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Posts Tagged ‘United States’

As part of my collection of honest leftists, I have a bunch of columns highlighting how some advocates of big government (including, to their credit, Bernie Sanders and Andrew Yang) don’t hide from reality.

I’m unalterably opposed to their policies, but at least they openly admit that huge tax increases on ordinary people are needed in order to finance a European-style welfare state.

Now we have two more honest statists to add to our list.

In a column for the Washington Post, Eric Harris Bernstein and Ben Spielberg openly embrace huge tax increases on Americans with modest incomes.

They start by complaining that the tax burden is lower in the United States compared to other western nations.

A no-new-middle-class-taxes pledge…is seriously misguided. Middle-class taxes are a necessary and desirable part of a comprehensive, progressive policy framework… Democratic presidential candidates should make the case for middle-class taxes, not run from them. Here is a basic fact: The United States is a low-tax country. In 2018, the most recent year for which data is available, the United States ranked fourth-lowest in the Organization for Economic Cooperation and Development (a consortium of 36 economically developed countries) in terms of tax revenue collected as a percentage of the economy — behind nations like Germany, Israel, Latvia and Canada. The gap between U.S. and average OECD revenue has widened over time, from 1.3 percentage points of gross domestic product in 1965 to 10 percentage points more recently. That’s nearly $2 trillion per year in forgone revenue from lower tax rates.

Interestingly (though not surprisingly), they don’t acknowledge that Americans are far richer than people in other advanced nations.

So maybe, just maybe, there’s a relationship between tax policy and economic outcomes.

The authors then complain that Reagan triggered an era of lower taxes for the non-rich. Oh, the horror!

In 1979, the year before Ronald Reagan was elected president, the average household in the middle quintile of the income distribution paid 19.1 percent of its income in federal taxes, according to data from the Congressional Budget Office. By 2016, that rate had dropped 5.2 percentage points, more than a quarter, to 13.9 percent. The story is similar for the second and fourth quintiles, which saw their rates decline by 5.6 and 3.8 percentage points respectively over the same period.

Here’s a graphic that accompanied the column.

As you can see, readers are supposed to conclude that the United States is “below average” compared to other developed nations.

What would it mean if politicians reversed all the tax cuts that started under Reagan?

The most revealing factoid from the column is their calculation that middle-income families should be paying $3800 more to the IRS every year.

In 2016, middle-quintile families paid $3,800 less in taxes than they would have at 1979 rates… Low middle-class taxes in the United States stand in stark contrast to the approach in other developed countries, which raise more revenue from the middle class through some combination of taxes on goods and services, payroll taxes, and income taxes.

And don’t forget that the authors don’t just want to go back to 1979 tax rates.

They want America to become another France.

Somehow, I suspect America’s middle-class does not want to be pillaged like their European counterparts.

Amazingly, it gets even worse. The authors want more debt-financed spending and they even endorse the perpetual motion machine of “modern monetary theory.”

Of course, middle-class tax increases are not the only means of providing these public goods. Trillions of dollars can be raised through various taxes on the rich… And funding public investments with government debt, which modern monetary theory’s adherents recommend, is a far better approach than requiring every program to have a designated “payfor.” The government is uniquely positioned to borrow money, and we shouldn’t let unsubstantiated, theoretical concerns about debt levels prevent us from addressing the concrete and urgent needs of today.

I could end the column at this point and simply observe that it’s good to find honest folks on the left, even if they’re wildly wrong.

But the authors of the column unintentionally have given me an excuse to make a key point about taxes, growth, the economy, and the Laffer Curve.

Their graphic inserted above reveals that the overall tax burden in France consumes 46.1 percent of GDP in France, nearly twice as high as the United States.

But high tax rates don’t necessarily produce high tax revenues.

Indeed, I crunched data from the International Monetary Fund and found that per-capita revenues in France are only about 10 percent higher than they are in the United States.

I’m sure Art Laffer won’t be surprised by these results. Neither would Ibn Khaldun.

The bottom line is that most people in Europe are subject to much higher tax rates, which leads to lower living standards and weaker economies, which means there’s not even a lot of tax revenue to spend.

