Tag: taxes

The Hottest Tax Ideas on the Left Are Really Bold. Does It Matter That They’re Also Really Bad?


Policy wonks have a soft spot for bold ideas. Doubly so if those ideas are new or making a comeback after years in the wilderness. The New York Times columnist David Leonhardt recently heaped much praise on presidential candidate Elizabeth Warren for her “bold” and “ambitious” agenda that’s appropriate “to the scale of our challenges.”

Voters are no different. Plenty of folks on the left seem giddy about the idea of a “Green New Deal” that would put the US economy on a war footing against climate change. And it’s not just Democrats and progressives. Many on the right fondly recall how Ronald Reagan in the 1970s said Republicans should raise ”a banner of no pale pastels, but bold colors.”

But at some point, bold ideas will collide with boring reality. And the sooner bold ideas are subjected to a reality check the better. Let’s take one of Warren’s biggest and boldest ideas, a wealth tax. It’s a nearly $3 trillion plan involving a two-percent annual tax on wealth over $50 million plus an additional one percent on wealth above $1 billion. She says her plan would raise $2.75 trillion over ten years. Definitely big and bold.

Jim Geraghty of National Review and Greg Corombos of Radio America welcome a Politico report showing that even if liberals soaked “the rich” they wouldn’t come anywhere close to paying for single-payer health care or the Green New Deal. They also shake their heads as testimony from former FBI attorney Lisa Page suggests the FBI was considering whether to recommend a federal charge against Hillary Clinton over her mishandling of classified emails but the Justice Department made it clear it had no intention of pursuing the case. And Jim offers his hilarious assessment of climate change activists refusing to have children until the world gets serious about climate change.

Jim Geraghty of National Review and Greg Corombos of Radio America applaud Oregon Senator Jeff Merkley’s decision to not run in 2020 but ask if his announcement was really necessary since very few Americans have any idea who he is. They also take a deep breath of fresh air as Texas Rep. Dan Crenshaw gives a clear and calm defense of conservative principles that is often missing from our public dialogue. And Jim notes the Clinton era ends in a whimper as Hillary officially states that she will not run for president in 2020.

Jim Geraghty of National Review and Greg Corombos of Radio America welcome the news that tax refunds are now slightly outpacing the amounts issued last year by the IRS. They also examine the record of the latest Democrat to run for president – former Colorado Gov. John Hickenlooper – and whether he has any path to victory. And they get a kick out of New York Sen. Gillbrand insisting she’s not a flip-flopper after running for Congress as a moderate Democrat and now running for president as a ardent progressive.

Jim Geraghty of National Review and Greg Corombos of Radio America applaud the Washington Post for calling out California Sen. Kamala Harris for her absurd contention that smaller tax refunds mean you’re paying more in taxes. They also play the entire insane questioning of longtime foreign policy official Elliott Abrams by Minnesota Rep. Ilhan Omar and marvel at her ignorance of U.S. history and bizarre badgering of the witness. And they get a kick both out of Senate Majority Leader Mitch McConnell planning a floor vote on the Green New Deal and bill sponsor Ed Markey fuming that Republicans are going to hold a vote on his legislation.

The Toxic Warren Wealth Tax


In my lastcolumn, I explained how Senator Elizabeth Warren’s wealth tax violates well-established constitutional limits on income and transfer taxes. Ever since the Sixteenth Amendment legalized the income tax, all taxes on income have been based on some fraction of the amount earned within a given year. And all taxes on capital are imposed only once, namely at their transfer during life or upon death. In contrast, the Warren wealth tax would be imposed annually on all forms of wealth at rates that start at 2 percent for households whose net worth is between $50 million and $1 billion, and 3 percent for households who hold amounts of wealth in excess of $1 billion. The tax applies in both rich and lean years, whether a person makes or loses money.

