Category: tax policy

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free trade & free markets tax policy

An Attack on Private Pensions

We all know that America’s socialized pension system is, barring major reforms, doomed to undergo major default. But Americans should be nervous about their private pension funds and accounts, too. 

Over at PensionTsunami​.com, the folks at California Public Policy Center have their ears to the ground, listening for rumblings of the next market collapses, a huge bubble bursting in multiple forms of pension systems. A link from that site led me to a Bloomberg article, about Ireland’s bizarro response to that country’s downturn.

And the ominous portent it presents.

You see, Ireland’s politicians are so convinced that they have to “do something,” something big, to jumpstart the economy out of its current depression, that they’ve decided to levy a tax against pensions — a special tax designed to raise 470 million euros a year for four years, to pay for a massive new jobs program.

Forget that government jobs programs rarely do much good. Forget that it’s not government investment which accounts for market progress, but private investment, and that people will invest when they feel secure enough about the future to do so.

Forget that robbing people of their savings for the future tends to make investors less secure, less likely to invest — and thus put the economy in a bigger, longer-​run fix.

Remember, instead, that to a politician nothing is sacred, nothing is out of bounds for a tax or control. 

And that this kind of dangerous public thievery could happen here.

This is Common Sense. I’m Paul Jacob.

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tax policy

At Risk of Drowning

To those who hold that government should be all things to all people at all times, the prospect of cutting back the ever-​escalating level of government spending is a non-​starter. Like their chief spokesman in the White House, they propose a different solution: Make “the rich” pay more. 

Never mind that while President Obama talks about socking “millionaires and billionaires” who “can afford it” with higher taxes, the hikes are actually designed to wallop folks making $200,000 a year. That’s actually a tad less than a million. In many areas, such a salary hardly qualifies one as rich. 

We’re supposed to ignore the fact that federal income taxes remain progressive. The richer you are, the more you pay. That’s why the top five percent of earners pay 59 percent of federal income taxes, while roughly the bottom half pay nothing at all. 

“Fair” becomes slippery.

Also slippery? The real-​world outcomes. Say tax rates were raised enough that deficits might be covered. What would happen?

Just recently I had dinner with a couple of millionaires. “You know, we don’t have to work,” they told me. “We already have enough money to live out the rest of our lives, so if we’re going to be punished tax-​wise, we’ll simply retire.” Comfortably, in fact.

But what about those they employ? What about the enterprises and jobs they won’t create?

Maybe punishing productive folks with even higher taxes isn’t such a great idea.

This is Common Sense. I’m Paul Jacob.

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tax policy

Tax Your Brain First

President Obama thinks that the federal government should tax the rich more, starting by closing itemizations “for the wealthiest 2 percent of Americans.” 

He says this will go a long way to reducing the deficit. But in the very sentence he advances it, he says it would “reduce the deficit by $320 billion over ten years.” Not in the first year, which might amount to something, but over a decade’s long stretch.

Big deal.

But, baby steps. Anything to raise taxes.

Democrats in Congress need to tax their brains, first. 

Unlike the bulk of the population, the rich don’t have to earn more to retire. That’s what it means to be rich. So, the more you take from their incomes, the less incentive they have to go out earning incomes. 

When tax rates rise, greater numbers of wealthy folk switch employment of their capital from productive enterprise (“making more”) to consumption. Not only are they then taxed less, but they employ fewer workers, who therefore pay fewer taxes.

This adds up, as can easily be seen by graphing tax revenue along with top marginal tax rates since World War II. Result? Tax revenues tend to hover just under 19 percent, despite radically different tax rates. As Reason TV’s Nick Gillespie puts it, “Any budget plan based on revenue being better than 19 percent of GDP is just blowing smoke.”

Which suggests where Obama’s audacious hope to resolve the federal budget crisis by raising taxes will end up — in smoke.

This is Common Sense. I’m Paul Jacob.

Categories
ideological culture tax policy

The Audacity of Sleep

During Wednesday’s big speech, just as President Obama laid into Rep. Ryan’s Medicare reform proposal, Vice President Joe Biden skirmished with the Sandman. Zzzzz.