Would your family be willing to give up $10,000, $15,000, or $20,000 of income just so politicians could spend an extra $2,000 per household?

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My favorite publication from the Canada-based Fraser Institute is Economic Freedom of the World, which ranks nations based on economic liberty.

I religiously write about each year’s report (starting back in 2011), and I also cite the data dozens of time each year when analyzing policy in various nations.

The second-best report from the Fraser Institute is Economic Freedom of North America, which ranks economic liberty in all American states, Canadian provinces, and Mexican states. Here’s the headline data from the most-recent edition, with Canadian provinces highlighted in brown and Mexican states highlighted in green.

I’m not surprised to see New Hampshire in first place, and I’m not surprised to see Florida in second place.

Both states rank near the top in various measures of economic liberty in the United States.

I’m also not surprised to see Mexican states clustered at the bottom.

What’s particularly interesting is to see how rankings have changed for the United States and Canada.

…economic freedom had been declining in all three countries until recently. From 2004 to 2013, the average score for all 92 jurisdictions fell from 7.64 to 7.09. Canadian provinces saw the smallest decline, only 0.08, whereas the decline in the United States was 0.59 and in Mexico, 0.63. However, economic freedom has increased in the United States and Mexico since 2013. In contrast, in Canada, after an increase in 2014, it has fallen back below its 2013 level. …on the all-government index the highest ranked jurisdiction is New Hampshire with a score of 8.13. After six straight years in first, Alberta fell to a tie for 6th last year, and fell further to a tie for 24th place at 7.94 in this year’s report. Florida is in 2nd with 8.07… The highest-rated Mexican state is Guanajuato at 61st with 6.49, behind all 50 US states and 10 Canadian provinces, and below 60th place by more than one full point.

Here’s a look at the biennial numbers for the three nations.

I’ve highlighted in green the two recent times Canada ranked about the United States (gee, thanks Obama) and highlighted in red the two recent times Canada ranked below the United States (gee, thanks Trudeau).

In my humble opinion, a key takeaway in the report is what happened to Alberta.

Here are some relevant excerpts.

Alberta, for seven years in a row up to 2015, was the top jurisdiction among the 92 jurisdictions in the index in the all-government index, as it was among Canadian prov-inces in the subnational index. However, in 2015, Alberta elected new political leaders who made changes in taxation, spending, and regulation that have had a significant negative effect on economic freedom. …Since 2015, Alberta has fallen from 1st to a tie for 24th place in the 2017 all-government index. It scored 8.31 in 2014 in this index, falling by 0.37 points in the 2017 index, the largest fall over that period of the 92 jurisdictions in the all-government index. Alberta’s decline in the subnational index, where of course provincial leader-ship has its greatest impact, was much larger, 1.42 points, between 2014 and 2017.

And here’s a table that shows what has happened over the past few years.

I actually warned about Alberta’s fiscal deterioration back in 2015, so I’ll be interested to see if the province can restore some budgetary sanity.

To be sure, Alberta is still the top-ranked province, but that’s more a reflection of bad policy elsewhere in Canada.

P.S. In general, Canada is a sensible, market-oriented nation. Indeed, the United States should copy its northern neighbor on issues such as spending restraintwelfare reformcorporate tax reform, bank bailoutsregulatory budgeting, the tax treatment of savingschool choice, and privatization of air traffic control.

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The Tax Foundation churns out lots of good information, but I especially look forward to their International Tax Competitiveness Index.

It shows how nations rank based on key tax variables such as corporate taxation, personal income tax, and international tax rules.

The latest edition shows good news and bad news for the United States. The good news, as you see in this chart, is that the 2017 tax reform improved America’s ranking from 28 to 21.

The bad news is that the United States is still in the bottom half of industrialized nations.

We should copy Estonia, which has been in first place for six consecutive years.

For the sixth year in a row, Estonia has the best tax code in the OECD. Its top score is driven by four positive features of its tax code. First, it has a 20 percent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 percent tax on individual income that does not apply to personal dividend income. Third, its property tax applies only to the value of land, rather than to the value of real property or capital. Finally, it has a territorial tax system that exempts 100 percent of foreign profits earned by domestic corporations from domestic taxation, with few restrictions. …For the sixth year in a row, France has the least competitive tax system in the OECD. It has one of the highest corporate income tax rates in the OECD (34.4 percent), high property taxes, a net tax on real estate wealth, a financial transaction tax, and an estate tax. France also has high, progressive, individual income taxes that apply to both dividend and capital gains income.

