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  • Archive for the 'Taxes' Category

    Draining the Swamp: Progressive Politics – the Road to Crony Capitalist Perdition

    Posted by Kevin Villani on 17th June 2018 (All posts by )

    From A Libertarian Republic to Majoritarian-Totalitarian Democracy: a Summary

    The 2016 American Presidential Election

    Trust in government fell by almost 80% from the end of the Eisenhower Administration to the end of the Obama Administration. Then Americans endured one of the most divisive and longest two year election campaigns leading up to the 2016 election. Former Democrat turned Republican Donald Trump defeated a field of 17 traditional center-right Republicans to run against traditionally center–left Democratic candidate Hillary Clinton who turned left to defeat her socialist competitor Bernie Sanders in the primary. Sanders correctly argued that the U.S. political system is rigged – more than he knew at the time – but responded by promising his generally young supporters socialism without totalitarianism. The public has endured another two years of divisiveness as the losing party tries to undermine and some would impeach the winner.

    Republican nominee and arguably crony capitalist businessman Donald Trump, the son of a crony capitalist housing developer, ran on the paradoxical promise to “drain the swamp.” The faux democratic election of crony capitalist supremo Vladimir Putin in 2011 drew the public reprobation of then U.S. Secretary of State Hillary Clinton, the subsequent Democratic Party nominee. Putin responded with a campaign of not so fake news not to elect Trump – they had the same polls as everybody else – but to expose Clinton as a crony capitalist who also engaged in election-rigging. He hit pay dirt. The faux Russian collusion scandal has since been used to undermine the legitimacy of the Trump Administration.

    On the issue of trade there was no difference between the three main candidates – all opposed the new TTP trade agreement. The U.S. trade deficit has been about $500 billion a year during this century, consumption financed mostly with additional debt. Candidate Clinton, who supported China’s entry into the WTO during the Clinton Administration agreed she would if elected renegotiate NAFTA, the trade bill passed at her husband’s initiative. On the related issue of immigration, candidate Clinton voted for the bipartisan Secure Fence Act of 2006, as did then Senators Obama and Schumer.

    The Obama Administration had doubled the federal debt outstanding to over $20 trillion – and the unfunded liability is approximately ten times that. President Obama’s Chairman of the Joint Chiefs of Staff publically warned as early as 2010 that the debt was a threat to national security. Candidate Clinton promised she wouldn’t add a penny to the national debt, but her platform had an imbedded $10 trillion increase, less than Sanders to be sure. Candidate Trump promised to eliminate the debt in eight years by increasing economic growth. Clinton’s was a political lie, Trump’s an outlandish campaign promise since going unfulfilled: his appropriations bill contained a $200 billion increase in spending, a Democratic victory for domestic spending in return for Republican defense spending.

    Candidate Trump ran against the “deep state” wars and military interventions that candidate Clinton had voted for. But as President, Trump embraced it with overwhelming Democratic support to punish Russia.

    Progressivism’s Administrative State

    The Democrats’ agenda has arguably fared much better under Trump than Republicans did under Obama. Given these similarities in proposed and actual policies, the subsequent animosity might appear puzzling. But the biggest difference among the candidates relates to the relative roles of the public and private sectors. The U.S. is now governed by an unaccountable patria administrative state: judicial and legislative subsumed in the executive branch and sometimes independent even of that – judge, jury and executioner. The new religion is “science” requiring a faux consensus and leadership by the “experts” as proposed by John Kenneth Galbraith in the New Industrial State (1967) over a half century ago.

    Washington, D.C. is a place where self interested deals are made in hotel lobbies and K street offices, but the entire federal bureaucracy sits on a former swamp. Most federal politicians are political swamp people having worked their way up in local and state politics by making political deals for budget and/or tax subsidies and/or regulatory discretion – legal extortion. Candidate Clinton is a self described progressive and candidate Sanders a socialist, the former supports state control of business, the later favors more direct state ownership.