Obama wasn’t boring, though. He had a theme.

As he saw it, the Republicans’ “pessimistic” vision is of an “America [that] can’t afford to keep the promise we’ve made for our seniors” or “invest in education or clean energy” or fix “our roads” or afford to do all the cool things done by South Korea, Brazil, and China.

He didn’t explain how it might have come to pass that our government became disabled. He barely mentioned previous budgets’ waste — on goofy projects, overpayments, duplicated efforts, and undeclared, never-​ending wars. Or how government regulation and subsidy might be the reason many people cannot afford medical insurance.

Or that if the government doesn’t invest in something, it doesn’t mean that private investors aren’t investing.

But he did mention his opposition to “more than $1 trillion in new tax breaks for the wealthy.”

And then came the corker: “In the last decade, the average income of the bottom 90 percent of all working Americans actually declined. The top 1 percent saw their income rise by an average of more than a quarter of a million dollars each.  And that’s who needs to pay less taxes?”

Wow. America’s wealthiest merely “saw their incomes rise”? They didn’t actually do something for their gains?

Maybe Obama was napping while others were working.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets tax policy

How Not To Be in Pictures

Everybody wants to be in pictures, it’s said. Michiganders, who’ve been funding moviemaking with their taxes for years, should try digital cameras and YouTube. The state’s governor, Rick Snyder, has proposed a new budget slicing and dicing the state’s generous (read: foolhardy) film subsidy and tax credit system.

This is called a “blow to Hollywood.” One nifty headline dramatizes the new situation: “Michigan to Hollywood — Get Off My Lawn,” with photo of Clint Eastwood on the porch of his Gran Torino house, wielding a shotgun. 

Over the top. 

Tax credits and tax subsidies given only to moviemakers are wrong on several grounds, as I’ve argued before (see “Knot Cannibalism” and “Cinema Without Subsidy”). Of course, the red tape and high taxes associated with setting up any business are wrong, too. You may say that the state’s gotta raise funds, but it most definitely shouldn’t kill the geese that lay the eggs, golden or Technicolor. 

Taxes should apply equally, all around. Low taxes evenly spread will entice businesses — including moviemakers — into an area, if other locales remain over-​taxed and confusing.

Some will cry “jobs!” but the word isn’t magic. Real jobs can be measured. Michigan’s subsidies created mainly temporary part-​time jobs for Michiganders. According to a commissioned study, “Michigan spent $378,240.74 per job in 2008; $586,779.18 per job in 2009.” 

No film incentive, it turns out, “has generated as much revenues as it has taken from the treasury.”

Cut. Print.

This is Common Sense. I’m Paul Jacob.

Categories
tax policy

A Chill Hits Illinois

That big bump in the night? It was the sound of a massive new tax increase dropping on the backs of Illinois citizens and businesses.

Not long after midnight, Wednesday morning, mere hours before the newly elected legislature was to be sworn into office, the state’s lame-​duck legislature voted to increase the personal income tax by a whopping 67 percent and the business income tax by nearly 50 percent.

That’s lame, all right.

Governor Pat Quinn, who had campaigned in favor of a smaller increase, will sign the bigger tax hike. “Our fiscal house was burning,” he said in its defense.

Is the fire now out? 

Well, there sure is a lot of smoke, and where there’s smoke, there’s … a lot of people making a quick exit.

Remember, people can vote with their feet. “Leaving Illinois,” a study by the Illinois Policy Institute, points out that between 1991 and 2009 Illinois lost one resident every ten minutes.

That’s $16.9 billion in lost state and local tax revenue.

So Wisconsin Governor Scott Walker was quick to offer a safer haven. “In these challenging economic times while Illinois is raising taxes, we are lowering them.”

As William Brodsky, chief executive of CBOE Holdings Inc, argues, “Merely throwing tax dollars at a broken system, without overhauling the expense side of the ledger, compounds the problem…” Bemoaning Illinois’ lost tax advantage in attracting business, Brodsky remarked, “They don’t come here for the weather.”

This is Common Sense. I’m Paul Jacob.