Here are some other important observations from the report, including mostly positive news on wealth taxation as well as more information on France’s fiscal decay.

…some countries like the United States and Belgium have reduced their corporate income tax rates by several percentage points, others, like Korea and Portugal, have increased them. Corporate tax base improvements have been put in place in the United States, United Kingdom, and Canada, while tax bases were made less competitive in Chile and Korea. Several EU countries have recently adopted international tax regulations like Controlled Foreign Corporation rules that can have negative economic impacts. Additionally, while many countries have removed their net wealth taxes in recent decades, Belgium recently adopted a new tax on net wealth. …Over the last few decades, France has introduced several reforms that have significantly increased marginal tax rates on work, saving, and investment.

For those who like data, here are the complete rankings, which also show how countries score in the various component variables.

Notice that the United States (highlighted in red) gets very bad scores for property taxation and international tax rules. But that bad news is somewhat offset by getting a very good score on consumption taxation (let’s hope politicians never achieve their dream of imposing a value-added tax!).

And it’s no big surprise to see countries like New Zealand and Switzerland get high scores.

P.S. My only complaint about the International Tax Competitiveness Index is that I would like it to include even more information. There presumably would be challenges in finding apples-to-apples comparative data, but I’d be curious to find out whether Hong Kong and Singapore would beat out Estonia. And would zero-tax jurisdictions such as Monaco and the Cayman Islands get the highest scores of all? Also, what would happen if a variable on the aggregate tax burden was added to the equation? I’m guessing some nations such as Sweden and the Netherlands might fall, while other countries such as Chile and Poland (and probably the U.S.) would climb.

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My primary job is dealing with misguided public policy in the United States.

I spend much of my time either trying to undo bad policies with good reform (flat tax, spending restraint, regulatory easing, trade liberalization) or fighting off additional bad interventions (Green New Deal, protectionism, Medicare for All, class warfare taxes).

Seems like there is a lot to criticize, right?

Yes, but sometimes the key to success is being “less worse” than your competitors. So while I’m critical of many bad policies in the United States, it’s worth noting that America nonetheless ranks #6 for overall economic liberty according to the Fraser Institute.

As such, it’s not surprising that America has higher living standards than most other developed nations according to the “actual individual consumption” data from the Organization for Economic Cooperation and Development.

And America’s advantage isn’t trivial. We’re more than 46 percent higher than the average for OECD member nations.

The gap is so large that I’ve wondered how lower-income people in the United States would rank compared to average people in other countries.

Well, the folks at Just Facts have investigated precisely this issue using World Bank data and found some remarkable results.

…after accounting for all income, charity, and non-cash welfare benefits like subsidized housing and Food Stamps—the poorest 20% of Americans consume more goods and services than the national averages for all people in most affluent countries. …In other words, if the U.S. “poor” were a nation, it would be one of the world’s richest. …The World Bank publishes a comprehensive dataset on consumption that isn’t dependent on the accuracy of household surveys and includes all goods and services, but it only provides the average consumption per person in each nation—not the poorest people in each nation. However, the U.S. Bureau of Economic Analysis published a study that provides exactly that for 2010. Combined with World Bank data for the same year, these datasets show that the poorest 20% of U.S. households have higher average consumption per person than the averages for all people in most nations of the OECD and Europe… The high consumption of America’s “poor” doesn’t mean they live better than average people in the nations they outpace, like Spain, Denmark, Japan, Greece, and New Zealand. …Nonetheless, the fact remains that the privilege of living in the U.S. affords poor people with more material resources than the averages for most of the world’s richest nations.

There are some challenges in putting together this type of comparison, so the folks at Just Facts are very clear in showing their methodology.

They’ve certainly come up with results that make sense, particularly when compared their results with the OECD AIC numbers.

Here’s one of the charts from the report.

You can see that the bottom 20 percent of Americans do quite well compared to the average persons in other developed nations.