    The Berlin Wall fell in 1989, followed by the Soviet Union two years later. In 1995 U.S. President Bill Clinton declared “The era of big government is over.” Britain’s Prime Minister Tony Blair, publishing in a Fabian pamphlet in 1998 argued: “Liberals (classical, i.e., American conservatives) asserted the primacy of individual liberty in the market economy; social democrats promoted social justice with the state as its main agent. There is no necessary conflict between the two, accepting as we now do that state power is one means to achieve our goals, but not the only one and emphatically not an end in itself.” But “the values which have guided progressive politics for more than a century – democracy, liberty, justice, mutual obligation and internationalism” have lead in practice to “state control, high taxation and producer interests (crony capitalism).” By the end of the century a few years after Blair spoke, the market had reached The Commanding Heights of the economy. But a decade later the Obama Administration had put the state back on top, seeking to control not just health care but finance and energy.

    Progressivism – like fascism and communism – started with the best of intentions, in opposition to crony capitalism. Social welfare programs were implemented to spread the wealth and provide a safety net, but during the progressive Obama Administration economic growth per capita stagnated. Candidate Trump believed that rolling back the administrative state regulations and the tax on savings and investment as suggested by Blair would restore real private economic growth, the key to managing the public deficit. His Democratic opponents both favored a vast expansion of the administrative state and increases in the tax on capital.

    Progressive Internationalism and the New World Order

    Progressives supported freer trade even if not reciprocal in the post WW II era because America could still enjoy a balance of trade surplus that could be used to fund investments abroad and a “new world order” of American dominance in a bi-polar world with the Soviet Union and its satellites. The European Union evolved as a mechanism to end European – especially German – “nationalism” in favor of this plan. Two events undercut this agenda of international control through capital flows: the 1960s wars on poverty and Vietnam turned American surpluses into deficits, and the common European currency created a German economic hegemony over Europe. The U.S. today is to China what Greece, Italy, Spain, Portugal and Ireland are to Germany, and that’s not a compliment. Both China and Germany – whose exports equal China’s with only 6% of the population – are mercantilist countries pursuing low wages and consumption domestically so that future generations can live off the debt that finances their over-consuming customers.

    Germany understands perhaps better than any country the problem of using foreign debt to finance current consumption as it did to feed a starving population during the interwar years. The excessive debt undermined the fledgling Weimar Republic, giving rise to Hitler. Trumps trade policy appears incoherent, as is much of the criticism. Progressives still argue for globalism and internationalism while conservatives and libertarians are hung up on Ricardian theory of comparative advantage in international trade and the accounting identity of the trade and capital balance.

    The problem isn’t global trade per se, but progressive policies that repress national saving and domestic labor and capital productivity while growing the administrative state. National boundaries still matter. In the EU the single currency zone has destabilized previously relatively stable prosperous countries, threatening political and economic collapse. The relationship between the U.S. and China reflects a similar dynamic: the willingness to accept American debt has kept the dollar from falling and trade adjusting. China holds over trillion dollars of debt backed by taxpayers, and was the biggest foreign funder of Fannie Mae and Freddie Mac during the sub-prime lending bubble. Progressives argued that we would grow out of this debt, but simultaneously and inconsistently deny that the failure to grow during the Obama Administration reflected economic repression but “secular stagnation” – that capitalist innovation has run its course. If so, we are doomed when countries attempt to collect.

    Thus far the main part of the Trump agenda, the tax reform and regulatory roll back – against universal Democratic opposition and condemnation – appears to be working. Economic growth per capita has picked up, unemployment is the lowest since the turn of the century, and business investment net of depreciation is rising from historic lows. But it is way too early to declare success. China entered the WTO without meeting the minimum requirements for intellectual property protection or reciprocity, a Clinton Administration oversight. Fixing the former should be uncontroversial. Reciprocity insures that the most competitive – not the most subsidized – win. Subsidies may benefit American consumers temporarily, but the dislocations are costly and overconsumption dangerous, the debt leading to contemporary “gunboat diplomacy” to settle debts. A reciprocal tariff is a consumption tax, not irrational to consider under those circumstances.

