Category: Taxes

Only consumers of redistribution count

Shouldn’t researchers ask you and me what we think?

Most senior citizens who signed up for Medicare’s new prescription drug coverage say they are happy with their plans, but some report that they are not saving money and many say the overall program could be better designed, two new independent studies show.

I’d also say the program could be better designed. Barring the obvious course (elimination), those receiving the “benefits” should pay for them. Those of us not receiving benefits shouldn’t. The phrase private markets comes to mind, but I’m probably being selfish.

Leslie Norwalk, deputy administrator of the Medicare agency, said, “I was heartened to know that we were largely successful.”

Let’s wait more than two months to pop the champagne. The longer-term success might need different standards to determine success.

Cleaning out the aggregator

My server died last Tuesday, locking me out of my site. My hosting company finally resurrected it late Wednesday, but by then my vacation interfered. Rare access to the Internets, as well as general mental decompression, stood in the way of regular posting. So I disappeared for almost a week. In no particular order, here are a few items filling my news inbox while I was away.

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From Reason’s Hit and Run, I think I might be the only person in America who answers Yes and No instead of some other combo.

…, New York Attorney General Eliot Spitzer fielded two questions on marijuana. One: Would he legalize medical marijuana? Two: Had he ever smoked marijuana? The answers: No and yes. The terror of Wall Street has picked up and run with the old Clintonite maxim: Do as I say, not as I did.

Spitzer should’ve been discredited as a candidate for any number of actions he’s taken, but this is just further proof that the people of New York need to see more than (D) when they get in the voting booth. I suppose it should be comforting to know that Virginia isn’t the only state with hack politicians.

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Is anyone shocked by this:

The federal government will need to either cut spending or raise taxes down the road to pay for extending President Bush’s recent tax cuts, the Treasury Department said in a report released [last Monday], dismissing the idea popular with many Republicans that such sacrifices can be avoided.

My question should be rhetorical, but there are many people in this town who will probably be genuinely shocked. Okay, actually, the shocked people will be voters. Those who are not shocked, but are bitter that the Treasury Department could be so treasonous as to impugn the American economy this way, will complain among themselves that their secret is revealed.

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Maybe I can start a network and force Comcast to air it:

After more than a year of inaction, Federal Communications Commission Chairman Kevin J. Martin yesterday addressed a dispute that has kept Washington Nationals games off the region’s biggest cable network.

The Mid-Atlantic Sports Network (MASN), which carries most of the team’s games, asked the FCC in June 2005 to order Comcast Corp. to begin carrying the games immediately, but the agency took no action.
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MASN now has the right to seek a resolution to its complaint through the FCC process or take the path of arbitration.

Shouldn’t customers decide whether or not MASN is important to them? Of course, lack of competition due to regulatory monopolies prohibits customers from having a sufficient voice, say to cancel and switch to a cable provider that carries MASN, but I’m certain the answer is not to push the regulatory hand deeper into the industry.

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Tomorrow MTV turns 25. Being old enough to remember the early days of MTV, and young enough to enjoy them, the present-day celebration is good for reliving fond memories. But this explanation of why MTV evolved (devolved?) into what it is broke the spell:

“I think we started as an idea with very little content; it was more like a radio station with songs and cheesy, hair-metal videos,” says Van Toffler, president of MTV Networks’ music/film/Logo group. “But we quickly realized the novelty of music videos wore off and was not repeatable with thousands of viewings. So we evolved into being more about TV production — yet still sloppy, live and organic.”

Forget that my musical tastes are stuck more in early MTV than current MTV, which means I don’t watch most new videos. The video has not gotten old. Look at iTunes and its music video sales. There is a market, meaning the novelty didn’t die. MTV killed it with its repetition of the same tiny number of videos.

Early on this was necessary due to the newness of the form. But by the late ’80s, that didn’t hold. MTV abandoned it. Today, when I watch music television, I watch the extra music video channels like VH1 Classic. Even when I’m watching country music videos, I’ll flip to the all video channels rather than the regular channels. When original programming appears on any regular music channel, I almost always pick up the remote. I understand that I’m not MTV’s target audience, but I didn’t age out of that audience. MTV decided my viewership didn’t matter. But that makes sense, because my money is not green, it’s plastic.

With six zeros and two commas, nine equals ten

I’m not affected by Canadian lottery tax questions, but I’m strangely comforted to know that America isn’t the only nation obsessed soaking the rich for no better reason than they have more money.