By the way, the report from Just Facts also criticizes the New York Times for dishonest analysis of poverty. Since I’ve felt compelled to do the same thing, I can definitely sympathize.

The bottom line is that free markets and limited government are the best way to help lower-income people enjoy more prosperity.

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Since I’ve been writing a column every day since 2010, you can imagine that there are some days where that’s a challenge.

But not today. The Fraser Institute has released a new edition of Economic Freedom of the World, which is like a bible for policy wonks. So just like last year, and the year before, and the year before, and so on (you may sense a pattern), I want to share the findings.

First, here’s what EFW measures.

The cornerstones of economic freedom are personal choice, voluntary exchange, open markets, and clearly defined and enforced property rights. …The EFW measure might be thought of as a measure of the degree to which scarce resources are allocated by personal choices coordinated by markets rather than centralized planning directed by the political process. It might also be thought of as an effort to identify how closely the institutions and policies of a country correspond with the ideal of a limited government, where the government protects property rights and arranges for the provision of a limited set of “public goods” such as national defense and access to money of sound value, but little beyond these core functions.

Now let’s get to the good stuff.

Unsurprisingly, Hong Kong is at the top of the rankings, followed closely by Singapore. Those jurisdictions have been #1 and #2 in the rankings every year this century.

The rest of the top 5 is the same as last year, featuring New Zealand, Switzerland, and Ireland.

The good news for Americans is that we’re back in the top 10, ranking #6.

Here’s what the report says about the United States.

…the United States returned to the top 10 in 2016 after an absence of several years. During the 2009–2016 term of President Obama, the US score initially continued to decline as it had under President Bush. From 2013 to 2016, however, the US rating increased from 7.74 to 8.03. This is still well below the high-water mark of 8.62 in 2000 at the end of the Clinton presidency.

It’s important to understand that the improvement in the U.S. score has nothing to do with Trump. The EFW ranking is based on America’s economic policies as of 2016 (there’s always a lag in getting hard data).

President Trump’s policies may increase America’s score (think taxes and regulation) or they may decrease America’s score (think trade and spending). But we won’t know for sure until we see future editions.

Here’s what’s happened to economic liberty in America between 1970 and 2016.

As you can see from the historical data, the U.S. enjoyed progress through the Reagan and Clinton years, followed by decline during the Bush years and early Obama years. But we’ve trending in the right direction since 2013.

Let’s look at other nations that get decent scores.

Here are the other nations that are in the top quartile.

Canada and Australia were tied for #10, so the rest of the rankings start with the under-appreciated success story of Taiwan at #12.

All the Baltic nations do well, especially Estonia and Lithuania. Chile also remains highly ranked, as is the supposedly socialist nation of Denmark.

Luxembourg, which was ranked #1 as recently as 1985, is now #25.

I also noticed that Rwanda (#40) has eased past Botswana (#44) to become the highest-ranked nation in Sub-Saharan Africa.

By the way, I’m not going to bother showing the bottom nations, but nobody should be surprised to learn that Venezuela is in last place.

Though that may simply be because there’s isn’t adequate data to include North Korea and Cuba.

Let’s close by including a chart that hopefully will show why economic liberty is important.

Simply stated, people enjoy much higher living standards in nations with free markets and small government. Conversely, people living under statist regimes suffer from poverty and deprivation.

The bottom line is that Economic Freedom of the World shows the recipe for growth and prosperity.

Sadly, very few nations follow the instructions because economic liberty is not in the interests of politicians.

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Over the years, I’ve shared some rankings that are utterly preposterous.

Needless to say, none of these ranking pass the laugh test. You know the people involved are either deluded or dishonest.

Well, we have a new addition to this disreputable collection, as reported by CBS.