    Progressive efforts to Impeach President Trump: the Totalitarian Administrative State Strikes Back

    Yet since the election, some progressive Democrats have been pushing for impeachment on grounds of Russian collusion and obstruction of justice, although no evidence has yet been produced of that after two years of investigation.

    One thoughtful progressive commentator dismisses these grounds, arguing that the real grounds for impeachment are the “threats Trumpism poses to democracy and rule of law.” If true, those would indeed be grounds for impeachment but he doesn’t define Trumpism or provide evidence. The many articles in the progressive media can be summarized thus: Trump is tweeting against the administrative state agents that are out to get him.

    Libertarians and Republican conservatives have argued that progressives have been undermining liberty and the rule of law for over a century to create the administrative state, obfuscating their agenda by manipulating words to mean the opposite of their historical meaning. Trump’s Court appointments are intended to reverse that trend. Statism is usually associated with one-party faux democracy to prevent state power from turning against the entrenched interests with a change of government. Trump ran against the progressive new world order, arguing to “put America first.” The Democrats didn’t think Trump had any chance to win. This seems the more compelling reason for their impeachment efforts. The anti-Trump organized hysteria bears a marked resemblance to the largely Soros funded Republican and Democratic efforts to ignite the democratic color revolutions in the former Soviet states described by F.William Engdahl in Full Spectrum Dominance: Totalitarian Democracy in the New World Order (2009).

    This isn’t about Trump tweets. It’s a battle for the commanding heights.
    Read the rest of this entry »

    Posted in Big Government, Capitalism, Civil Liberties, Civil Society, Conservatism, Crony Capitalism, Economics & Finance, History, Leftism, Libertarianism, Political Philosophy, Politics, Public Finance, Taxes, Tradeoffs, USA | 9 Comments »

    Paying Higher Taxes Can be Very Profitable

    Posted by David Foster on 17th April 2018 (All posts by )

    (originally posted in 2010)

    Chevy Chase, MD, is an affluent suburb of Washington DC. Median household income is over $200K, and a significant percentage of households have incomes that are much, much higher. Stores located in Chevy Chase include Tiffany & Co, Ralph Lauren, Christian Dior, Versace, Jimmy Choo, Nieman Marcus, Saks Fifth Avenue, and Saks-Jandel.

    PowerLine observed that during the 2008 election season, yards in Chevy Chase were thick with Obama signs–and wondered how these people were now feeling (in October 2009) about the prospect of sharp tax increases for people in their income brackets.

    The PowerLine guys are very astute, but I think they were missing a key point on this one. There are substantial groups of people who stood to benefit financially from the policies of the Obama/Pelosi/Reid triumvirate, and these benefits can greatly outweigh the costs of any additional taxes that these policies require them to pay. Many of the residents of Chevy Chase–a very high percentage of whom get their income directly or indirectly from government activities–fall into this category.

    Read the rest of this entry »

    Posted in Big Government, Politics, Taxes, USA | 4 Comments »

    Tax Reform Impact – Capital Gains and Investment Income

    Posted by Carl from Chicago on 21st January 2018 (All posts by )

    Recently I was at Powell’s bookstore In Oregon when I came across this book which attempts to be an introduction to the complexities of taxation. I thought that this was in the spirit of what I was going to try to do as I start to review the 2017 Tax Reform act and its’ myriad impacts on the economy and individual incentives.







