Category: tax policy

Categories
national politics & policies tax policy too much government

Let’s Jump!

When I was a kid, my mother would rhetorically ask, “If your friends jumped off a cliff, Paul, would you?”

Moot question now. My friends don’t dare jump, nor do my political enemies. Face it, Ma, nobody wants to do a swan dive off the fiscal cliff.

Except for me.

It now appears that enough House Republicans will join Democrats in voting to raise taxes on the so-​called “wealthy,” thus hiking up taxes on some of my countrymen. It will do little to raise revenue, and nothing to control spending.

We taxpayers should stand together. I oppose being divided and conquered. And when they ask us to turn over Spartacus — er, the wealthy — we should each declare, “I am wealthy!”

Debt-​delivering, big-​spending politicians relentlessly provide us with pious pronouncements to the effect that, though we simply must stop piling up such debt and cut wasteful and out-​of-​control spending, because such fiscal responsibility remains unthinkable, at present, we must postpone responsibility till later.

They see the fiscal cliff and insist we climb higher.

Let’s face this fiscal cliff honestly, let’s not pretend that the acme of responsibility is funding government on the backs of the few. Besides, if there is no political will to make spending cuts today or tomorrow, why would anyone expect such backbone to miraculous appear … later?

I see the cliff and say, “Let’s jump!” While we can still land safely.

This is Common Sense. I’m Paul Jacob.

Categories
individual achievement initiative, referendum, and recall tax policy

The Lion of Oregon

When I think of Oregon, I often think of Don McIntire. Last Friday, 74-​year-​old Don died from a heart attack suffered at home.

I knew him as a great storyteller, with a Mark Twain sort of wit. But McIntire was best known in the Beaver State as a longtime taxpayer activist, specifically the main proponent of Measure 5, a 1990 citizen initiative that limited the state’s oppressive property taxes.

Then-​Governor Barbara Roberts hyperbolically predicted that if voters passed Measure 5, “people would die.” Nonetheless, voters enacted the citizen initiative … and lived to tell about it.

Learning of McIntire’s passing, Jason Williams with Oregon Taxpayers United recalled the many phone calls he’d received from senior citizens, expressing their “heartfelt gratitude for Measure 5” and saying, “If it wasn’t for Don McIntire, I wouldn’t be able to live in my home today.”

Radio talk show host Lars Larson recognized McIntire as “a tax hero to millions of Oregonians whose taxes were reduced by literally billions of dollars because of the tireless efforts of this man.”

“Don McIntire was a giant in Oregon’s limited government movement,” said Cascade Policy Institute founder Steve Buckstein. “He gave tirelessly of himself for literally decades to reign in the government he thought was too large and too intrusive.… Every Oregonian who wants to keep government in check owes Don McIntire a huge debt of gratitude.”

Thanks, Don, for siding with taxpayers. Rest in peace.

This is Common Sense. I’m Paul Jacob.

Categories
national politics & policies tax policy too much government

Avoid the Big Gov Trap

We do not face just one problem, but our many problems tend to come down to one thing: trying to do too much through government.

Last weekend, at Townhall, I noted that the most wildly popular economic policy doctrine of the last hundred years, Keynesianism, has not — its proponents say — been properly given a chance during the two biggest financial contractions of our time, the Great Depression and the recent mortgage-​backed securities implosion. In both cases, more money was needed for proper “stimulus.”

Ironic, perhaps, since Keynesianism has been used as an excuse to run deficits and increase debt for scores of years.

Yes, even a doctrine designed to play into the hands of politicians gets abused by politicians.

The lesson: Excuses to grow government are not revolutionary insights, they’re traps.

Yesterday I talked about how the “Laffer Curve” point where raising the tax rate actually reduces revenue is lower for capital gains than for general income. But one consequence of a revenue-​maximizing capital gains rate is that there would then be rich investors who wind up paying a smaller percentage of their incomes in taxes than do common laborers.

Tax fairness is an issue that should not be ceded to those caught in the clichés of the age. Think of tax fairness, instead, as a rationale for a limit. Not as an excuse to raise tax rates punitively, hatefully, foolishly (like the current president wants).

Bring all tax rates down to the level of the tax with the lowest revenue-​maximizing rate. Don’t raise capital gains taxes, lower the income tax. 

Taxes would then be fair. And government would have to be reduced to accommodate the fairness, and thus more limited.

Less of a trap.

This is Common Sense. I’m Paul Jacob.

Categories
ideological culture tax policy

Curvewise, Gainswise

The so-​called “Laffer Curve” — the graphic representation of the varying relationship between tax rates and tax revenues — really bugs people left of center.

The curve maps an economic reality, showing that not all increases in tax rates can increase tax revenues. Why object to reality?

Perhaps because, on the left, taxes are seen less as a practical means to raise government revenue than as an expression of one’s values. The more “leftist” one is, the more equality matters, which too often boils down to: the more one wants to punish the rich. Higher rates stifle the economy and garner less revenue? Big deal. Consequences be damned. One’s values must be expressed.

This came out in Barack Obama’s first presidential campaign. He famously didn’t care whether a capital gains tax rate increase would decrease revenues, as has happened in the past. For him, “fairness” was more important.

Interestingly, it appears that capital gains tax rates tend to top out Laffer-​Curve-​wise much lower than income taxes. The reason? One seeks a return on capital from invested savings, but one also fears the possibility of loss.  Risk. Pile higher tax rates onto the already palpable negative of uncertainty, and the investor will be tempted to consume his capital rather than engage further in risking his wealth for less reward.

But I confess: I sort of sympathize with the left’s attitude towards taxation. I don’t really want the government to maximize revenue, either. Government misspends most everything it takes in, so I’d prefer lower rates for reasons maximizing quality, not equality.

I bet that the poor, though, would be far better off were the rich not targeted for extra penalties. But that’s not an egalitarian concern, for me. It’s a humanitarian concern.

This is Common Sense. I’m Paul Jacob.

Categories
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.

Categories
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.