Tag: taxes

Politics vs Economics

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I was interested in the idea of six economic policies that economists across the spectrum support and politicians across the spectrum oppose. It’s not that I am surprised that there are big ideas that make perfect sense from an economic perspective which are politically unpopular – after all, doing what has been deemed to be politically possible has led us to a dire economic position. Once I read the six policies I found my reactions to be interesting.

Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. I have to admit that is one deduction that I have always wanted to keep but the fact is that it is not economically beneficial overall. The people who benefit the most are those who least need the deduction.
End the tax deduction companies get for providing health-care to employees. This is one that I have long felt should be enacted. Many people are unaware of this deduction but I think if they understood how it works and what effect it has on our health care costs they could realize that it should be eliminated.
Eliminate the corporate income tax. Completely. I can easily see why this one is politically unpopular but, like the deduction for providing health care for employees the net effect is to remove capital that would otherwise be used to create jobs or increase wages.
Eliminate all income and payroll taxes. All of them. For everyone. I can easily see why this is politically unpopular but the logic is the same as eliminating corporate taxes. I especially liked their explanation on this one: “Taxes discourage whatever you’re taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs.” For those who are squeamish about this they go on to encourage the creation of a progressive consumption tax to replace it – this isn’t simply a starve the government proposal.
Tax carbon emissions. This is the first of their proposals that I am not sure I support. I recognize their justification for the policy but I’m not sold yet. This is really just a new version of a tobacco tax and I’m not sure that taxing tobacco has really accomplished what proponents might have hoped. Also, I consider that such a tax might distort the market in adverse ways that we have not yet considered.
Legalize marijuana. I’m not a fan of the war on drugs but like the carbon tax I am not prepared to jump on board with this idea yet. I have heard the arguments and I recognize a certain amount of logic behind it but I am dragging my feet for now. I figure that to be intellectually consistent anyone pushing such a proposal should at least include taxing marijuana like we tax tobacco and like they are proposing to tax carbon.

So there they are. Six proposals and I really like at least four of them. The other two would take some convincing.

Tags economics, government, policy, taxes

State

Taxes: Supply vs Demand

The bulk of the discussion at the legislative town hall meeting last week was focused on fiscal issues of one kind or another. One thing that was briefly touched on was the potential return of sales tax on unprepared food. I have always been a fan of not having that tax, because of its supposedly regressive nature and because unprepared food is generally what I spend my money on, and I see no reason to volunteer for higher taxes on it. A couple of statements in that brief discussion got my brain thinking about some different aspects of tax policy.

One statement that someone made was that when the tax on unprepared food was eliminated the stores simply raised their prices accordingly so that the savings went into their pockets rather than taxpayers. That didn’t strike me as accurate, but even if it was accurate it is no excuse to reinstate the tax – the stores would let consumers absorb the taxes on the now higher prices rather than lower the price to accommodate the tax.

Sen. Liljenquist mentioned that people don’t tend to buy luxury items in down economies. When combined with the fact that our expectations fo government tend to increase in down economies I saw why governments tend to grow endlessly – there is generally an inverse relationship between our demand for government services and our ability to pay for them. When times are tough we demand more and politicians do their best to oblige us. When times are good we tend to expand government in areas that were not previously considered crucial by eating into any taxes that exceed our recession-limited budgets. When times become lean again the once-discretionary programs are viewed as essential and demand greater sacrifice from citizens to maintain the programs that would have been considered outrageous in the previous downturn.

From this perspective it makes more sense to favor regressive or at least “fair” tax schemes where those with the least ability to pay also have a vested interest in the tax rates so that they are less likely to get extravagant when times are generally better and so that the tax revenue is generally more stable. It is simply foolish to base our most essential services on revenue sources that are unavailable when the services are crucial.

I’m not trying to argue that luxury goods should be tax-exempt, but if they form the basis of our tax revenue for essential services we will always be in for gut-wrenching decisions whenever their is a dip in our economic outlook.

Tags Dan Liljenquist, economics, House 20, Senate 23, taxes, thoughts, town hall

State

Return of the Food Tax

Curtis Haring is concerned about the possibility that the state legislature will reinstate the food tax that they repealed all too recently. Considering that the state is facing a budget shortfall in the neighborhood of 3/4 of a Billion dollars, it is a very legitimate concern for Curtis and a very legitimate consideration for the legislature.

I wish that I could provide a link to the poll Curtis cited showing that 68% of Republican political insiders who favor bringing back the tax on unprepared food. (Curtis has now provided the link to that poll – thanks.) On the other hand I can provide a link to a report from Senator John Valentine stating that Governor Herbert has submitted a budget devoid of any tax increases. I hope that budget is also free of numerous fee increases, but either way I recognize that it is the legislature and not the Governor who will ultimately pass a budget bill to deal with the shortfall.