    As an individual investor, I started with looking at capital gains and investment income. Some thoughts:


    1. The same general split applies; long term gains are taxed at favorable (lower) rates, and short term gains are taxed as ordinary income. The ordinary income tax brackets are always higher than the capital gains brackets

    2. The tax rates for capital gains are 0, 15% and 20%. These are the same as under the previous tax laws.
    Here is a brief article from the Motley Fool

    3. The rates on ordinary income have gone down a bit, so the average person would pay less on gains, all else being equal (but this gets into your state and the standard deduction, a different topic). Thus there is no significant impact on investments here, it should be slightly favorable

    4. Although there was talk of changing the way stock sales are accounted for to limit “tax loss harvesting”, these changes did not occur. I believe that you can still deduct up to $3000 in losses against ordinary income, but I haven’t been able to find that yet to confirm either

    5. The 3.8% surtax on gains if your income is above $250,000 remains the same; this does not seem to be impacted by the law

    6. While there were changes throughout the code that impacted REITS (real estate limited trusts) and MLP’s (Master Limited Partnerships), these changes didn’t fundamentally impact their value to classes of high income investors (they still have favorable tax characteristics)

    7. There was some discussion of eliminating the Federal tax free nature of municipal bonds, but that deduction remained intact

    8. There also was some discussion of changing the 401(k) deductions; this too, remained intact


    Thus for investors, the basics of investing for individual investors (not the super wealthy) and the impact of taxation did not see significant changes under the new tax law. The types of tactics you would use under the prior tax law mostly moved into the new environment intact.




    Cross Posted at LITGM

    Click Here To Save $15 at Ammo.com

    Posted in Taxes | 10 Comments »

    Some Thoughts on Trump, Free Trade, and Horses

    Posted by Lexington Green on 28th February 2017 (All posts by )

    A friend sent a link to a leaked, recorded conversation between Trump and Wilbur Ross, his nominee for Commerce Secretary. There is nothing particularly troubling in the conversation. Trump is talking like Trump. He is the same person in public and in private, which is nice.

    I responded:

    Sounds good to me.  A tariff is a consumption tax collected at the port of entry.  The American founders expected to fund the operations of the national government with revenue from a tariff, and it worked.  He is also right that the Japanese and other countries use safety regulations as non-tariff import barriers.  There is nothing bad on here at all.  

    Read the rest of this entry »

    Posted in Culture, Economics & Finance, History, Politics, Public Finance, Taxes, Trump | 20 Comments »

    Trump and Conflicts of Interest.

    Posted by Michael Kennedy on 19th November 2016 (All posts by )

    Trump is organizing his administration but he is facing another crisis.

    The Wall Street Journal is giving him painful and unwelcome but good advice.

    He must liquidate the family business.

    One reason 60 million voters elected Donald Trump is because he promised to change Washington’s culture of self-dealing, and if he wants to succeed he’s going to have to make a sacrifice and lead by example. Mr. Trump has so far indicated that he will keep his business empire but turn over management to his children, and therein lies political danger.

    Mr. Trump has for decades run the Trump Organization and during the campaign said if he won the Presidency he’d turn over the keys to Donald Jr., Eric and Ivanka, all of whom are now serving on the Trump transition. A company spokesperson says the family business is “in the process of vetting various structures” and that the ultimate arrangement “will comply with all applicable rules and regulations.”

    Some of Mr. Trump’s lawyers have called the plan a “blind trust,” which past Presidents have used to protect their assets from the appearance of conflicts-of-interest. But that set-up typically involves liquid assets like bonds and stocks, not buildings or a branding empire. Mr. Trump will know how any given decision will affect, say, the old post office property in Washington, D.C. that he’s leasing from the federal government (another conflict). By law blind trusts are overseen by an independent manager, not family members.

    The Journal is correct. I don’t know how Trump is going to do this but he has to.

    Read the rest of this entry »

    Posted in Big Government, Capitalism, Current Events, Elections, Taxes, Trump | 23 Comments »

    Paying Higher Taxes Can be Very Profitable (rerun)

    Posted by David Foster on 15th April 2016 (All posts by )

    (originally published in 2010 and now an April perennial)

    Chevy Chase, MD, is an affluent suburb of Washington DC. Median household income is over $200K, and a significant percentage of households have incomes that are much, much higher. Stores located in Chevy Chase include Tiffany & Co, Ralph Lauren, Christian Dior, Versace, Jimmy Choo, Nieman Marcus, Saks Fifth Avenue, and Saks-Jandel.

