing the size of the pie and dividing the slices more equitably among all Americans.

Most people, when looking at why some nations grow faster and become more prosperous, naturally recognize that there’s a trade-off.

So what’s the basis of this counter-intuitive and anti-empirical assertion from Warren, et al?

It’s partly based on their assertion that more government spending is an “investment” that will lead to more growth. In other words, politicians ostensibly will allocate new tax revenues in a productive manner.

Ms. Warren wrote on Twitter that education, child care and student loan relief programs funded by her tax on wealthy Americans would “grow the economy.” In a separate post, she said student debt relief would “supercharge” growth. …Ms. Warren is making the case that the economy could benefit if money is redistributed from the rich and corporations to uses that she and other liberals say would be more productive. …a belief that well-targeted government spending can encourage more Americans to work, invest and build skills that would make them more productive.

To be fair, this isn’t a totally absurd argument.

The Rahn Curve, for instance, is predicated on the notion that some spending on core public goods is correlated with better economic performance.

It’s only when government gets too big that the Rahn Curve begins to show that spending has a negative impact on growth.

For what it’s worth, modern research says the growth-maximizing size of government is about 20 percent of economic output, though I think historical evidence indicates that number should be much lower.

But even if the correct figure is 20 percent of GDP, there’s no support for Senator Warren’s position since overall government spending currently consumes close to 40 percent of U.S. economic output.

Warren and others also make the discredited Keynesian argument about government spending somehow kick-starting growth, ostensibly because a tax-and-spend agenda will give money to poor people who are more likely to consume (in the Keynesian model, saving and investing can be a bad thing).

Democrats cite evidence that transferring money to poor and middle-class individuals would increase consumer spending…liberal economists say taxes on high-earners could spur growth even if the government did nothing with the revenue because the concentration of income and wealth is dampening consumer spending.

This argument is dependent on the notion that consumer spending drives the economy.

But that’s not the case. As I explained two years ago, consumer spending is a reflection of a strong economy, not the driver of a strong economy.

Which helps to explain why the data show that Keynesian stimulus schemes routinely fail.

Moreover, the Keynesian model only says it is good to artificially stimulate consumer spending when trying to deal with a weak economy. There’s nothing in the theory (at least as Keynes described it) that suggests it’s good to endlessly expand the public sector.

The bottom line is that there’s no meaningful theoretical or empirical support for a tax-and-spend agenda.

Which is why I think this visual very succinctly captures what Warren, Sanders, and the rest (including international bureaucracies) are proposing.

P.S. By the way, I think Tankersley’s article was quite fair. It cited arguments from both sides and had a neutral tone.

But there’s one part that rubbed me the wrong way. He implies in this section that America’s relatively modest aggregate tax burden somehow helps the left’s argument.

Fueling their argument is the fact that the United States now has one of the lowest corporate tax burdens among developed nations — a direct result of President Trump’s 2017 tax cuts. Tax revenues at all levels of government in the United States fell to 24.3 percent of the economy last year, the Organization for Economic Cooperation and Development reported on Thursday, down from 26.8 percent in 2017. America is now has the fourth lowest tax burden in all of the O.E.C.D.

Huh? How does the fact that we have lower taxes that other nations serve as “fuel” for the left?

Since living standards in the United States are considerably higher than they are in higher-taxed Europe, it’s actually “fuel” for those of us who argue against class-warfare taxation and bigger government.

Though maybe Tankersley is suggesting that America’s comparatively modest tax burden is fueling the greed of U.S. politicians who are envious of their European counterparts?

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