Each week Ontarians spend hundreds of millions of dollars for a chance at quick riches and early retirements; while each week more stories surface about infrastructure costs skyrocketing and hospitals and schools crumbling. Reports of water and sewer systems needing upgrades abound, and the cost to even barely maintain roads puts ever-increasing tax burdens on residents.

Every Wednesday and Saturday night people young and old hope they are the holders of the next multi-million dollar ticket while the Ontario Lottery Gaming Commission awards prizes ranging from $1 or $2 to mega-millions. And unlike our neighbours to the south who pay a full 38 percent on all lottery and casino winnings, Ontarians receive 100 percent of their winnings and are exempt from any taxation on those winnings.

Fine so far, since taxing lottery winnings seems reasonable under the given assumptions that winnings are income and income should be taxed. That doesn’t have to imply any notion of progressive taxation, although that 38% figure jumps out. If there should be a lottery, tax it. Whatever. But as we’re conditioned to expect, this is the fun part:

It’s time municipalities start pushing the province to tax lottery winnings in an effort to raise the necessary funds to ensure future financial viability.

Would a 10 percent flat tax on all winnings in excess of $50,000 really impact the winner that much, or deter them from playing lotteries?

Does someone really need all $10 million in lottery winnings, or would $9 million be equally life-changing?

That’s not a justification for taxation. That merely exposes a belief that one person wants something and another person has the means to acquire that something. Since those two aren’t the same person, the first person decides it’s reasonable to take what he needs, by force of government. There’s nothing wrong with that, since he who has $9 million remaining should not worry about the extra million. The winner’s concern for the remaining million demonstrates how much he hates roads, hospitals, clean water, and children. Mostly the children.

The logic throughout is classic big government socialism, but that’s just telling the story. The last paragraph of the editorial shows it:

The costs to maintain what infrastructure we have are only going to increase. Municipalities need to start pushing now for more ways to generate funds that will be distributed among them in a non-competitive manner.

Or the municipalities could prioritize expenditures in a competitive manner and determine what’s most needed. It’s just a thought.

Cross-country network of dollars communication

Since politicians have already shown their economic ignorance through copious central planning, the unintended consequences caused by advances in communications technology will surely surprise them. I’m not surprised:

Rural phone-service subsidies are so bloated and inefficient that providing wireless or satellite phones is cheaper, an economic analysis prepared for a senior citizen advocacy group suggested yesterday.

Taxes to support the universal service fund, which is intended to pay for higher costs of serving rural areas, are growing so fast as to force some low-income people to drop phone service, said Thomas Hazlett, a George Mason University economist who prepared the analysis for the Seniors Coalition.

“It’s perverse when shifting tax money around for the universal service fund results in more people leaving the network than joining it,” said Hazlett.

Why I should subsidize those who choose to live in rural areas is a question I will never accept. Since it’s not up to me, I worked around it (and other similar questions of fees and taxes) years ago when I abandoned traditional phone service¹ almost five years ago. Now I use a combination of cellular and VoIP. I’ve never missed the land line, and I’ve definitely never missed the higher costs. I changed because I assessed my needs and made the decision that new technology satisfied my communication needs. No politician could know that.

More importantly, how much faster would rural customers have received phone service if politicians had let the free-market sort out customer requirements? Of course, that question is merely interesting because of the multiple interest groups involved. Each group wants it own special consideration, which only makes the tax structure confusing and the collection process more bureaucratic. For example:

Universal service subsidies have become so widespread that rural phone companies on average collect only 27 percent of their revenue from customer payments, Hazlett found. Even so, many rural customers are opting to drop traditional wired service to go wireless because “it’s cheaper, and they like the mobility,” he said.
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Many rural carriers receive subsidies that exceed $1,000 a year per customer, with some subsidies topping $10,000 a year per customer, Hazlett said.

There will be no incentive to innovate in that atmosphere. Why bother, when the government will take from those living in cities and give through subsidies to those who don’t. There is no sense in this, other than politics. But politics rarely makes for good economics. It’s time to cut the apron strings and let each customer bear the cost of his choices.

¹ I have a land line today, but it’s the minimum service and is used only to provide communications for my home’s security system. Fees or not, I want emergency services contacted when necessary. I don’t think that gives politicians an open invitation to tax me for the economic inequality-du-jour.

Like a burglar returning your DVD player

I received a surprise in the mail yesterday. It seems I overpaid my taxes, so the United States Treasury sent me a sizable check, with interest, for my overpayment. I’m surprised because I use tax software to prepare my tax return. A card accompanying the check promised an explanatory letter in the near future, so I await that. I can’t imagine what I could’ve missed, but I’m shocked by pleased with the government’s honesty. Sweet.

