Category: Taxes

One brilliant governing strategy

The Wall Street Journal’s editors know how to frame a debate. That frame is made of lies, of course, but so be it. If it sells the party line, all is fair.

If ever there was a market test of economic policy, the last three years have been it. The stock market has recovered from its implosion in Bill Clinton’s last year in office, unemployment is down to 4.7%, and growth has averaged 3.9% in the three years since those tax cuts passed–well above the post-World War II average and more than twice the growth rate in Euroland.

It’s not enough to say the tech bubble collapsed, it was clearly Bill Clinton’s fault. Our greater economic growth than Europe has nothing to do with a complex combination of factors, but rests solely on one set of tax cuts. The partisan defense only appears because it’s so self-evident, I guess. More interesting, though, is this:

Yes, gas prices are high and interest rates are rising, which helps to explain the anxiety felt by some of the public. But these headwinds are all the more reason to be impressed by the economy’s ability to push ahead nonetheless. We’d have thought that the Democrats who are now voting to let taxes increase would be thrilled to know that things turned out better than they had feared. Americans are better off despite Democratic predictions that, as Minority Leader Nancy Pelosi put it back in 2003, tax cuts would “damage long-term economic growth.”

When long-term is now defined as three years, it’s little wonder that current Republican economic “policy” is so great. Reap all the benefits of lower taxes and greater spending, with no worries that the looming (super-duper, extra-double long term?) devastation will come up and bite the savior President Bush. The hero always rides off into the sunset, but perhaps this is where we should remember what the horse leaves behind for the saved as the hero claims the glory.

Tax cuts are great, and I’m generally for them. I like the money I earn and would love to keep it. However, Congress and the President have lost all sense of how to run a budget. I’d rather feel the rough impact of this current profligate spending in the next few years, than to feel the decimation from bankruptcy. Maybe that’s just a dash of realism in knowing that “starve the beast’ is a joke, or maybe it’s just naked cynicism. No matter. The bill is coming due at some point.

I know the political strategy is to leave the Democrat to take the blame for increased taxes (which they’ll happily do because they won’t control spending, either). But it tells me a lot to know no politician seems to care that we’re all the ones who will get screwed eventually. Consider the lesson learned. No political point is too small to score.

Killing legitimate rights to invent progressive rights

The lede to this article intrigued me.

Liberals and Democrats in search of new ideas might surprise everyone by embracing the cause of states’ rights.

I’m sure this would just be an opportunity to play progressive politics locally, instead of the prudishness played out nationally. While I agree that states can work towards better solutions (not best – try private) than the federal government, due to nothing more than closer proximity to the problems (ditto local versus state), I was right to doubt this article. Consider:

Contrast this week in our nation’s capital with the week in Boston, capital of the Commonwealth of Massachusetts.

Congress was solving the enormously important problem of making sure that wealthy Americans can continue to pay low taxes on their dividends and capital gains.

Phrase the issue that way and I know that ideology is more important than solving the problem, regardless of the rhetoric attached to the proposal. I’ve already addressed this in the past, but here it is again. Just because a tax cut is likely to affect the wealthy, that does not mean it’s inherently bad. Unless you like socialism, in which case you’re doubly wrong. Middle-class Americans own investments and receive dividends. They pay taxes, as well. How you frame the question shows exactly the outcome you want. For me, it would be based on principle. I happen to like “keep what you earn” more than “don’t make too much”.

Still, you can’t require people to buy insurance if they can’t afford it. That’s where Salvatore DiMasi, the Massachusetts House speaker and a Democrat, came in. He suggested combining an individual mandate with an assessment on employers who do not cover their employees. Most conservatives hate “employer mandates,” but why should employers who insure their workers provide an indirect subsidy to employers who don’t?

Why should employers who reach an (implicit or explicit) agreement with their workers that cash is the best benefit be punished for coming to a different conclusion than the socialists? They don’t force other employers to provide health insurance and shouldn’t be punished for having the intelligence to try a better way. The social contract is a larger culprit for our problems than the free market’s “failure” to provide every worker employer-sponsored health insurance. Which brings us to this:

… The federal government should solve problems or, failing that, give states the room, the incentives and the opportunities to solve problems for themselves. It’s amazing what local politicians can accomplish when good ideas and skilled agitators come together.

Only as a last resort should the federal government get out of the way. And only if they get out of the way for state and local governments. Brilliant. This is statism, not states’ rights.

More thoughts at Cato @ Liberty

Imagine! His plan doesn’t involve spending cuts

I’ve written about Senator Ron Wyden’s proposed Fair Flat Tax in the past, so I’m not going to rehash much of that. The plan was ill-conceived in the beginning, and Sen. Wyden is still promoting it without correcting the mistakes. Unfortunately, he’s swayed one editorial board enough that the board wrote a glowing recommendation for Sen. Wyden’s “screw the rich” plan. A few passages are worth comment, so here goes:

Taxpayers with incomes under $100,000 for an individual or $150,000 for a couple would see their taxes go down, Wyden says, stressing that his plan benefits the middle class. Taxes on the wealthy would go up, and he believes the plan would raise enough revenue to move the nation a bit closer to a balanced budget.