Amazingly, amid his criticism of what he expects out of the Republican legislature, Curtis fails to mention even a hint of disappointment with Democrats despite his acknowledgment that the same poll showed that 81% of Democratic political insiders favored reinstating the food tax. (With the link to the poll Curtis also provided the correction that 81% of Democratic political insiders are against reinstating the food tax.) While I hold out hope that the food tax will stay dead, based on what Senator Valentine said about the Governors proposed budget, I am absolutely confident that if the food tax returns it will be the result of the democratic super-minority in the legislature being unwilling to make necessary cuts along with a good chunk of Republican legislators who do not have strong principles against government control of virtually everything. It will be the Democrats and these semi-principled Republicans who are unwilling to make unpleasant cuts in waste and some not-truly-critical programs who force the return of the food tax if it does come back to life.

Looking forward to the next legislative session I would give at least 50% odds that the food tax returns to Utah. If it does, I hope that final suggestion that Curtis makes – that any tax increases (and I would add fee increases) in the budget have a sunset clause built in so that the legislature is required to revisit those increases as the economy recovers in the next couple of years – is attached to the budget bill that finally passes.

Tags connections, legislature, taxes, Utah

General

Hit Them Where it Hurts

[quote]As Congress finds new and ever more inventive ways to spend money (both real money and imaginary money) more and more voters are waking up to find themselves becoming fiscal conservatives. First off, I must say that there are not nearly enough of us among the voters and secondly I feel compelled to add that we would be in a much better position to be taken seriously if there had been many more converts to the cause while Bush was still in office.

Earlier this week a friend of mine asked for my thoughts on an idea he had to slow and/or reverse the growth in government spending. (I feel compelled to state that said friend was awake to this issue well before Obama was elected – lest anyone mistakenly think that he just woke up to this in the last week.) His idea consists of two parts and boils down to this:

Have states set the wages for their Congressional delegation.

Have each member of Congress pay for 0.00001% of the federal budget out of their own paychecks. (That’s one out of 10 Million dollars for each member of Congress.)

My initial response was to point out the fact that it would take a Constitutional amendment to make the first part legal due to the provisions of Article I Section 6 that their salaries be paid out of the U.S. treasury (not that state money is not already mostly from the U.S. Treasury).

After thinking about the proposal more I recognize that it only works if both parts are enacted because if only the second portion is enacted it would only take about 30 minutes for the House to pass emergency legislation (or simply attach it to that proposal if they want to be efficient) in which the calculation for Congressional salaries is changed from it’s current “$170,000 plus an automatic annual cost of living increase” to “0.000012% of that year’s annual budget plus $169,999.99 plus an automatic annual cost of living increase.”

The real kernel of the idea was to hit Congress in the wallet – where it hurts – for the egregious budgets they pass from year to year like kidney stones in the national economy. For myself I have long believed that we should make congress feel the pain of their overspending by having them be responsible for a portion of their deficit spending – say 3 times whatever portion of their budget is financed by deficits. (In other words, if 15% of the budget is deficit spending then members of Congress lose 45% of their salaries – and probably the same portion of their budget for staffers etc. for the year – to help offset their budget.) This only works if there are no exceptions (“oops, we had an emergency and had to overspend – but our regular spending didn’t include a deficit so we should not pay a penalty.”) On the other hand they should also receive some incentive for wise management by offering a bonus of one tenth of any percentage surplus they run for their personal salaries. (That would be, if 10% of revenues were in excess of the annual budget they would get a 1% bonus on their salary for the year.)

Theoretically this would have the downside of encouraging them to raise taxes to cover their spending priorities thus causing citizens to bear a greater cost for their government. Personally I think that would be beneficial because people would spend less time clamoring for more government handouts because they would almost universally feel the effects of any spending increases. Such a change should also have the side effect of having people be more engaged in the process of removing representatives who ignore them because they would be more likely to feel the effects of whatever votes their elected officials cast.

Tags change congress, connections, deficits, ideas, money, taxes

National

Future Amendment – Fiscal Discipline

Post author By David
Post date September 9, 2009
2 Comments on Future Amendment – Fiscal Discipline

I believe I have been very clear about what I think of the 16th Amendment. For anyone who wasn’t sure – I think it should go the way of the 18th Amendment and be repealed. Not long ago I found a group that feels the same way and is pushing for the 28th amendment to do just that. Their website does not give their proposed amendment a prominent a place as it deserves so I will copy their proposal here.

Section 1. The 16th Amendment to the Constitution of the United States is hereby repealed.

Section 2. Congress may collect no revenue by any means other than a flat individual income tax not to exceed 15% of an individual’s earnings, a flat corporate tax not to exceed 10% of net revenues, and actual user fees for services. All citizens and businesses shall be taxed at the same rate, and no exceptions, exemptions or credits will be allowed.