The smart thing to do is to stick it in my 401(k), not to treat it as found money as so many do when receiving their expected tax refund. I advise that ad nauseam, so using this to justify some unplanned expenditure would be hypocritical. That might save me, too, because I have a sneaking suspicion that it’s a government trick. Give taxpayers a whole bunch of money back, expecting them to spend it, thereby rescuing the economy. After that, just follow up with an “Oops, you were right all along, please return what you owe.” But politicians would never do such a thing. Would they?

Anyway, I must be the favored class that progressives complain about. Clearly President Bush himself is looking out for me. Wait until he finds out I don’t live in Texas and won’t contribute this check to his party’s Permanent Majority Fund. Sucker.

Joe Buck could be a Congressman

Sen. Charles Grassley is quite the innovator:

Sen. Charles Grassley, chairman of the tax-writing Senate Finance Committee, wants the Internal Revenue Service to chase after pimps and sex traffickers with the same fervor it stalked gangster Al Capone for tax evasion.

Grassley, R-Iowa, would hit pimps with fines and lengthy prison sentences for failing to file employment forms and withhold taxes for the women and girls under their command.

The proposal would make certain tax crimes a felony when the money comes from a criminal activity. A one-year prison sentence and $25,000 fine would become a 10-year sentence and $50,000 fine for each employment form that a pimp or sex trafficker fails to file.

Implement a little extra residency in the federal pen, and prostitution ceases. Or pimps start reporting their income and we nab them for being dumb enough to implicate themselves running a prostitution ring. This has the smell of success. Just like drug prohibition with stiffer penalties eliminated drugs, this’ll be quick and effective.

Why is Sen. Grassley so stupid? If he really wants to protect our poor, vulnerable women, he could seek to decriminalize prostitution and, dare I suggest, regulate it? Might that do more to help women working as prostitutes, excuse me, being exploited by evil men, than threatening criminals with extra-super punishment?

I know, I know… think of the children. Why do libertarians hate children so much?

I can read your lip service

I don’t know which passage to laugh at more:

For the past 15 years, progressive free-market politicians have offered an appealing mantra …

After reading a new oxymoron such as “progressive free-market politicians,” I knew I didn’t need to read on for any serious discussion of capitalism. The usual drivel about how the author supports capitalism, but every fair person understands that it’s not perfect and needs a little help, is sure to follow. I’ve heard it before and I know it’s still code for more government intrusion. It’s never possible that government interference in capitalism is causing the problems. Never.

The other laughable part is that supposedly logical conclusion.

Historically, voters turn away from conservative free-market politicians after they conclude that capitalism needs help in living up to its commitment to create widely shared abundance. After World War II, voters in rich countries entered a social democratic bargain in which capitalism became the bedrock of the economy but was tempered by a large public sector and a unionized industrial sector that provided social insurance, education, pensions and health care.

Capitalism has a commitment to create “widely shared abundance”, which conservative free-market politicians ignore. Setting aside government interference as a cause, if you don’t get some of that guarantee of widely shared, for whatever reason (luck, laziness, …), progressive free market politicians will hand you some widely redistributed. In this view, how can anything be a tempered bedrock, especially when adding so many socialist guarantees?

I’d continue, but uncontrollable laughter makes typing impossible.

100% of people agree, if you fabricate agreement

The title alone is enough to ignore Sebastian Mallaby’s latest editorial, but a quick dissection of the text may go further at undermining the crazy assumption that taxes are good because they bring in much-needed revenue, no matter how unfair (or harmful) the tax may be. Consider:

It doesn’t matter if you are liberal or conservative, Democrat or Republican. There is no possible excuse for doing what Congress is poised to do this week: Abolish the estate tax.

The federal government faces a future of expanding deficits. Thanks to the baby bust and medical inflation, spending is projected to rise by nearly 3 percent of gross domestic product by 2030, a growth equivalent to the doubling of today’s Medicare program. What is the dumbest possible response to this? Take a source of revenue and abolish it outright.

What’s the dumbest possible assumption? Accept that spending, and the inevitable increases, are untouchable. Here’s an idea: spending is out-of-control? Stop spending so much. I can’t afford the BMW 645 I want, so I haven’t bought it. The concept isn’t difficult.

And since history is filled with examples of trust fund kids blowing their fortune and permanent elite status, here’s a little bonus fun:

The nation faces the prospect that inequality will damage meritocracy. When the distance between top and bottom widens, it becomes harder to traverse the gap; people of low birth are stuck at the bottom, and human talent is wasted. What is the dumbest possible response to this? Take the tax that limits what the super-rich pass on to their children and get rid of it. Send a message to hereditary elites: Go ahead, entrench yourselves!