The United States has been ranked for the first time among the 10 nations deemed to be the most dangerous for women by experts in the field. A survey by the Thomson Reuters Foundation of about 550 experts in women’s issues around the globe labeled the U.S. the 10th most dangerous nation in terms of the risk of sexual violence, harassment and being coerced into sex. …According to the survey, which was last carried out in 2011 and did not then rank the U.S. among the top 10 most dangerous nations, India is the most perilous country for women… Most of the other countries in the top-10 determined by the foundation’s survey are countries with ongoing military conflicts or insurgencies, or where long-held religious and political views have kept women on an unequal footing in terms of law enforcement and treatment in society generally. …The foundation asked the experts which five of the 193 United Nations member states they felt were “most dangerous for women and which country was worst in terms of health care, economic resources, cultural or traditional practices, sexual violence and harassment, non-sexual violence and human trafficking,” according to the foundation.

And here’s their list of the supposed 10-worst countries for women.

I’m assuming that the top-9 countries are not good places for women, but think about what sort of person would put the United States at #10.

  • Do they really think the United States is worse for women than Egypt, where about 90 percent of females are subject to the horrifying practice of female genital mutilation?
  • Do they really think the United States is worse for women than South Africa, where the rape rate is five times higher?
  • Do they really think the United States is worse for women than Nepal, where per-capita income is just 1.3 percent of American levels?
  • Do they really think the United States is worse for women than Angola, where the average woman dies nearly three decades sooner?
  • Do they really think the United States is worse for women than China, where girl children are much more likely to be aborted or subject to infanticide?

In other words, the list is a joke. And the 550 supposed “experts” in women’s issues beclowned themselves.

By the way, my criticisms have nothing to do with ideology. There are many lists from left-wing groups that are intellectually rigorous. I strongly disagree with the folks at the Tax Justice Network, for instance, but their Financial Secrecy Index is methodologically honest and sound.

I also should point out that my objections have nothing to do with the USA looking bad. I don’t like it when the United States doesn’t crack the top-10 in measures of rule of law, tax competitiveness, or economic liberty, yet I share such data with no hesitation.

Shame on the Thomson Reuters Foundation is a joke for publishing such a list.

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When writing about the statist agenda of international bureaucracies, I generally focus my attention on the International Monetary Fund and the Organization for Economic Cooperation and Development.

Today, let’s give some attention to the United Nations.

Based on this story from the Washington Post, the bureaucrats at the UN have concluded that America is a miserable and awful nation.

…a new United Nations report that examines entrenched poverty in the United States…calls the number of children living in poverty “shockingly high.” …the report, written by U.N. special rapporteur on extreme poverty and human rights Philip Alston, says the United States tops the developed world with the highest rates of youth poverty… The results of the report are not out of line with a number of others…in recent years by different organizations in which the United States has turned up at or near the top on issues such as poverty rates.

But I’ve learned from personal experience (see here and here) that the United Nations is guided by statist ideology and I should be extremely skeptical of any of its findings.

For instance, when it intervenes in policy (global warming and gun control, for instance, as well as the Internet, the War on Drugs, monetary policy, and taxpayer-financed birth control), the UN inevitably urges more power and control for government.

So let’s take a jaundiced look at some of the assertions in this new report, starting with that dramatic claim of record child poverty in America.

The United States…has the highest youth poverty rate in the Organization for Economic Cooperation and Development (OECD)… The consequences of neglecting poverty… The United States has one of the highest poverty…levels among the OECD countries… the shockingly high number of children living in poverty in the United States demands urgent attention. …About 20 per cent of children live in relative income poverty, compared to the OECD average of 13 per cent.

So is it true that poverty is very high in the USA and is it also true that America has the highest rate of child poverty of all OECD countries? Even higher than Mexico, Greece, and Turkey? And what is the source of this remarkable assertion?

If you look at footnote #51, you’ll see reference to an OECD publication that contains this supposedly damning chart.

But if you look at the fine print at the bottom, you’ll discover that the chart on child poverty doesn’t actually measure child poverty. Instead, the bureaucrats at the OECD have put together a measure of income distribution and decided that “relative poverty” exists for anyone who has less than 50 percent of the median level of disposable income.

In other words, the United States looks bad only because median income is very high compared to other nations.

Which is the same dishonest data manipulation that the OECD uses when exaggerating America’s overall poverty rate (other groups that have used this deliberately dishonest methodology include the Equal Welfare Association, Germany’s Institute of Labor Economics, and the Obama Administration).

The bottom line is that the key finding of the UN report is based on a bald-faced lie.