    PowerLine observed that during the 2008 election season, yards in Chevy Chase were thick with Obama signs–and wondered (in 2009) how these people were now feeling about the prospect of sharp tax increases for people in their income brackets.

    The PowerLine guys are very astute, but I think they missed a key point on this one. There are substantial groups of people who stand to benefit financially from the policies of the Obama and company, and these benefits can greatly outweigh the costs of any additional taxes that these policies require them to pay. Many of the residents of Chevy Chase–a very high percentage of whom get their income directly or indirectly from government activities–fall into this category.
    Read the rest of this entry »

    Posted in Big Government, Economics & Finance, Leftism, Taxes, USA | 3 Comments »

    Toward Financial Independence

    Posted by Nathaniel T. Lauterbach on 28th February 2016 (All posts by )

    I commented in this post about the consumerist fog that in which I was living as a middle-rank American military officer, and my desire to “fix” or improve my situation by taking command of my finances.

    How did we do it?

    It was simple, but not easy.
    Read the rest of this entry »

    Posted in Book Notes, Economics & Finance, Human Behavior, Miscellaneous, Personal Finance, Personal Narrative, Taxes | 14 Comments »

    “We Were Poised for Real Criminal Justice Reform”

    Posted by Jonathan on 27th January 2016 (All posts by )

    Indeed.

    Something similar happened in the early ’90s. It looked as though a political consensus favoring smaller government was taking shape. Republicans with a well-considered smaller-govt agenda took over the Congress and the Democrats started to cut deals with them. Then the Oklahoma City bombing happened, the Clinton Democrats outmaneuvered the Gingrich Republicans over the government shutdown, and the smaller-government impetus was weakened considerably (we did get cap-gains tax cuts, welfare and a few other reforms that did a lot of good in the subsequent decade).

    But then Sept. 11, 2001 and the Middle East war kicked much of what was left of the smaller-government movement over the far horizon, and since 2009 a hard-Left executive branch has been extending and doing its best to entrench post-Reagan government expansion.

    There are tides in the affairs of men. The problem with tides is that they can go out for a long time before they reverse and start to come in. Let’s hope that the statist tide has finally run its course and that we are near a reversal.

    Posted in America 3.0, Big Government, Current Events, History, Politics, Taxes, Tea Party, USA | 27 Comments »

    The Most Important Story No One Is Talking About – Puerto Rican Debt

    Posted by Carl from Chicago on 15th October 2015 (All posts by )

    Dan and I go back and forth on the relatively arcane topic of municipal debt. As we all know, the state of Illinois is awash in debt. The situation is so bad that:


    1. The State of Illinois is operating without a budget

    2. The city of Chicago is proposing a massive property tax increase

    3. Cook County just raised our sales tax (one of the highest rates in the country, already) and is proposing additional fees

    4. Chicago Public Schools face a major deficit and without some sort of massive state tax relief is likely going to face significant layoffs and a likely teachers strike

    5. Note that we are one of the few states and cities to be in such dire straits that we issue TAXABLE debt instead of MUNICIPAL debt which is generally exempt from Federal taxes and some state taxes. This is due to the fact that you generally cannot issue muni bonds to pay off operating expenses (like payroll and legal settlements)

    The long term most indebted players have been Detroit, Puerto Rico, and the State of Illinois / City of Chicago. We saw how the Detroit bankruptcy occurred, with bondholders generally taking it on the chin and unsecured pension holders in fact emerging in a relatively better situation.

    Now Puerto Rico is up to bat. They have massive, unpayable debts of many varieties (some secured by full faith and credit, some secured with revenues, some bank loans, etc…) and their governor basically said so out loud. All of this is inevitable as their island’s best talent has fled to the mainland USA and the remaining population is more and more reliant on government aid to survive. They also have failed to modernize their power infrastructure and / or build new industries outside of tourism which erodes their ability to compete against the mainland USA that in turn has much higher productivity.

