Category: tax policy

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budgets & spending cuts deficits and debt tax policy

The Beast Cometh

national debt

As the U.S. Debt Clock ticks towards $39 trillion, a predictable but horrible beast slouches towards us, ready to knock on the door. Or, rather, burst through.

The federal debt hit $38.8 trillion this weekend: it’s $38,830,051,666,666 as I type these words on Sunday.

But that’s not the beast. 

This year’s annual deficit is $1.9 trillion.

But that’s still not the beast.

The Congressional Budget Office warns that the debt-to-GDP hits 120% by 2036 — above post-WWII peak.

That isn’t the beast either.

The beast is the interest on the debt, and the service charge the government must regularly make merely to keep the borrowing going.

Net interest payments will be over one trillion smackeroos this fiscal year. That rivals or exceeds spending on defense/veterans in many breakdowns — those payments are projected to double to over two trillion per year by 2036. 

It’s the fastest-growing line item. 

It’s non-discretionary. 

And it compounds; the beast only gets bigger.

And with it any hope for tax relief goes out the window. Just last week the president, reacting to the Supreme Court decision in Learning Resources v. Trump, floated what amounts to a revenue-directed tariff, and under normal circumstances voters could not unreasonably demand, say, an offsetting 15 percent reduction in income taxes, across the board.

Nothing like that is in the offing. Not because tax cuts wouldn’t be a big win for the tariffer-in-chief, but because any extra revenue might be more cost-effectively thrown as debt service at the American holders of $31 trillion in federal debt.

This is as bipartisan an issue — and failure — as anything can be, yet the bipartisan response?

Crickets.

This is Common Sense. I’m Paul Jacob.

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defense & war tax policy U.S. Constitution

The Emergency Tariff Question

tariffs, Supreme Court, Congress, balance of power

As is often the case in Supreme Court decisions, in Learning Resources v. Trump it is the dissenters’ views that are most interesting. 

At issue? The president’s authority to impose tariffs, or alter them. Donald Trump — a life-long tariff proponent — took the International Emergency Economic Powers Act (IEEPA) as an excuse to levy broad new duties on imports from multiple countries. That act delegated to the executive the power to use tariffs as emergency foreign policy measures.

On February 20, the majority on the court gave a decisive No to the President’s use of IEEPA to impose tariffs.*

I generally oppose Congress delegating powers to the executive branch and support free trade. But what does the Constitution actually say? Could dissenters Kavanaugh, Thomas and Alito have a point?

Kavanaugh’s humungous written opinion claims that tariffs are a traditional, common, and lawful means of “regulat[ing] . . . importation” in foreign-policy crises; he says the majority’s narrow reading ignores text, history, precedent, and the special deference due the President in external affairs. “The text of IEEPA authorizes the President to regulate importation,” explains Kavanaugh, “and tariffs are a means of doing so.”

Thomas stresses that IEEPA’s emergency-declaration process provides political accountability, so judicial second-guessing is unwarranted. Further, he argues that from the Founding, “regulate importation” has always included duties; early Congresses and Presidents (Monroe, Jackson, etc.) routinely delegated and adjusted tariffs. While matters of rights cannot be delegated, Thomas argues that privileges can, and have, and that this has long been recognized in constitutional law.

The key question, as Kavanaugh advances, is the balance of power. “Congress retains the ultimate authority to clarify, amend, or repeal IEEPA,” he reasonably asserts, “if it believes the President’s exercise of emergency powers has gone too far.”

This issue became a federal court case because Congress is dysfunctional.

Which puts the issue back in our lap. Where voters can have some control. How? Through elections, pressure, or pushing . . . term limits.

This is Common Sense. I’m Paul Jacob.

* Other avenues may remain open. And Trump is jumping on them.

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ideological culture media and media people tax policy

Post California Soaking

California, taxes, wealth, government

Rumors that Washington Post owner Jeff Bezos has been pushing the Post in a more commonsensical editorial direction could very well be true.

A recent Post editorial slams progressives who “think of taxation the way teenage boys think about cologne: if some is good, more must be great.”

I’m no fan of even a moderate amount of that brand of cologne. But anyway. The Post is discussing a proposed ballot measure backed by the ultra-lefty Service Employees International Union.