Section 3.

A. Any budget passed by the Congress must be funded by actual revenues collected through taxes as described in Section 2. Except in time of War as defined below, no deficit spending, borrowing on future funds, borrowing from other entities or other mechanism to meet budget requirements will be allowed.

B. For purposes of this section, “War” shall be defined as hostilities declared by the President of the United States in his Constitutional role as Commander-in-Chief, and duly authorized by the Congress under the terms of the “War Powers Act” of 1973. Any funds borrowed shall be used exclusively for executing that War and shall be re-paid entirely no later than 15 years from the end of the War.

Section 4. All agencies, programs, entitlements and other devices that will be excised by budgetary requirements will be returned to the responsibility of the individual States. No federal regulations or legislation will dictate how the States fund or execute such devices.

Section 5. The Congress may not make State eligibility for redistribution of revenue contingent on compliance with regulations or legislation that has the effect of a nationally uniform standard.

Section 6. Those areas of federal responsibility prescribed by the original Constitution will have budgetary priority. No bill will be passed that funds any other concern without first meeting the budgetary requirements of these areas. No funding will be included in the budget for a concern that is the responsibility of and reserved to the States.

Section 7. Article I, Section 8, Clause 3 of the United States Constitution is hereby amended to read as follows: “To regulate commerce with foreign nations and with the Indian tribes”

This proposed amendment solves a number of problems that currently plague our approach to government spending. The first two sections remove the sixteenth amendment and replace it with an income tax that is limited to 15% on individual incomes and 10% of corporate profits with no deductions or credits. I’m sure the intent of those rates is to be somewhat close to budget neutral. Although I would like to see budget reductions I think a constitutional limit on income tax rates is a positive step.

The third section stipulates that we not engage in deficit spending except in time of war. Section 3(B) defines war – although I appreciate the mandate that war debts be repaid within 15 years of the end of the war I see two problems with this section: first and most importantly, the President is not authorized to declare war (their definition of war should require that war be defined as conflicts that have been declared by Congress); second, requiring funds to be repaid within a set time after the end of a war would be a disincentive to acknowledge the completion of the conflict (it would be far better to require deficit war spending to be repaid within a set time after the beginning of the war – that would encourage the ending of conflicts both to hold down costs, and to allow for the repayment in a timely manner rather than delaying the date when repayment was required by keeping the “war” open).

Sections 4 and 5 help to restore state sovereignty in the use of their funds consistent with the 10th amendment. In Section 6 I would strike the word “original” as it may be necessary at some time to fund something through the government that was not included in the original Constitution.

Section 7 narrows the much abused commerce clause so that the government no longer has any excuse to regulate what I choose to pay my neighbor for mowing my lawn simply because he purchased gasoline that had been shipped across state lines.

Overall I think this a good proposal to remind people inside and outside government that Congress was not intended to babysit every aspect of society and commerce in the nation. It’s sad that such a reaffirmation would have to be written into the Constitution – but evidence suggests that it does need to be reaffirmed legally in that document.

Tags amendments, Constitution, fiscal restraint, future, taxes

National

Money Down the Drain

A little statement from an article titled “Cash For Clunkers”: Did It Work? got me wondering about the fate of three hundred million dollars.

When the $3 billion is exhausted, roughly 600,000 vehicles will have been swapped for more fuel-efficient models, based on statistics released from the government so far.

Do the math there and we find that if every single “Cash for Clinkers” deal returned the maximum $4500 to the person trading their car in there was still another $500 paid by the government for the deal. For 600,000 cars that makes $300,000,000 that went into someones pocket. (This does not count any other hidden costs of the system which may never be revealed in losses to other businesses or interest paid by people who already had a working vehicle that they owned outright.) I’d like to know how much of it went to dealers, how much went to paying for the destruction of the “clunkers” and how much was government setting up a website and processing paperwork.

One thing is for sure, we have a huge double standard operating when insurance companies are considered greedy when 2% of their gross income is profit while government is considered efficient when only 10% of their cost goes directly to program overhead.

Tags economics, government, money, taxes, waste

National

Bad Year for Liberty

photo credit: Leo Reynolds

I consider 1913 to be a very bad year for liberty because in that year the 16th and 17th amendments were both passed. Each of these amendments is a lever that loosened the moorings that had limited the power of the federal government for 126 years to that point. It’s true that before either of those amendments were passed the actions they authorized were already in use but by codifying the legality of an unlimited income tax and the direct election of senators removing even the appearance of states as sovereign political entities it became nearly impossible to lend any credence to the notion of limited national government held in check by the interests of state and local governments as well as the prevailing interests of the body of voters.