Let’s pretend for a moment that such a clear penalty for marriage could ever survive a showdown in the Senate, why do supposedly smart people buy into the notion that taxes must go up to balance the budget? Has anyone ever contemplated a single spending cut, which should be included in every tax reform discussion? Finally, why should those who receive the fewest direct benefits pay the most in taxes? Are they not paying enough?

Wyden’s plan probably won’t fly. But President Bush’s approach is built on tax cuts that go disproportionately to the wealthy and a budget that leaves the country with wildly growing debt. This is unfair and irresponsible.

The problem with President Bush’s plan, like most other plans under consideration, is that he’s accepted the worst assumption raised in this issue. Revenue–neutral almost guarantees we’ll end up screwing someone, probably on purpose. Laying it out as an untouchable only encourages the rent-seekers to organize now. Sen. Wyden’s plan is heavy on this part. Brilliant.

The Senate is scheduled to take up tax reform in the fall. Wyden has given Democrats something to talk about other than how bad the Republican plan is. He is right to question whether, in a nation where the gap between the rich and everyone else keeps increasing, the national policy should be to tax work at a far higher rate than wealth.

Much of the editorial board’s analysis is like its conclusion above, so I’ll just stop with a request. Explain why we should tax wealth, if that’s preferable to income.

Progressive Tax Day propaganda

The editors at The Washington Post certainly know how to frame skew a discussion in their favor. Today, they’re trying to make a case against the Senate essentially ignoring one of its rules to get tax cuts extended. That would be a fine argument, and worth pointing out if only to further build the case of Congressional hypocrisy. But that’s not the setup the editors use. Consider:

MUCH TO THE chagrin of the White House and the GOP leadership, lawmakers didn’t get a new round of tax cuts done in time for tax day today. But when Congress comes back from its recess, it’s expected to take up a deal to extend President Bush’s capital gains and dividend tax cuts. To make their budget-busting tax policy appear less costly than it is, the lawmakers are resorting to a gimmick that is even more egregious than their usual tactics.

If they want to use the size of the deficit as the justification for their position, they should anticipate, and understand how poorly it reflects on them, the simple counter-argument that reducing spending is just as effective at deficit reduction. It’s certainly more appropriate. Instead we get terms like “budget-busting”. What’s more budget-busting, bringing in too few dollars or sending out too many dollars? One thing is easier to control than the other. I know which one it is. It’s a shame the Post’s editors don’t, or at least won’t acknowledge it since it doesn’t fit a liberal vision of American government.

Via: To The People

I’m stealing the term “definitional elasticity”

As long as it increases tax-receipts revenue, any logic is acceptable. Increasingly, states apply irrational justifications to tax iTunes and other music download services.

In Kentucky and Washington, state law does allow the taxation of computer software. Washington law defines software as “a set of coded instructions designed to cause a computer…to perform a task,” which tax officials have interpreted to include music, movies and e-books.

“We use that same rationale on other types of files, such as music files or video files,” said Gary Davis, the state’s tax information and education manager. “We view them as similar because they cause some action by a piece of hardware to play them.”

Davis recited aloud the definition of computer software from Washington’s tax law and said he believed that data files, like an executable program, cause a computer to “perform a task.” He said, “I think it’s our policy that that’s exactly what a music file does in order to hear it.”

That definitional elasticity has alarmed online retailers, which say states are interpreting tax laws in ways never envisioned by elected officials or the general public. They would rather see the issue decided openly in state legislatures than behind closed doors by tax agencies.

On what basis could any rational human being interpret an mp3 file to be software that causes a computer to perform a task? The only software that causes a computer to perform a task has an .exe extension. That stands for “executable”. It’s a bizarre notion, I understand, but it’s universal. An mp3 file has an .mp3 extension. Click that without an mp3 player on a computer and the computer will do nothing. Absolutely nothing. An mp3 is data used by a program as a set of instructions to create sound waves through computer speakers. Next, I suppose Mr. Davis will determine that a ball rolling down a hill is being propelled by perpetual motion instead of gravity.

Perhaps the music download tax question is valid. I’m all for as little taxation as possible, but I understand that politicians aren’t reasonable people. At least understand that updating legislation is the way to deal with new situations. Loose reinventing of the same language only cheapens the constitutional basis. Instead, understand that the words mean what the words say.