To defend this dubious scheme on economic grounds, Warren, now a presidential aspirant, relies on a letter prepared by two prominent economists from Berkeley, Emmanuel Saez and Gabriel Zucman, both experts on the economics of inequality. Indeed, it is just there that the problems begin, for any fixation with equality or, as Saez and Zucman call it, equitable growth, rests on shaky premises.

It’s not clear why we should worry about inequality of income or wealth. Both concentrate solely on the gap between those at the top and those further down in the distribution. To be sure, the gap is striking. As Saez and Zucman point out, the yearly increase in wealth for the top 0.1 percent between 1980 and 2016 has averaged about 5.3% compared to the general average of 2.5%. But where is the social problem? Why am I worse off because someone else has become better off? The superrich have made their money by providing goods and services to their fellow citizens. Rather than just engaging in massive consumption, the rich, especially at the billionaire level, typically reinvest or give a large fraction of their wealth, often to charitable enterprises. The upshot is that the distribution in consumption is far more equal than that in income.

Jim Geraghty of National Review and Greg Corombos of Radio America are still shaking their heads over the political chaos in Virginia, but they are happy to see a weakened Gov. Ralph Northam give Republicans most of what they want on tax relief. They also point out some of the most insane provisions included in the Green New Deal, proving how out of touch the socialists in the Democratic Party really are. And they shudder as former KKK official David Duke endorses Hawaii Rep. Tulsi Gabbard for president because he thinks Gabbard is least likely to send troops to die on behalf of Israel in the Middle East. Gabbard has denounced Duke and rejected the endorsement.

Looking at the Economic Risks from Much Higher Taxes


Nearly doubling top tax rates is hardly a risk-free policy proposal. Of course that is not the impression being given by some policymakers pushing the idea. But even a cursory survey of economic opinion reveals big tax hikes come with trade-offs, just like pretty much any other policy idea.

For instance: A recent UChicago-IGM Forum survey found that 63 percent of economists surveyed (with responses weighted by each scholars confidence level) “disagreed” (52 percent) or “strongly disagreed” (11 percent) with the notion that a 70 percent top rate “would raise substantially more revenue … without lowering economic activity.” On the other side, 17 percent “agreed” and 4 percent “disagreed.”

Taxes matter. Tax rates matter. Incentives matter. In “Taxing Top Earners: A Human Capital Perspective” from Georgetown University, researchers find that the “revenue maximizing top tax rate in the US is approximately 49 percent” — not 70 percent or higher — because “an increase in the top tax rate reduces the benefit of skill investment but not the cost of skill investment. Thus, the skills of top earners fall.”

Elizabeth Warren’s Unconstitutional Wealth Grab


As part of her populist presidential campaign, Senator Elizabeth Warren has unveiled a proposal for an annual wealth tax of 2 percent for ultra-rich families whose net worth is between $50 million and $1 billion. That tax would increase to 3 percent for families whose net worth exceeds $1 billion. The tax is on top of many other taxes to which such a family would be subject, including, presumably, the progressive ideal of a 70 percent income tax as well as state and local taxes. The wealth tax would even apply to people whose net worth has declined during the past year so long as they remain above the stated threshold. Cumulative taxes could easily exceed 100 percent of income. That result is not an unanticipated bug but rather an essential feature: Warren wants to mandate greater income equality through tax policy, even if it means leveling down, not up.

In a future column, I shall address the economic ramifications of this proposal. But for now, I turn to the question of the constitutionality of this novel wealth tax. On that topic, Senator Warren offers in support two short letters signed by sixteen prominent American constitutional law scholars that vouch for the constitutionality of her plan.

One letter relies on a 2018 Indiana Law Journal article by legal scholars Dawn Johnson of the University of Indiana and Walter Dellinger, of Duke University, entitled “The Constitutionality of a National Wealth Tax.” Johnson and Dellinger claim that the Supreme Court’s 1796 decision in Hylton v. United States, which sustained an annual tax on carriages as an “indirect” tax, is a decisive precedent for upholding Warren’s proposal. The second letter relies on a 1999 article by Yale Professor Bruce Ackerman that claims that “the key decision” of Knowlton v. Moore (1900), which upheld a state inheritance tax, provides constitutional support for the Warren wealth tax. Both letters reject the view that her wealth tax is a “direct” tax that must be apportioned among the states. Neither addresses a second important issue in American constitutional law—whether any tax can be so confiscatory that it counts as a taking of private property.

