Tag: taxes

Eric Garner and the Dog Who Didn’t Bark

 

shutterstock_121088260Amid the contention over the Eric Garner case — whether the force used against him was justified, how much his criminal and medical histories should bear on the events, etc. — two points have emerged with what should be crystal clarity: that the cigarette taxes that make selling “loosies” so profitable are absurd, and that the crime Garner was being arrested for at the time of his death is almost wholly a creation of these taxes.

To give a sense of just how crazy cigarette taxes are in New York City, consider that each pack of 20 is subject to $4.35 in state taxes, plus an additional $1.50 in city taxes: in all, a little over $0.29 per cigarette. Given that cigarettes are legally available within a day’s drive for less than the cost of the taxes, it’s little wonder that an estimated 57% of the cigarettes sold in the state are smuggled in (the highest rate in the nation; Lord knows how much higher the figure is for NYC itself). It’s even less of a surprise that street vendors like Garner and this fellow can make a living selling individual cigarettes for $0.70 each or $1 for two.

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The Making of a FiCon

 

My teenage daughter, who is very keen on astrophysics and space exploration, came to me in a huff. She had watched a video that claimed a manned Mars mission was now only a matter of money, not engineering. “According to the video, if everyone in the country paid something like only half a penny, NASA would have the money they need for the mission!”

I don’t know enough about the science to evaluate the truth of the engineering claim without further research. But we had a fruitful discussion of whether money is truly the only obstacle in government bureaucracies, who pays taxes, how much they pay, where the spending goes, and what the disincentive effects are of taxes on the labor supply.

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Burger King Shrugged

 

Progressives are outraged. “But that’s so unlike them, Jon.” I know, but this time they mean it.

Burger King, a fast food establishment I last visited during the Clinton administration, has determined that their tax bite is a bit lower if they incorporate in Canada rather than the U.S. Or something like that. I’ll let the experts explain:

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Memo to Leader McCarthy: Talk About Pocketbook Issues, Not Freedom

 

From a good friend:

Listening to Uncommon Knowledge with Kevin McCarthy at the gym. The new House Majority Leader is making a big mistake. Why do conservatives keep using LIBERTY! in every interview? It adds zero-content and non-conservatives think it’s weird.

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Member Post

 

How much time does government take from you each week, month, or year? How much time is wasted by paperwork and by unnecessary processes (undue regulations)?  More

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The First Paycheck of the Summer, or, a Conservative is Born

 

shutterstock_183463727An email from Nico Robinson, age 19, who, today, opening the first paycheck from his summer job, suddenly discovered withholding taxes:

As I open the letter, I see the first line reading Direct Deposit Voucher, immediately skim to the bottom, expecting my full paycheck, and I notice something amiss. Rather than the figure I was expecting, I only see merely a much smaller figure, mocking me. I still have yet to grasp the concept of what withholdings are and why the feds can take my money — money that I don’t even owe them yet!

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About ‘The Republican Case Against Republican Economics’

 

New York Times’ columnist Thomas Edsall uses my recent The Week column, “What Conservatives Don’t Understand About the Modern U.S. Economy,” as a prompt for analysis on how Republican “reformers” are, in his view, “questioning … free-market orthodoxy.”

The subject of my critique was a recent manifesto put forward by top conservative groups after a big meeting in Washington. To me, their agenda reflected little recognition of the major challenges facing today’s economy. As I wrote:

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Business owners and those who hope to become one (wantrepreneurs) are a dying breed. First some wonky background: Technically, the U.S. economy is in “recovery”. However, most economists agree growth is anemic and vulnerable. 2014’s first quarter GDP was a mortifying 0.1%, surprising most everyone. Forbes called the growth “glacial”. Now we are informed that […]

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Piketty’s Focus is in the Wrong Place

 

It says something about how much attention the French economist Thomas Piketty’s new book, Capital in the Twenty-First Century, is getting — and something about how deeply flawed Piketty’s thinking is — that I have, for the second straight week, dedicated my column at Defining Ideas to rebutting the arguments made in the book. As I’ve noted before, one of Piketty’s greatest errors is focusing on inequality to the exclusion of economic growth. We should welcome any increase in wealth to the rich or the poor that does not leave other people worse off, whether that change increases or narrows the gaps in wealth between rich and poor—any such Pareto improvement meets the gold standard of economic welfare.