SEIU troops are currently collecting signatures. And before they’ve even gotten enough to post it to ballot, the people being targeted have started moving. 

Out of state.

The measure would impose a new 5 percent tax on billionaires. Some of the state’s billionaires, including Google cofounder Larry Page and Palantir cofounder Peter Thiel, aren’t willing to wait and see whether it actually reaches the ballot and passes in November. Why? The measure would apply retroactively “to those who were California residents on January 1, 2026.”

Some Democratic lawmakers are saying “good riddance,” as if it’s possible to loot billionaires who don’t wait around to be looted. Or that it’s good for state coffers to lose their billionaire entrepreneur “contributors.”

The Post says the retroactivity would open the measure to legal challenges, but that if it gets passed and survives litigation, “it’s a safe bet this won’t be a one-off. Funding ongoing expenses like health care with one-time taxes isn’t sustainable. Progressives will want to return to the well until they’ve sucked it dry.”

And no one should know better than Californians how dangerous dry wells are.

This is Common Sense. I’m Paul Jacob.

California, taxes, wealth, government

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property rights tax policy

Tax Assessor, House-Nabber

Pacific Legal Foundation, tax law

In 1994, Scott Pung won exemption from a school tax. He died in 2004. But years later, a local tax assessor contended that his widow, now also deceased, should have submitted new paperwork to retain the exemption.

Pacific Legal Foundation observes that according to state law, “the exemption continues as long as family members continue to live in the home. . . . Based on her misreading of the law, the tax assessor retroactively denied the exemption for several previous years.”

The estate’s administrator, Mike Pung, got nowhere trying to explain things to the tax assessor. So he brought his case to the Michigan Tax Tribunal. The tribunal ruled in favor of the Pungs.

Didn’t matter. When Mike paid the property taxes for 2012, the assessor called it an underpayment, since payment for the tax that the Pungs did not owe had not been included.

Mike still refused to pay the school tax. So the county grabbed the home that it had assessed at $200,000 and auctioned it for $76,000 to recover the amount of that tax.

With PLF’s help, the Pungs ultimately received $73,000 of this amount, less than half the home’s assessed value. Now PLF is headed to the Supreme Court to make the case for further compensation.

Chances are good. Two years ago, the Supreme Court affirmed in other PLF litigation that local governments “are not allowed to abuse the tax system to take more from families than is owed.”

Or not owed.

This is Common Sense. I’m Paul Jacob.

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Hating One’s Own Tax Hikes

Maine, taxes

It’s terrible, the high taxes these days, Maine Senate President Mattie Daughtry decries. Look at property taxes. We must fix this!

“Property taxes just keep going up,” Daughtry lamented on social media. So “first-time homebuyers can’t take the plunge . . . and older Mainers struggle to afford staying in the towns they know and love. . . . We’re setting up a Property Tax Task Force. They’ll provide suggestions to the legislature. Then legislators can use their findings to pass laws that make living in Maine sustainable for EVERYONE in our state.”

Steven Robinson, editor-in-chief of the Maine Wire, points out in his Robinson Report that Daughtry herself is a big reason for the problem she now supposedly wants to remedy.

Her hand-wringing over high taxes is, he says, “borderline psychopathic behavior and true gaslighting — akin to O.J. Simpson standing over some stabbing victims and filming a TikTok video demanding an explanation for how they ended up dead. . . .

“On two occasions just this year Daughtry has celebrated — yes, celebrated! — taxes going up on working Mainers.”

Daughtry and other Democrats passed LD 2012, a bill to repeal the limit on municipal property tax levies. As the bill itself said right up front, “property taxes may increase.”

The Senate leader is not exactly apologizing for her tax-and-spend ways to date, so maybe her giddy gaslighting has something to do with seeking higher office. Who knows. 

But at least with Steven Robinson in the neighborhood, she isn’t getting away with her phony baloney scot-free.

This is Common Sense. I’m Paul Jacob

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free trade & free markets regulation tax policy

The New Old Coke

Trump, Coke, sugar

The President of these United States famously drinks Diet Coke.

Despite his preference, however, it’s regular Coca-Cola he’s making waves about.

“I have been speaking to Coca-Cola about using REAL Cane Sugar in Coke in the United States, and they have agreed to do so,” Donald Trump wrote on Truth Social last week. 