Jim Geraghty of National Review and Greg Corombos of Radio America see a teachable moment as New York Gov. Andrew Cuomo blames President Trump and the GOP tax reform for many wealthy people leaving his state over high taxes, but the solution would seem to be pretty simple. They’re also surprised to see 50 percent of Democratic voters in Virginia approving of Ralph Northam as governor – even after the yearbook controversy. And they react to the accuser of Virginia Lt. Gov. Justin Fairfax hiring Christine Blasey Ford’s legal team.

Elizabeth Warren’s Theory of America’s ‘Freeloading’ Billionaires


Sen. Elizabeth Warren says she wants “billionaires to stop being freeloaders.” It’s a statement akin to the idea that billionaires need to “give back” to society. Which is not how I immediately think about the wealth inequality issue. Surely Microsoft co-founder Bill Gates didn’t begin to “give back” or generate value for society only when he began “giving back” via the Gates Foundation to boost education and reduce global poverty. Society benefited from his role in revolutionizing home computing, generating massive wealth for retirement plans everywhere, and creating hundreds of thousands of jobs over the decades.

Oh, and Gates became superrich in the process. And he should pay taxes. Lots of them. Does he or other wealthy Americans pay anywhere near enough? Warren and many Democrats don’t seem to think so, (although paying for new spending does seem to be the primary concern here). Thus the talk of a wealth tax or a higher top income tax rate. There’s less talk on the left, however, of possible tradeoffs from such ideas. A wealth tax would certainly be a theoretically powerful — though difficult to administer and possibly unconstitutional — way to break up or diminish concentrated wealth. (Many nations that have tried them have since abandoned them.) But there is another side of the story. My AEI colleague Alan Viard notes that wealth taxes of the sort Warren advocates “would be a drain on the pool of American savings, [which] finance the business investment that in turn drives future growth of the economy and living standards of workers.” Something to consider at a time when the American economy faces historically low economic growth due to demographics and low productivity.

Another thing to consider: Most of the value created by entrepreneurial innovation isn’t captured by the entrepreneur. And that’s under the current tax system. In the 2004 paper “Schumpeterian Profits in the American Economy: Theory and Measurement,” 2018 Nobel laureate William Nordhaus concludes “that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.”

Alexandra DeSanctis of National Review and Greg Corombos of Radio America enjoy watching Howard Schultz and Elizabeth Warren trade insults over Warren’s proposed wealth tax and shudder to think that Schultz might be the most sensible liberal considering a 2020 presidential run. They also slam Kamala Harris for suggesting that lawmakers who don’t support gun control don’t care about the victims of mass shootings and contending that if Republicans saw photos of murdered children that they would vote differently. And they laugh and cringe as the chairwoman of a California State Senate committee bans the use of gendered pronouns in committee – and then proceeds to violate her own rule over and over again.

Jim Geraghty of National Review and Greg Corombos of Radio America get a kick out of CNN commentator Areva Martin telling radio host David Webb his success is a result of white privilege – until Webb tells her he is black. They’re also aghast as 59 percent of registered voters support a 70 percent marginal tax rate on the nation’s highest earners, including 45 percent of Republicans. And they shake their heads as Beto O’Rourke openly wonders whether our “empire” can “still be managed by the same principles that were set down 230-plus years ago.”

Jim Geraghty of National Review and Greg Corombos of Radio America think President Trump did alright in his speech and agree that his presentation was better than the stiff stares of Chuck Schumer and Nancy Pelosi. They also shake their heads in wonder as more Democrats embrace huge tax increases and government-run health care and Jim breaks down the truly radical ideas contained in Alexandria Ocasio-Cortez’s Green New Deal. And speaking of the new congresswoman, Jim unleashes a fantastic rant after Ocasio-Cortez suggests on national television that the people trying to enter the U.S. illegally are more American than people who want a border wall.