There are many conservative pundits calling for a scaling back of government. From what I have observed most of them seem to want to go back 30 or 50 years. Some may even be bold enough to suggest going back 80 years before the New Deal and the great depression. Very few understand that to truly have a limited government again we must go back at least 96 years to rest the two levers that were thrown in 1913.

Tags amendments, Constitution, Elevated, history, ideal, senate, taxes

General

Constitutional Amendment 16

Post author By David
Post date July 31, 2009
4 Comments on Constitutional Amendment 16

The longer I live and the more I study, the more convinced I become that the sixteenth amendment is the greatest assault on liberty in our Constitution.

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

The amendment was passed as a benign revision to the Constitution, amending Article I Section 9 which had specifically prohibited Congress from laying any direct tax. Without this amendment the government could never have sufficient funds to substantially exceed their constitutional authority.

This amendment was passed in order to make it possible to levy income taxes – the most sinister aspect of income taxes being that government now holds first claim on the income of its citizens. If I don’t wish to support what the government is doing my only legal way to not support it is to have no income (or at least, less income than they are interested in taxing). While it will never happen in my lifetime (and probably will never happen period) the fact that the government has first claim on my income means that Congress could claim everything I produce and take it as income tax. So much for the right to property because my property (and yours) is now a gift or loan from the government.

Tags amendments, Constitution, documents, history, liberty, taxes

culture National

Political Action vs Reaction

Post author By David
Post date April 15, 2009
15 Comments on Political Action vs Reaction

It’s tax day and I doubt anybody who reads this has not heard in advance about the many "Tea Party" events that have been planned around the country for today. Ive been hearing about them from various sources for months and I have been conflicted in my feelings related to such activities. From a constitutional perspective we have a first amendment right to free speech and peaceable assembly so barring any violence there is no question as to the legality of these events. My conflict is in the way the events are being promoted.

Many of the public figures who are promoting these events paint them as a kind of legitimate political action. Among those who really care about the issues of constitutionally limited government and perpetual government deficit spending there are many, such as myself, who recognize that these tea parties have no possibility of bringing about real political results – they are a grand publicity stunt played off of the frustrations of one segment of the population. As such they are merely a political reaction and political reactions are easy to spin. Promoters are spinning this as an argument against larger government and deficit spending. Detractors are spinning it as a bunch of ridiculous anti-Obama rallies.

Real political action, in contrast to political reactions, is very difficult to spin. It takes much more time and effort than simply gathering some press coverage and getting people to show up one day carrying signs and shouting in megaphones. Real political action, for those who are interested, would include regularly seeking information on issues of interest to you. It would include attending county party organizing conventions. As Rob Miller so aptly said, "If you believe that you have something to contribute to the American experience, you should come to a county convention." In Davis County that would be this Saturday (4/18) for both Democrats and Republicans. If you really want to make a difference you should be looking to be a delegate to county and state party conventions (or even national conventions if you are so inclined). It means participating in those caucus meetings and conventions where parties are organized and candidates are chosen. It means not letting your party get away with ignoring its principles in the name of political expedience. (That does not preclude the possibility of compromise, but it does reject the argument that all of politics is compromise.)

Thankfully today I have come to my own resolution regarding that internal conflict. Real political action is what this country desperately needs from many more people of all political persuasions. We need people who are willing to put in the work and engage in civil debate even when the debate gets spirited. While political reactions do not qualify as real, effective political action they can serve as a first step for those who have not participated in real political action before. I hope that whatever else happens with the tea party events we will see many among the attendees who will start to take part in lasting political action.

Tags civic participation, deficits, Obama, taxes

National

Two (or more) Wrongs Don’t Make a Right

Post author By David
Post date March 20, 2009
No Comments on Two (or more) Wrongs Don’t Make a Right

I was listening to Peter Schiff’s Wall Street Unspun for this week and he said something that cemented a change of perspective I had been considering regarding the AIG bonuses. I had been thinking about this idea of taxing the bonuses at 100% and relizing that it amounted to an ex post facto law – which is specifically forbidden in the Constitution. What Peter said was that Congress was wrong to bail AIG out in the first place and that if they hadn’t AIG would not be able to pay these bonuses now. Secondly, he said that if they had wanted to stop the bonuses they should have done so up front by making it a condition of receiving their bailout money. (He also accurately pointed out that the excuse that these bonuses should not be necessary to reatain AIG employees in this economy – few people would leave their jobs in a climate of rapidly rising unemployment and smart companies should be avoiding the employees from the division that crippled a company the size of AIG.)

Between the Constitution and the logic of Peter Schiff I realized that as much as I dislike the fact that these bonuses are being paid I cannot support Congressional action to tax them back after the bonuses have been paid and after the bailouts have been given. Simply stated, Congress is acting immorally anytime they try to change the rules after making their promises – it’s solid proof that they should not have made those promises in the first place.

Tags bailout, change congress, money, taxes, unconstitutional