Socialism can really help poor families

Having thought a little bit further about yesterday’s post on Virginia’s sales tax holiday, if the General Assembly really wants to help poor families, wouldn’t it make more sense to institute universal school uniforms throughout the Commonwealth? Include them in the cost of public education, so that every family gets uniforms for their school-aged children each year. Everyone in the community pays for the students to have them by paying their local taxes. As an added bonus, the poor kids don’t have to feel bad or have the rich kids destroy their self-esteem since everyone will wear the same thing. It would work.

Is this idea any more or less ridiculous than a sales tax holiday?

What, no day off for this holiday? Wouldn’t I spend more?

Virginia Governor Tim Kaine signed the tax holiday bill sent to him by the General Assembly. I wrote against it when it first came up, and my opinion is the same. It’s nothing more than politics playing to a small-minded crowd, both in the General Assembly and among the Virginia citizenry.

Regarding the specifics of what Gov. Kaine signed, this is absurd:

The sales tax holiday will occur on the first Friday/Saturday/Sunday in August. Consumers will not have to pay taxes on school supplies that cost $20 or less an item and on clothing and shoes that cost $100 or less an item. For that weekend, businesses also can choose to pay the tax on other items for their customers and advertise those items as tax-free, a practice normally illegal.

It may be a sales tax holiday for residents, but will it significantly increase sales? And will those sales offset computer system changes for retailers? Who qualifies for each retailer what meets the criteria and what doesn’t? I assume the increased sales will offset costs, but I’m guessing. Somehow, I suspect that’s what the General Assembly did when it proposed the change. We don’t get numbers to support claims. Instead, we get populist nonsense.

“The back-to-school sales tax holiday is relatively modest in its fiscal impact, but it will make a huge difference for working families with school-age children,” Kaine said.

It’s nothing major, but it helps poor people. That makes no sense. When I was a kid, we were poor enough that we fell into Gov. Kaine’s “poor people” category. There is no way a sales tax holiday would’ve helped significantly. I wasn’t getting expensive wardrobes and piles of supplies. I got the basics to cover what I’d outgrown or to fill in the gaps in my supplies where I’d used up all the pages in notebooks. How different are poor people today?

Of course, the bill’s sponsor betrayed Gov. Kaine’s logic, showing the both sides of the aisle can have ludicrous reasoning.

Sen. Ryan T. McDougle (R-Hanover), the bill’s Senate sponsor, said he believes the state actually will make money during the holiday because customers will respond to holiday ads and end up purchasing taxed items as well.

“This will draw people from other states to purchase goods in Virginia,” he said. “It’s good for families and parents and good for business.”

So, is it for poor people or is it to raise state revenue? If they’re poor, they’re not buying extras just because they saved a few pennies on sales tax. If it’s really meant to raise revenue, wouldn’t a regular sales tax cut work better, extending the greed fun all year?

Idiots, every one of them.

Your neighbor has to pay for your broccoli

More information on the Massachusetts bill requiring universal health care coverage.

“We insist that everybody who drives a car has insurance,” [Gov. Mitt] Romney said in an interview. “And cars are a lot less expensive than people.”

I’m dismayed to see that a likely presidential candidate’s thinking is so evolved that he compares people to cars. It would be an effective analogy if he hadn’t forgotten that a car is a choice that poses a known hazard to other people, which in turn imparts legal liability on the owner. If I choose to carry no health insurance and I get sick, I face the financial burden of that choice. Big difference. Naturally, Gov. Romney hoped to imply that the financial burden placed on society from uninsured individuals requiring medical attention. That’s a reasonable debate, but instead of going for the reasonable, he aimed low to appeal to the simple-minded who want government to manage everyone’s life. Or at least everyone else’s life.

This is, I suspect, the target for this new legislation:

But no state, experts say, has taken the step of making health insurance coverage a legal requirement. The idea was applauded by Uwe E. Reinhardt, a professor of economics and public affairs at Princeton University, who said that he has long believed that the American system of allowing uninsured patients to receive care at the government’s expense was nothing more than “freedom to mooch.”

I can hear the chorus of cheers coming from market-driven liberals progressives (it’s a faint cheer), but the overall idea looks a little different when considering the final portion of Prof. Reinhardt’s statement:

“Massachusetts is the first state in America to reach full adulthood,” said Reinhardt, noting that the new measure is a move toward personal responsibility. “The rest of America is still in adolescence.”

Only in modern America, with our full complement of government parentalism, could anyone consider forced action to be personal responsibility and adulthood. I could wear a penguin suit to work tomorrow, but that won’t make me a penguin.

As for the plan itself, if this is what providing a conservative, private sector solution looks like, I’m giving up.

Uninsured people earning less than the federal poverty threshold would be able to purchase subsidized policies that have no premiums, and would be responsible for very small co-payment fees for emergency-room visits and other services. Those earning between that amount and three times the poverty-level amount would be able to buy subsidized policies with premiums based on their ability to pay. Though no maximum premium is set in the bill, legislators’ intent seems to be for it to top out at about $200 to $250 per month.