The Atlanta-based company has confirmed the story, but it will not be removing High Fructose Corn Syrup (HFCS) Coke from the market. 

What will change? 

“Mexican Coke” (made from refined cane sugar) is available in glass bottles right now, for a premium, in many venues. In effect, Trump is merely helping promote this currently U.S.-made product, allowing it to sit next to regular Coke just as aspartame-sweetened Diet Coke competes on the shelf with Coke Zero, which is made with a blend of artificial sweeteners, including aspartame and acesulfame potassium (Ace-K).

Maybe all Coca-Cola will really do is re-brand Mexican Coke.

To “Trump Coke”?

“I’d like to thank all of those in authority at Coca-Cola,” added the president. “This will be a very good move by them — You’ll see. It’s just better!”

Matters of taste aside, cane sugar may be marginally healthier for you than HFCS. Invented in the Fifties and Sixties in labs, it has been pushed by the USDA, which regulates its prices (as Matt Damon’s 2009 comedy The Informant! makes clear). But both are sugar, if slightly different, chemically.

Behind the proposal to switch to HFCS lies a broader reality: domestic refined cane sugar production from states like Hawaii, Florida, and Louisiana falls short of U.S. consumption needs, while protectionist policies keep its price significantly above global market levels.

For some reason, Donald Trump hasn’t been talking about reducing the sugar tariff!

This is Common Sense. I’m Paul Jacob.

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free trade & free markets international affairs tax policy

The Tariff King

The fight over the president’s tariffs is taking place in Congress. 

Or is it?

“House Republicans blocked on April 9 an effort by Democrats to force a vote on halting the reciprocal tariffs imposed by President Donald Trump,” explains The Epoch Times, “which are currently paused for three months.”

Let’s make that clearer. These now-infamous/much-debated “reciprocal tariffs” went “into effect” immediately after midnight yesterday. As Republicans “sneakily” worked to change the rules to disallow any congressional move to dissolve the president’s declared emergency — which, by Congress’s own legislation, gives the executive a great deal of latitude to change tariff rates — and Democrats moved to do just that, get rid of the “state of emergency,” President Trump put most of his tariff hikes on hold for three months.

Except for those on China — now in effect, at a rate of 125 percent.

It sure looks like Trump’s main concern is trade relations with China, not Lesotho or Israel or anywhere else. And much can be said about China’s trade policies (try selling American consumer goods in China) or respect for intellectual property. But it is the matter of constitutionality that interests me most.

Whatever the alleged merits of high tariffs, unilateral free trade, or any of these issues, these policies should not be decided by the president; the Constitution gives Congress the responsibility “to lay Taxes, Duties, Imposts and Excises” and “regulate Commerce with foreign Nations.”

By handing the president “emergency” powers to change tariff policy in the first place, Congress has abdicated its role in setting tax policy. Republicans in the House seem gung-ho about Trump’s prerogatives. And Democrats haven’t sought to repeal the International Emergency Economic Powers Act, which gives the president legislative taxing authority.

Apparently, Congress wants the president to be king.

This is Common Sense. I’m Paul Jacob.

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national politics & policies tax policy

DOGE Does the IRS

DOGE, dog, meme, watch dog, who watches the watchers?

A note of caution going into today’s subject: let us try to bite our tongues; no expressions of schadenfreude; no sarcastic “Boo-hoos” or the like.

The IRS has been grossly inefficient for a very long time, as now uncovered in a Department of Government Efficiency [DOGE] investigation.

Courtesy of Laura Ingraham, we learn that the Internal Revenue Service is “35 years behind” in its scheduled upgrades, and “already $15 billion over budget.”

“You’ve heard the sob stories,” says Ms. Ingraham. “And they are quite entertaining at times. But the [presumably non-Fox legacy news] media — they continue to spread this story: ‘DOGE is some dark and mysterious organization; you know, embedding itself into departments like some jack-booted thugs, just intimidating staff, threatening those that don’t comply.’ OK. We’re asking, what is the truth?” 

So she interviewed Treasury Secretary Scott Bessant and Treasury’s DOGE adviser, Sam Corcos.

“We,” Corcos said, including himself in the IRS’s very “they” themness, “process about the same amount of data as a midsize bank. A midsize bank has 100 to 200 people in IT and a $20 million budget. The IRS? It has 8,000 IT employees and a $3.5 billion operations and maintenance budget. I don’t really know why yet.” But he does notice that 80 percent of that budget goes to “contractors and software licenses.”