Life isn’t fair. Get used to it.

I can’t help myself, so one more:

If the abolitionists succeed, some other tax will eventually be raised to make up for the lost revenue[ed. note: reduce spending?]. So which tax does Congress favor? The income tax, which discourages work? A consumption tax, which hits the poor hardest? The payroll tax, which is both anti-work and anti-poor? Really, which other tax out there is better?

The abolitionists don’t respond to this question because there is no convincing answer. Paul Volcker, the former Federal Reserve chairman, has written that “we would be hard-pressed to find evidence that, compared with the alternatives, a reasonable estate tax significantly discourages work or innovation or savings.” In other words, killing the estate tax and raising some other tax instead would damage the economy. [ed. note: he’s cheating.] And that’s before you take into account the positive distortions introduced by the estate tax, such as more social mobility and higher charitable giving. Charitable bequests will fall by at least a fifth if the estate tax is repealed permanently.

Positive distortions. Offered with no further comment.

Should police ticket under-inflated tires?

I’ve already said I won’t vote for Sen. Clinton when if she runs for president in 2008, so this entry is really just piling on. However, it’s important to highlight examples of why she’s every other hack politician, except she had the good fortune to be First Lady before entering public office. She gets more acceptance than she should. Her new energy plan proves it.

Sen. Hillary Rodham Clinton (D-N.Y.) said yesterday that the United States should cut its consumption of foreign oil in half by 2025, and outlined a national strategy of tax incentives, an oil-profits tax and more funds for research aimed at spurring conservation and development of alternative sources of energy.
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“Our present system of energy is weakening our national security, hurting our pocketbooks, violating our common values and threatening our children’s future,” Clinton said in a speech at the National Press Club. “Right now, instead of national security dictating our energy policy, our failed energy policy dictates our national security.”

How creative. She managed to include fear of death, poverty, and morality, with a nod to the children. Classy leadership. At least she’s learned her trade well, no matter how despicable its current tradesmen may be.

Clinton said she plans to introduce legislation to create a strategic energy fund, largely paid for by an excess profits tax on big oil companies, who she noted earned a combined $113 billion in profits last year.

She estimated that the profits tax and a repeal of other tax breaks for the oil industry could pump $50 billion into the energy fund over two years and pay for an array of tax incentives and for $9 billion in new research initiatives for wind, solar and other alternative energy resources. Oil companies could escape the tax if they reinvested profits into similar programs.

Theft, redistribution, and bribery are admirable public policy goals. And what will the good senator say to the investors whose stock portfolios get hammered because the major oil companies will no longer earn windfall average profits? Take one for the team, maybe? It’s for the children?

Or economic decline could be her goal. If we’re all a little bit poorer, we can’t afford so many vacations and wasteful trips in our gas guzzlers. (Don’t tell House Speaker Hastert.) Hence, we’ll use fewer barrels of oil. Conservation works, she’ll say. And we’ll all be thankful that she’s in charge.

Maybe, but it’ll be without my vote.

These are my choices?

I have no idea what political persuasion the authors of this article in today’s Opinion Journal hold, nor do I care to score partisan points, but they clearly bought the idea that current Republican economics is the only way to look at government budgets. Consider:

Voters will elect governors in 36 states this year. And as they decide who to send to the governor’s mansion, they will also be shaping the economic future of their state. On taxes, the gubernatorial candidates fall into one of two camps. Either they believe that the best way to close a budget gap is to raise taxes. Or, like Ronald Reagan and George W. Bush have done from the Oval Office, they believe in raising revenue by growing the state’s economy with tax cuts.

There are a few cursory nods to fiscal restraint later in the article, but overall, it’s a glowing review of supply-side economics as the solution for budget woes. Crazy me, I think it’s clear that we need to look at both sections of a government’s income statement. I also find it amusing disheartening that so many otherwise smart people can so completely ignore the well-ingrained small-government principle. Spending matters, and I dare say it matters more than taxes for long-term growth. Especially when legislators are ignoring the other side of the balance sheet with the spending they’re adding.

Until legislators refrain from dining at the public trough at every opportunity, government will have an insatiable need for growing tax receipts. Low taxes now, high taxes tomorrow. It’s not complicated, unless you’re blind to reality. Everyone will be an economic libertarian eventually. I just wish it didn’t have to come through bankruptcy.