As I write in this week’s column:

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Alternate-Side Parking is a semi-regular, once or twice a week, podcast. Each episode lasts approximately as long as it takes for me to find a new alternate-side parking space in my neighborhood in Brooklyn, New York, plus however long I feel like sitting in the driver’s seat. In today’s episode, I talk about how unhappy […]

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I completely overlooked the significance of April 15th when I signed up on 10 Cents’ list. But, having walked right into it, there’s nothing for it but to confess to my Tax Day story. For every one of us, there was a First Time: the year you first had dealings with the IRS. For some, […]

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Do Liberals Really Think An 80% Tax Rate Wouldn’t Hurt the U.S. Economy? — James Pethokoukis

 

Federal income taxes went up last year, a financial reality becoming ever clearer to many higher-earning Americans as tax day looms. But how much higher can Washington clip wealthier Americans before rising tax rates really weigh on US economic growth?

041414taxesQuite a bit, some would argue. Despite those tax hikes, the American economy actually grew faster in 2013 than in 2012. Real GDP — measured fourth quarter over fourth quarter — accelerated to 2.6% from 2.0%. Another point: while the current top tax rate of 39.6% is the highest since the 1990s, the economy has done just fine with top rates double that level. Real GDP grew by 3.6% annually in the 1950s even with a 91% top rate. Going forward, progressive economist and inequality researcher Thomas Piketty recommends a top rate of 80% in his new book Capital in the Twenty-First Century, a work much praised on the left. Clearly, then, tax rates could go a lot higher both to reduce income inequality and raise more dough for government spending programs, right?

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Where the Right is Wrong — Salvatore Padula

 

