Category: tax policy

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national politics & policies tax policy

Tax Reductions Ahead?

As the president yammers on about making the rich “pay their fair share,” behind the scenes his administration has suggested reducing corporate tax rates by seven points. Meanwhile, Obama’s main challenger, Mitt Romney, promised a full ten point rate cut, if elected.

Why? By international standards, American corporate taxes are obviously way too high.

The U.S. effective tax rate on new corporate investment sits at 35.6 percent today, which, write Duanjie Chen and Jack Mintz for the Cato Institute, “is almost twice the average rate for the 90 countries” the duo studied, in “Corporate Tax Competitiveness Rankings for 2012.”

The U.S. has higher corporate tax rates than France.

And India, Colombia, Brazil, Japan, Venezuela, Korea, Russia, Costa Rica, you name it. This is not something we want to be No. 1 at.

Well, at least Argentina, Chad and Uzbekistan tax at even higher rates.

There’s no consolation in others’ folly, though.

The authors look northward, to Canada, which, since 2000, made some huge adjustments downward on tax rates affecting businesses: 15 percent cuts in federal statutory tax rates, eliminating most capital taxes, removing sales taxes on capital goods, and scaling back on special preferences that tend to make taxation such a mess there as well as here. And all the while revenues from these taxes have remained stable per GDP.

Could we get lower corporate taxes, here? Well, this is not an area where those on the left can enviously eye their beloved European social democracies to make their usual, tedious case for higher taxes. Norway’s rates are ten percent lower than ours, and Sweden’s, Denmark’s and Finland’s are lower yet.

This is Common Sense. I’m Paul Jacob.

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tax policy

Dutch Treat

As long as there are taxes, there will be tax avoidance. This turns out to even be true of at least one government operation:

The state-​owned Dutch railway company NS has managed to cut its Dutch tax bill by at least €250m since 1999 by routing the cost of new trains through Ireland, the Volkskrant reported at the weekend.

The tax dodge means the treasury has lost out on income generated by a company it owns, the paper points out. The finance ministry, meanwhile, is said to be ‘unhappy’ about the arrangement, which it has been aware of from the beginning.

Through some tricky maneuvering, the NS’s Irish financial wing bought trains in Ireland, where taxes are lower, and then rented the new trains to the Dutch public railway. Even though the trains had never run in Ireland.

Ah, the advantages of globalism!

Political posturing then ensued, with talk of “lack of morals” rampant. An economist touted for his expertise on railways charged that the “NS is busy ‘playing at being a company.’ But the NS is not a company but a government service, he said.”

Government service or no, the players at the NS had a very businesslike response, claiming (quite plausibly) that the “tax route” allowed it to “better compete in the market.”

The lesson I draw from this is one some politicians won’t want to hear: High taxes are bad. They cripple enterprise, including government enterprise. When your government operations turn to elaborate tax-​avoidance schemes, you should be planning tax decreases. And accompanying decreases in spending.

This is Common Sense. I’m Paul Jacob.

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local leaders tax policy

CARE Wins

Communist dictator Mao Tse Tung was fond of quoting Laozi, who said, “A journey of a thousand miles begins with a single step.”

Dennis Collins is neither a Taoist philosopher nor a dictator. The physician’s assistant, husband and father from Jacksonville, Illinois, is fine with that. “I’m just a private citizen,” says Collins. “I saw something that I thought wasn’t right and needed to be righted and it worked out for us.”Dennis Collins VOTE NO TAX INCREASE

What Collins saw was a ballot referendum that would have raised the sales tax in his county. With his area facing a tough economy and job losses, he didn’t think raising taxes made any sense.

So he took the first step; he called some neighbors and, together, they formed “Morgan County CARE.” CARE stands for Citizens Acting for Responsible Education.

“We knew we were outgunned from the start, but we just did the best we could,” Collins recalls in a video produced by the Illinois Policy Institute.

On a budget of just $3,100 and shoe leather, group members went door-​to-​door and made countless phone calls. “We went out and gave an honest message,” Collins explains, “and ended up making a change.” They defeated the tax hike.

“When I go to the store and see the sales tax receipt it feels very good,” Collins explains after the victory at the polls. “I’m thinking about the less fortunate and the elderly that are on fixed incomes and knowing they aren’t going to have to struggle any more than they currently are.”

“Individual citizens do need to step up and try to make change,” says Collins. That’s not the voice of a history-​making dictator or a philosopher, but a community-​protecting American citizen.

This is Common Sense. I’m Paul Jacob.