All residents will have to provide details about their health insurance policy on their state income tax returns in 2008. Those who do not have insurance would first lose their personal state tax exemption, perhaps worth $150, and later face penalties equal to half the cost of the cheapest policy they should have bought. That might work out to $1,200 per year, officials said. Those who cannot find an affordable plan could obtain a waiver.

I might give up anyway. Please, someone in Massachusetts, step back from the nanny-state abyss and think about what this really means. I’d love for it to succeed, but I’m only promising that I won’t say “I told you so” when it fails to deliver the hoped-for outcome. Rather than babble on further, I’ll let yesterday’s hero, Massachusetts House Speaker Salvatore F. DiMasi, fill you all with his words of inspiration:

“We did something to solve the problem,” he said.

Do you think he’ll stand on “we did something” or “solve the problem” when this blows up?

For a smart take on this: National Review

Is the free lunch vegan?

Interesting transportation news from Northern Virginia:

The region’s airports authority has reached a deal with Virginia officials to take control of the Dulles Toll Road and use the revenue to move quickly to build a Metrorail line to Dulles International Airport, sources familiar with the agreement said last night.

I hope it succeeds because traffic in the Northern Virginia area is ridiculous. However, the details of the plan aren’t important for my discussion. Instead, I want to focus on an informative statement surrounding the deal. Consider:

Fairfax County Board of Supervisors Chairman Gerald E. Connolly (D) said the agreement, which was described to him yesterday, “has promise.” But he said the state has ignored the interests of commuters on the toll road.

“I’ve got constituents who will be paying tolls in perpetuity,” Connolly said. “That’s a long time. My constituents want some assurances that there is going to be some cap on the tolls they will be paying.”
…

“Lost in the haste to accept a proposal are the interests of the commuters,” Connolly said.

What is Chairman Connolly really saying behind his concern for his constituents? The tolls aren’t going away, but no one’s surprised by that. But, if the local authorities figure out a way to make the tolls suddenly stop, who pays for the roads? Fairfax County constituents are happy, but who pays for the roads? Lady Luck doesn’t wave her magic wand for VDOT, pouring new asphalt out of pixie dust. Someone will still pay for the roads. What Chairman Connolly is saying is that he wants someone else to pay for the roads his constituents use. Better to have some poor schmo in Roanoke pay for a portion of the road than the local (voting) soccer moms.

“We get the benefits, but we all pay for the public good” is a popular, winning stance for politicians. Just ask Sen. Ted Stevens. Unfortunately, it’s also wrong. If the Dulles rail line deal is unwise, he should attack it on its merits. He shouldn’t attack it because he expects something for nothing.

They were for the Constitution before they were against it

Two interesting tidbits from this story about proposed spending cuts increases cuts before Congress. First, Sen. Arlen Specter impersonating Rep. Tom Delay:

“We’re beyond cutting the fat and beyond the bone. We’re down to the marrow,” said Sen. Arlen Specter (R-Pa.), who plans to introduce an amendment today to raise spending on health care, education and worker safety by billions of dollars above the president’s request for next year.

I suppose a cheesy smile for the mug shot camera is next up on Sen. Specter’s busy agenda? Here’s a hint: check the Constitution and you’ll find the general guidelines for where Congress should be spending federal dollars. There may be a few unwritten implications since the founders couldn’t possibly have foreseen how significantly the world would change in the first few centuries of the Republic. However, I’m fairly certain they knew about areas such as education. Somehow that oversight probably wasn’t implied. Resume cost-cutting there.

Next, this engaging theory:

Reps. Daniel E. Lungren (R-Calif.) and Jane Harman (D-Calif.) plan to unveil legislation today that would raise spending on port security by $801 million a year. That bill nearly equals a bipartisan Senate legislation that would raise annual port security spending by $835 million. Both bills are scheduled for quick action in the House and Senate homeland security committees in the coming weeks.

Proponents of the measures say the government has avoided such spending for too long under the guise of fiscal restraint. Three times since the Sept. 11, 2001, terrorist attacks, the House has voted against Democratic efforts to raise spending on port security. But in the wake of a Dubai company’s effort to take over management responsibilities at six major U.S. ports, such opposition appears to be collapsing.

“There simply is no cheap way to be better prepared,” Lieberman said yesterday.

There isn’t a direct connection between port security and spending reductions, but I’m sure a reasonable person could indirectly link over-spending on non-federal issues (and pork barrel madness) with a reduced availability to fund legitimate federal needs like national security. Granted, I don’t have the wisdom of a congressman, so it’s just a thought. I’m just saying that “no cheap way” doesn’t mean we should just throw money around because it makes us feel better. For instance, on health care and education. Maybe if we spent only on legitimate funding needs, we’d stop worrying about cheap and stop focusing on effective.