Category: tax policy

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ideological culture tax policy

A Social Contract You Can’t Refuse

Massachusetts U.S. Senate candidate Elizabeth Warren really worked up “progressives” with a rant about “fair taxation.”

“There is nobody in this country who got rich on his own — nobody.”

As A. Barton Hinkle points out, no one suggests otherwise. But the real meat of her argument is worth studying … for a peculiar pathology in logic:

You built a factory out there? … You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-​forces and fire-​forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did.

Upon this rests her case for ramped-​up progressive tax rates.

Apparently, according to Ms. Warren, successful businessfolk are takers only. But all along the way, businesses pay for the services they hire. Indeed, they pay for roads, too. Truckers, for instance, pay special weight-​rate taxes and licenses for carrying heavy loads across roadways. 

Her “argument” no more justifies government taxing truckers or factories more than a similar argument, mutatis mutandis, would allow the kid who mows your lawn to reach into your wallet when you aren’t looking.

The social contract doesn’t originate the way Warren specifies. Her logic establishes only that she’s not thinking clearly about obligations and lacks an appreciation for making a business succeed.

This is Common Sense. I’m Paul Jacob.

Categories
tax policy too much government

Excise Excitement Exorcizes E‑Biz

Retail sales taxation became vogue among the states of the union during the Great Depression. When other revenue sources dried up, many states decided to nab potential taxpayers at each transaction.

We’re in a depression again, and numerous legislatures are looking to expand their retail sales tax base by targeting out-​of-​state Internet purchases.

California has made the biggest stink about this, and its fight with Amazon​.com has been in the headlines for some time. Though the issue has been put “on hold” for a year, the Assembly’s rapacity has produced at least one effect. It has driven many online businesses out of the state, and severely curtailed the online sales of many California brick-​and-​mortar concerns.

Take Shopobot, a new online business. One of this San Francisco company’s biggest revenue streams was Amazon. And Amazon dropped it like a hot rock.

So what did Shopobot do? It fled California for the cooler Seattle, Washington.

Why skip Oregon — which lacks a retail sales tax? My guess is that Oregon’s political environment struck the Shopobot folks as nearly as crazy as California’s, so heading further north made more sense, to sit beside Amazon itself, and across Lake Union from Adobe’s compound, er, “campus.”

The online sales tax question is widely perceived as a problem. The only solution, I guess, is to let Congress do its constitutional duty and “regulate interstate commerce.”

Amazon sure wants that.

But why am I not optimistic about a good solution?

This is Common Sense. I’m Paul Jacob.

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free trade & free markets ideological culture tax policy

Greed and Bigotry on the Campaign Trail

On the video page featuring Mitt Romney’s notorious “corporations are people” comment — the one I clicked to, anyway — every comment was negative, with jokes like “Did you hear that S&P downgraded the Tea Party credit grade to KK+?” and economically illiterate whoppers like “Corporations do not help anyone except those who own them or do what they say.” It’s saddening to see ignorance and bigotry so self-​righteously maintained by everyday Americans.

Yes, bigotry.

For Romney was right: Corporations are made of people. Those who roil with hatred for corporations, singling them out for more regulation or greater taxation, are attacking actual living, breathing people, who, as Milton Friedman pointed out, are made up of three classes of just plain folks: the owners, the shareholders, who are people; the corporation’s hired workers and managers, who are people; and served customers, that is, people who have chosen, sans duress, to buy stuff from the corporations. 

Economist Steven Horwitz, writing in the Buffalo News, cited one study that estimated that “45 percent to 75 percent of the burden of a corporate tax increase is borne by workers,” and noted that, if profits fall, fewer dividends would go to stockholders.

And “stockholders” are often nothing other than workers’ retirement funds. 

Yeah, soak the older people. That should make corporation-​haters feel good.

Setting aside “some other people” to hate is exactly what anti-​corporatists are doing. It’s bigotry. And it’s ugly … and de-humanizing.

This is Common Sense. I’m Paul Jacob.

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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.

Categories
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.