Like Friedrich Hayek, I am a man of the Right. Though I do not adhere down the line to the contemporary orthodoxy of the Right, I firmly believe that personal liberty and personal responsibility are the cornerstones of both human fulfilment and a healthy society. I am utterly convinced that for our society to remain strong it is imperative that conservative and libertarian policy be implemented. In order for this to happen, it is necessary for those of us on the Right to win the argument and sway public opinion. Happily, this appears to be happening, both because of the inherent merits of our positions and because of the manifest failures of progressive statism.
While I am optimistic about the prospects of the American Right and I am heartened by the increasing effectiveness of our persuasive efforts, I believe that there are always areas for improvement. Specifically, I frequently encounter arguments put forward by some on the Right that are counterproductive in persuading the unconvinced — as well positions held by segments of the Right that are simply incorrect. To that end, I have compiled a list (not meant to be comprehensive) of arguments and opinions which those who desire the implementation of good policy may want to reconsider, or at least raise more sparingly.
Tax Cuts Pay for Themselves
This is a common argument put forward by many on the Right and it is not without merit. Some tax cuts do, in fact, pay for themselves. It is not, however, always (or even usually) the case. While it is absolutely true that punitively high income and capital gains tax rates disincentivize economic activity and slow economic growth, it is not necessarily true that losses in revenue will be made up by the overall increase in the size of the economy.
Whether or not that is the case is primarily a function of the applicable multiplier. Macroeconomics is far from a science and predicting what a particular multiplier will be is largely a theoretical crap shoot (as evidenced by the failure of the 2009 Stimulus, which assumed a much higher Keynesian multiplier than that which actually occurred). It is common on the Right to invoke the Laffer Curve to support the notion that cutting taxes will increase revenue. Laffer was certainly on to something and the Laffer Curve does apply under certain circumstances, but these circumstances occur when marginal tax rates are exorbitantly high. There is strong evidence to support Laffer at marginal rates of 60% and higher. The evidence for lower rates (including our current top rates) is much more equivocal.
I am not saying that we should abandon calls for lower taxes. We should, however, be circumspect about this particular claim.
More Guns, Less Crime
I like guns. I own several. I believe the Second Amendment recognizes an individual’s right to keep and bear arms. I find many claims advanced by those opposed to guns to be risible, particularly concerning assault rifles. That said, I think that gun advocates often make arguments which have the effect of shooting themselves in the foot.
While my title for this topic alludes to John Lott’s book of the same name, I’m less opposed to general claims about the effect of gun ownership and carrying on crime reduction (though the data cited to support such claims are far from compelling) than I am on individual instances where increased firearm distribution is suggested as a solution to a problem. For example, after the Sandy Hook massacre it was common to hear gun advocates call for arming elementary school teachers. This response is just as disproportionate and ineffective as were calls from the left to ban assault rifles and large capacity magazines. What’s worse, they overshadowed the sensible calls to reform our mental health system and allowed an unsympathetic media to caricature supporters of gun rights as quacks in the mold of Alex Jones. Similarly, when we object to sensible policies, such as prohibitions on carrying weapons in bars, we do much to discredit ourselves with the mass of our fellow citizens who think that alcohol and firearms are a bad combination.
Supporters of gun rights would also do well to admit that guns make certain crimes more likely. Mass killings are certainly more likely due to firearms. It’s difficult to have a mass stabbing, for example. (Though there apparently was one in in China recently, there were a large number of perpetrators and the casualties were relatively few when compared to something like the massacre perpetrated by assault rifle-armed Anders Brevik in Norway a few years ago.), and physical altercations involving firearms more easily escalate into fatalities. Conceding these fairly obvious truths doesn’t weaken our case (since nobody takes the denials seriously) and it allows us to make the reasonable argument that, given the facts that guns exist and that criminals will possess them, prohibiting legal gun ownership deprives law abiding citizens of their right to self-defense.
State Nullification and Secession
Much to my dismay, both nullification and secession seem to be increasing in popularity among segments of the Right. I’m not going to dwell upon why this poses a problem for the Right in terms of public perception. I think the reasons are self-evident. What I would like to address is why both nullification and secession are unconstitutional.
I will start with noting the social contractarian basis of our Constitution. The United States Constitution begins with “We the People of the United States.” It is not an agreement between the states; it is a compact between the people. While it is true that sovereignty under the Constitution is divided between the federal and state governments, federal sovereignty is not derived from the states, but from the people. Because our Constitution is a compact between the people of all the states, it is not within the power of individual states to unilaterally secede. While there is a natural right to revolt against an oppressive or tyrannical regime, that right is possessed by the people, not the states, and is, in any event, extraconstitutional.
Beyond that basic principle, nullification is squarely contradicted by the Supremacy Clause (Article VI, Clause 2 of the Constitution, which states that federal law is the supreme law of the land and overrides state statutory and constitutional law) and Article III, Section 2, which grants the federal courts jurisdiction over, amongst other things, cases arising under the Constitution and the laws of the United States.
The Federalist Papers also contradict the legitimacy of state nullification. Federalist No. 33 declares federal laws supreme to state laws. No. 39 explains that, under the Constitution, conflicts over jurisdiction between state and federal power are to be resolved by the federal courts. No. 44 discusses the role of the states in checking federal overreach, specifically stating that the election of new representatives is the recourse available to states. It does not mention nullification. No. 78 states that federal courts have the power to void legislative acts that are contrary to the Constitution. It does not grant a similar power to the states. No. 80 specifically denies that states have the power to invalidate federal law.
We Should Return to the Gold Standard
I deplore out-of-control spending and the profligate printing of money. Inflation is a terrible thing. I’m very critical of the policies of the Federal Reserve. That said, I think that a return to gold-backed currency is a terrible idea and is frequently advocated by people who don’t really understand what they are talking about. (Note: many advocates of the gold standard are highly informed. If you are one of them, much of what I have to say here is not directed toward you. I still think you’re mistaken though.)
There are undoubtedly good arguments in favor of having a gold-backed currency. They include long-term price stability, reduced risk of significant inflation, and the near impossibility of hyperinflation. Gold standards also make it more difficult for a government to engage in sustained deficit spending. More debatable is the assertion that a gold-backed currency has objective value in contrast to the ephemeral nature of fiat currency.
On to why the gold standard is a bad idea. First, despite claims to the contrary, gold has very little objective value. Gold certainly has industrial applications and people think it’s pretty, but there really is no such thing as objective worth. Something is only worth as much as someone is willing to pay for it. In any case, if you are looking for a stable store of objective value linking your currency to any single commodity (gold included) is inferior to a basket of goods. Second, while excessive inflation can be a serious problem, deflation is often disastrous. Fixing the money supply to gold reduces the risk of inflation at the cost of increasing the risk of deflation. As a general matter, moderate inflation (around 2%) is widely considered by economists to be desirable. Third, while a gold standard usually leads to long-term price stability, it is prone to short-term extreme volatility as the value of money is dependent upon the supply of gold.
In any case, fiat currency is often unfairly maligned. A well-managed and politically independent central bank should have no problem responsibly managing the currency in a way that encourages growth and avoids inflation. While it is true that the Fed has pursued a dangerous policy of quantitative easing (though I’m slightly less concerned than are many about the prospects of mass inflation, I think it a real danger), this is not an inherent weakness of fiat currency. It is a consequence of the politically imposed dual mandate under which the Federal Reserve is tasked with limiting inflation and maximizing employment. These are often contradictory aims and the proper role of a central bank should be limited to curbing inflation.
Representative Peter King
The man is an ass.
Anyway, these are a few areas where I think the Right should reconsider. I’d love to know what you think and if you have anything you’d like to add to the list.

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Member Post

 

Governor Scott Walker signed a huge $500 million tax cut for the state of Wisconsin today. If the left’s understanding of economics is correct, Wisconsin is in for rough times. Lower taxes will mean that the state’s revenues will suffer, forcing it to cut back on services and expenditures for building and maintaining vital infrastructure. […]

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