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national politics & policies tax policy

Fair is Fair

President Barack Obama is not targeting the country’s 99 percent against the wealthiest 1 percent. In a news conference, yesterday, he instead singled out the top 2 percent.

Even though they account for 46 percent of all income taxes collected, Obama says members of this group don’t pay their “fair share.” Meanwhile, the bottom 50 percent of income earners pay just 3 percent of income taxes. 

Though the president readily confesses to being in that top two-​percent, sadly I’m not. But hey, even if I’m not rich, this country is as much mine as any wealthy person’s. If tax hikes truly are necessary (and this is for the sake of argument — I do not believe they are), shouldn’t I be part of his tax-​hike solution to our national deficit and long-​term debt?

Even those making less could afford to hand over an extra percent or two of their income for essential government services, eh?

And why leave out the poor? A surcharge of $20 (or $10 or $2.50) a year — even if that’s only removed from their earned income credits or food stamps or welfare payments — would put their “skin in the game.”

We should all be in this together, so why didn’t Obama propose a solution that included sacrifices by everyone?

My guess: It has nothing to do with revenue, everything to do with November’s election.

Obama is asking Congress to extend the Bush tax cuts for everyone making less than $250,000 a year. But he seeks a mere one-​year extension.

Why?

My guess is that the over-$100,000 cohort is next on his list.

But he needs their votes, first.

This is Common Sense. I’m Paul Jacob.

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tax policy

French Rolls

Jim Dixon, Kingsley Amis’s infamous Lucky Jim, put the logic of wealth redistribution in everyday terms: “If one man’s got ten buns and another’s got two, and a bun has got to be given up by one of them, then surely you take it from the man with ten buns.” Remarkably simple, leaving out, as it does,

  1. the making of buns;
  2. the effect of expropriating buns now on future bun production;
  3. trade in buns and
  4. consequent changes in ratios of bun ownership, sans expropriation;
  5. what effect the nabbing of buns has on the demand to take more buns in the future; and
  6. the necessity of taking buns in the first place (which Lucky Jim’s interlocutors noted).

Think about it longer than a minute, and it’s easy to see that the “soak-​the-​rich” plan quickly runs into trouble, one bit of difficulty neatly stated in the old adage often attributed to Margaret Thatcher: “The problem with socialism is that eventually you run out of other people’s money.”

Sometimes you even run out of other people. As France may show next.

Socialists there have won the recent elections. They promise to reinstate the old, ugly wealth tax, as well as up the income tax on “the rich.” And so of course some of the richer French folks contemplate exile — at least as far as the welcoming cantons of Switzerland.

There are problems with this option, though. Under Sarkozy, the French government had instituted a whopping exit tax. But, if Mathieu van Berchem is to be believed, even this will prove “unlikely to stop any ‘exodus.’ There are often more reasons to leave than to stay, while the Socialist government could turn on the wealthy even more.”

If so, expect future French buns to have Swiss crosses stamped upon them.

This is Common Sense. I’m Paul Jacob.

Categories
judiciary tax policy too much government

Supreme Oxymorons

With the Supreme Court’s decision in National Federation of Independent Business v. Sebelius, the Patient Protection and Affordable Care Act has achieved its first milestone: The repudiation of logic, the Orwellian assertion that A both is and is not A.

The reform package, popularly known as Obamacare, requires that individuals buy medical insurance. If you fail to do so, the law imposes a fine.Justice Roberts

The zillion page legislation refers to this financial penalty 18 times. It never refers to a tax.

Its principal booster, President Obama, repeatedly insisted it wasn’t a tax. And as Justice Antonin Scalia wrote in his dissent, “We have no doubt that Congress knew precisely what it was doing when it rejected an earlier version of this legislation that imposed a tax instead of a requirement-with-penalty.”

But Chief Justice John Roberts, a George W. Bush-​nominee, joined the four liberal justices to declare that what was not a tax, when proposed and passed, now is a tax — so that it could be declared constitutional under Congress’s taxing power. Roberts explains:

Congress did not intend the payment to be treated as a “tax” for purposes of the Anti-​Injunction Act. The Affordable Care Act describes the payment as a “penalty,” not a “tax.” That label cannot control whether the payment is a tax for purposes of the Constitution, but it does determine the application of the Anti-​Injunction Act.

Only were Obamacare not a tax could it be litigated at this time under the Anti-​Injunction Act. Accordingly, the majority says it is not a tax. But it can only be ruled constitutional if it is a tax. So, the High Court calls it a tax and not a tax at the same time.

The dissent called this “remarkable.” Stronger words spring to mind.

This is Common Sense. I’m Paul Jacob.