Taxes
Supply, Demand, and Policy
Back in the 1980s one of the political phrases that came into vogue was “supply-side economics.” It was demagogued by the left on two fronts. First, critics insinuated that only the rich got tax cuts; in reality, Kemp-Roth tax reduction was across-the-board. Second, they misrepresented the supply-side concept as “trickle-down economics” – wealth transfer to the rich intended to spur business activity that will “trickle down” to lower income brackets.
One problem with the slur is that it regards tax cuts as a subsidy, basically the same as funding stadiums with tax dollars. In reality, tax cuts are the opposite of wealth transfer. Quoting Rush Limbaugh from memory, “It ain’t yer [the government’s] money.” Another is that it equates supply with the rich. Many businesses are not run by the rich. There are rich people (e.g. Randi Weingarten) who may invest in producers but do not produce anything directly; their direct economic activity is limited to consumption and/or rent-seeking.
The greater problem is that the “trickle-down” canard treats tax policy as the only factor relevant to spurring or hindering supply. Even as a political novice who had yet to hear the name Thomas Sowell I was able to figure out that supply-side economics concerned all such factors, and that demand-side economics revolved around all obstacles to consumption. Taxation is an impediment to both. The other great factor that government must address is its own laws. Regulations prohibit some or all parties from entering certain industries, or (more relevant to this discussion) they impose compliance costs on producers.
Likewise, demand-side economics should also address all barriers to consumption and not just tax rates (or resort to subsidy). If some regulations can depress supply, what other regulations depress demand?
The Wages of Sin
Once upon a time pot and gambling were considered vices and banned in most states.
Now they are big business.
The little strip mall where my gym is located has three retail outlets which sell marijuana (which is legal here in Maryland). Perhaps not coincidentally, there is also a 7-11 which does a booming business at night and on weekends.
Also visible from the parking lot are three very large signs promoting on-line sports betting.
Gambling and pot are not only big business, they are highly lucrative for state governments. Maryland currently takes in a bit more than $100 million in marijuana tax revenue and about $25 million in sports gambling. The amount generated by gambling is expected to double over the next 12 months as Maryland will raise the tax rate from 15 to 30% on revenue.
The wave of marijuana legalization kicked into overdrive in the 2010s, and sports betting was jumpstarted when the Supreme Court ruled in 2018 (Murphy vs. NCAA) that the issue was a matter to be resolved by the individual states. In both cases concerns about public health effects were downplayed, both in the belief that such effects were minimal, and that they were more than offset by increases in tax revenue and by reduced strain on the criminal justice system.
“A Disease of the Public Mind”
All Hat and No Cattle – Section 25C Tax Credits
I love that expression. There are lots of explanations of the saying, but I take it to mean (and I assume most do) that it is meant to describe a big talker – one who says a lot but doesn’t really have/do much to back it up.
As the dust has begun to settle from the Inflation Reduction Act (I always laugh at that title), that saying keeps going through my head.
There are a lot of things in the IRA that are HVAC related and one of them was the extension and expansion of 25C Tax Credits. Before I go any further, a short primer on tax credits.