By the way, I’m not surprised to see that the UN report also cites the IMF to justify statist policies.

In a 2017 report, the International Monetary Fund (IMF) captured the situation…, stating that the United States economy “is delivering better living standards for only the few”, and that “household incomes are stagnating for a large share of the population, job opportunities are deteriorating, prospects for upward mobility are waning, and economic gains are increasingly accruing to those that are already wealthy” …A much-cited IMF paper concluded that redistribution could be good for growth, stating: “The combined direct and indirect effects of redistribution — including the growth effects of the resulting lower inequality — are on average pro-growth.”

For what it’s worth, the IMF’s research on growth and inequality is embarrassingly bad.

Here’s another big takeaway from the UN report.

The United States…has the highest…infant mortality rates among comparable OECD States. …The infant mortality rate, at 5.8 deaths per 1,000 live births, is almost 50 per cent higher than the OECD average of 3.9.

I’m not an expert on infant mortality. Indeed, I’ve never looked at infant mortality data. But given the UN’s reliance on dodgy and dishonest numbers in other areas, I’m skeptical whether these numbers are true.

And, according to Johan Norberg, the numbers about high levels of infant mortality in the United States are false.

The UN report contains many other ideologically motivated attacks on the United States.

For instance, America is a bad country because taxes supposedly are too low.

The United States has the highest rate of income inequality among Western countries. The $1.5 trillion in tax cuts in December 2017 overwhelmingly benefited the wealthy and worsened inequality. …The tax cuts will fuel a global race to the bottom, thus further reducing the revenues needed by Governments to ensure basic social protection and meet their human rights obligations. …There is a real need for the realization to sink in among the majority of the American population that taxes are not only in their interest, but also perfectly reconcilable with a growth agenda.

While the above passage is remarkable for the level of economic illiteracy, I confess that I chortled with glee when I read the part about how the recent tax reform “will fuel a global race to the bottom.”

As I wrote last year and this year, the fact that other governments will face pressure to reduce tax rates is something to celebrate.

Here’s one final excerpt. The UN report also bashes the United States because we don’t view dependency as a human right.

Successive administrations, including the current one, have determinedly rejected the idea that economic and social rights are full-fledged human rights, despite their clear recognition not only in key treaties that the United States has ratified… But denial does not eliminate responsibility, nor does it negate obligations. International human rights law recognizes a right to education, a right to health care, a right to social protection for those in need and a right to an adequate standard of living.

Needless to say, a problem with this vision of “positive rights” is that it assumes there will always be a supply of chumps willing to work hard so the government can tax away their money to finance all the goodies. But Greece shows us that it’s just a matter of time before that games ends with disaster.

In other words, Thomas Sowell is right and Franklin Roosevelt was wrong.

Let’s close with some good news. As the Washington Post just reported, the UN’s dishonest anti-American screed apparently will prove costly to that bloated bureaucracy.

Alston arrived in Washington last fall on a mission from the U.N. Human Rights Council to document poverty in America. …he was told by a senior State Department official that his findings may influence the United States’ membership in the human rights body. …“I think I was being sent a message.” Two other people at the meeting, speaking on the condition of anonymity, confirmed Alston’s account. …Nikki Haley announced this week that the United States would withdraw from the Human Rights Council.

Good for Ambassador Haley.

Her actions stand in stark contrast to some of her predecessors, who apparently believed in taxpayer-financed self-flagellation.

Alston said he was initially invited by the U.S. government under President Barack Obama to study poverty in America. The invitation was extended again by U.S. officials under then-Secretary of State Rex Tillerson in 2017, he said. “We look forward to welcoming Mr. Alston to the United States for a country visit this December,” Flacelia Celsula, part of the U.S. delegation at the United Nations, said in a meeting of the Human Rights Council on June 8, 2017.

It goes without saying that Mr. Alston should have the freedom write leftist reports. He also should have the freedom to spread lies in those reports. But I don’t want American tax dollars to finance his ideological bilge.

Which brings us to the obvious takeaway. As seems to be the case with all international bureaucracies, the United Nations wastes money at a prodigious pace. With any luck, Alston’s nonsense will convince American policymakers that deep budget cuts for the UN are long overdue.

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