“DOGE advisers have found billions in waste just by asking questions,” explains Ingraham’s report. Secretary Bessant blames the power of special “entrenched interests” that “keep constricting themselves around the power, the money, and the systems. Nobody cares.”

“Inertia” is also a word often heard on this subject.

Democrats have been complaining about the president’s cutting of the IRS budget, and number of employees. But if most of the force is just spinning gears, the cuts could hardly be said to hurt the “service.”

And you’d think that the most pro-government party in our political system would want this key function of government — everything rests on taxes, they admit — to be efficient, do the assigned jobs well.

But for some reason that does not seem to be the case.

Shocking, I know.

This is Common Sense. I’m Paul Jacob.

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media and media people national politics & policies political economy tax policy

The Trump-Tariff Question

Donald Trump

“To this day I cannot tell you what Trump truly believes about tariffs,” Daily Wire’s Michael Knowles recently confessed. “Does he want tariffs instrumentally, to increase trade? Does he believe in tariffs as a revenue-raising mechanism? And is he hard-core on tariffs? I couldn’t tell you; the man is inscrutable.”

In “Tariffs Are Awful, But The Income Tax May Be Worse,” economist Walter Block seems less confused. “Donald Trump supports them on the ground that the McKinley administration was prosperous, and relied upon tariffs,” Walter’s Eurasia Review op-ed posits. Our free-market economist notes that this rests on a fallacy: “since A precedes B, A must be the cause of B.”

Professor Block offers a better “historical episode to shed light on this matter, the Smoot-Hawley Tariff of 1930.” You know, the tariff hike that worsened the Great Depression.

The best part of Walter Block’s refutation, however, follows his explanation of the Law of Comparative Advantage. He discusses the gains to our economy if the expert workers Trump fires from the IRS were to find work in the private sector.

And, contemplating the idea of switching from income taxes to tariffs, our widely-published octogenarian notes that “it takes relatively little labor to run a tariff system. Hey, we already have tariffs in place. An increase in their level would hardly call for much more manpower, likely hardly any more at all.” The gains of nixing income taxes would be vast; the harms of higher tariffs would be comparatively minuscule.

An interesting argument? Sure. But I don’t see politicians giving up the income tax any time soon.

This is Common Sense. I’m Paul Jacob.

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subsidy tax policy

Oh, SNAP!

junk food, SNAP, welfare, food stamps, RFK, health

It appears that recipients of “food stamps” (the Supplemental Nutrition Assistance Program, or SNAP) “often have lower diet quality and higher rates of diet-related health issues compared to non-participants,” according to an article in healthjournalism.org. 

“While it’s unclear whether SNAP directly causes these outcomes or if other factors are at play, some argue that the program, at minimum, sustains unhealthy eating habits by not restricting purchases of nutritionally poor foods.”

Among the “some” who argue for restrictions is Robert Kennedy, Jr., head of Health and Human Services. He promises to purge unhealthy foods from the subsidy list.

Currently, the taxpayer-funded “benefit” may “be used for ‘any food or food product intended for human consumption,’ except alcohol, tobacco and hot foods, including those prepared for immediate consumption. Critics argue that SNAP’s allowance for purchasing sugary snacks, soda and junk food promotes unhealthy eating habits, which can lead to obesity and other related health issues.”

The critics are undoubtedly correct; indeed, the proposed limitations will almost certainly be too tame. 

If the program must exist, it should do good without enabling demonstrable harm. So instead of a cumbersome and extensive list of prohibited food items, there should be a concise list of allowed categories:

  • uncooked meats and dairy products without added sugars
  • fresh, frozen, dried, and canned beans, fruits and vegetables
  • staple ingredients of traditional meals, such as flour, spices, and oils

Some rail against any idea of restricted benefits, but government handouts are not there to expand the “freedoms” of the poor; they are provided to help folks weather hard times. 

The freedoms of taxpayers have already been sacrificed for their sake. Forcing taxpayers to watch SNAP’s EBT card users in the grocery line buying candy and sodas adds insult to the benefactors while injuring the beneficiaries.

This is Common Sense. I’m Paul Jacob.

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