Before We Crank Up Tax Rates, Let’s Have a Smart Debate


It now seems there’s going to be a national conversation about whether top federal tax rates should be dramatically higher. And for that, you can partially credit first-term House member Alexandria Ocasio-Cortez — as well as the extreme media attention given to her every policy utterance. But only partial credit here. At a time of a) high national debt that’s heading even higher, and b) increased inequality — including the creation of some truly massive personal fortunes — it’s a discussion that was probably inevitable.

Jim Geraghty of National Review and Greg Corombos of Radio America are grateful to see House Democrats revealing their real goals right from the start – impeachment, huge tax increases, abolishing the electoral college – and hope Americans see what they’d be getting if Democrats also controlled the Senate and the White House. As the partial government shutdown creeps towards three weeks, some conservatives are concluding that because their lives haven’t changed much, the impacted agencies aren’t really needed. Jim explains why that conclusion is badly misguided. And they throw up their hands as the mainstream media concoct the narrative that Republicans condemned Alexandria Ocasio-Cortez for dancing in a video, when only one anonymous Twitter user lashed out and any conservative who weighed in on the matter defended the congresswoman.

Jim Geraghty of National Review and and Greg Corombos of Radio America find themselves drowning in crazy martinis again today. They slap their foreheads as a new GOP congressman from Tennessee – who is also a doctor – appears to tell a constituent that he’s hesitant to accept the government’s denial that childhood vaccinations cause autism and says he thinks the Centers for Disease Control have “fraudulently managed” data on the issue. They also rub their hand with glee at the possibility of political inroads with young people as Democratic regulators in California consider a tax on text messaging and then consider some far more annoying aspects of modern communication that ought to be taxed. And they can only smile as Nancy Pelosi somehow jumps on the bandwagon for term limits in the Democratic leadership in exchange for four more years as Speaker of the House.

Daniel Foster of National Review Online and Greg Corombos of Radio America cheer the French people for forcing their government to suspend implementation of new fuel taxes, although their tactics leave a lot to be desired. They also shake their heads as Congress punts any tough spending decisions to Dec. 21 and appears unwilling to do much of anything to rein in spending. And the liberal site Slate draws an avalanche of condemnation for trashing the late Pres. Bush’s service dog, suggesting there should be no sentimental reaction to the dog since Bush only had him since June.

Daniel Foster of National Review Online and Greg Corombos of Radio America reflect on the life and political legacy of President George H.W. Bush, who died on Friday. They applaud Bush’s service in World War II and many stops in his career of public service and also remember his leadership and the Berlin Wall and the Soviet Union crumbled, his successes in the Gulf War, and his support for embattled Supreme Court nominee Clarence Thomas. They also wince at some low points, namely the selection of David Souter to the Supreme Court and breaking his pledge never to raise taxes. And they point out that while the media is largely extolling Bush for his leadership and decency today, their despicable coverage of Bush during his political career painted a much different picture.

Jim Geraghty of National Review and Greg Corombos of Radio America hope the accuser is OK but cannot miss the irony of lawyer Michael Avenatti begging for the presumption of innocence after being charged with domestic violence and just a month after trying to destroy Supreme Court nominee Brett Kavanaugh with no evidence. They also welcome New York Gov. Andrew Cuomo’s explanation that his state offered $1.5 billion in tax incentives to Amazon because it’s tax rates are too high for New York to compete with places like Texas on a level playing field. And they roll their eyes as Democratic Senators Sherrod Brown and Corey Booker insist Stacey Abrams must win the Georgia governor’s race or else it was stolen by Republicans. They also cringe as President Trump claims people vote multiple times by changing clothes and getting back in line and that people get voter ID by buying cereal.