    The real issue – long term – is whether or not the Federal government will back up the states. This is essentially the “long game” of the State of Illinois and the city of Chicago – waiting to see whether or not the Federal government is really going to stand by and let us go bankrupt or not. If the government is ultimately going to pick up our debts, it is “business as usual”, and the corruption, back-scratching, and non-competitive behavior can just continue indefinitely, with taxpayers across the nation picking up the debris rather than forcing the citizens of Illinois to clean up our act.

    Today Puerto Rico and the treasury announced that they are working to backstop the Puerto Rican debt with some sort of Federal umbrella per this article.

    Puerto Rico and U.S. officials are discussing the issuance of a “superbond” administered by the U.S. Treasury Department that would help restructure the commonwealth’s $72 billion of debt, people familiar with the plan said.

    And what a great name! A “superbond” means that all the US citizens will pick up the “super” obligations of our corrupt, crony-laden, inefficient city and state. That’s super!

    This is the path out for Illinois and the city of Chicago. Play brinksmanship with Federal government and receive a backstop. Puerto Rico leads the way!

    Cross posted at LITGM

    Click Here To Save $15 at Ammo.com

    Posted in Big Government, Chicagoania, Economics & Finance, Politics, Public Finance, Taxes | 15 Comments »

    Paying Higher Taxes Can be Very Profitable (rerun)

    Posted by David Foster on 17th April 2015 (All posts by )

    (Originally posted in January 2010–now an April perennial)

    Chevy Chase, MD, is an affluent suburb of Washington DC. Median household income is over $200K, and a significant percentage of households have incomes that are much, much higher. Stores located in Chevy Chase include Tiffany & Co, Ralph Lauren, Christian Dior, Versace, Jimmy Choo, Nieman Marcus, Saks Fifth Avenue, and Saks-Jandel.

    PowerLine observed that during the 2008 election season, yards in Chevy Chase were thick with Obama signs–and wonders how these people are now feeling about the prospect of sharp tax increases for people in their income brackets.

    The PowerLine guys are very astute, but I think they’re missing a key point on this one. There are substantial groups of people who stand to benefit financially from the policies of the Obama/Pelosi/Reid triumvirate, and these benefits can greatly outweigh the costs of any additional taxes that these policies require them to pay. Many of the residents of Chevy Chase–a very high percentage of whom get their income directly or indirectly from government activities–fall into this category.

    Consider, for starters, direct employment by the government. Most Americans still probably think of government work as low-paid, but this is much less true than it used to be. According to this, 19% of civil servants now make $100K or more. A significant number of federal employees are now making more than $170,000. And, of course, the more the role of government is expanded, the more such jobs will be created, and the better will be the prospects for further pay increases.

    If one member of a couple is a federal employee making $100K and the other is making $150K, that would be sufficient to allow them to live in Chevy Chase and occasionally partake of the shopping and restaurants. But to make the serious money required to really enjoy the Chevy Chase lifestyle, it’s best to look beyond direct government employment and pursue careers which indirectly but closely benefit from government activity…which are part of the “extended government,” to coin a phrase.

    Read the rest of this entry »

    Posted in Big Government, Taxes | 3 Comments »

    Why Gruber has to lie

    Posted by Michael Kennedy on 10th December 2014 (All posts by )

    The left does not do economics. They do politics and elections and lying to get past the “stupid voters” but, when pressed, nothing they do qualifies as numerically or mathematically sound. Social Security worked until everyone found the queue and until Congress raided the trust fund in the 90s.

    Obama and the Democrat leaders knew that Hillary made enemies of the insurance companies in 1992. The insurance companies funded devastating TV ads with “Harry and Louise” that cost the Democrats Congress in 1994. Therefore, they had to do what was necessary to get the insurance companies “inside the tent pissing out and not outside the tent pissing in” in Lyndon Johnson’s immortal words.

    Insurance companies have considered health insurance a loser for 25 years now. What they prefer is becoming “Administrative Service Organizations” which administer self funded health plans by employers.

    Corporate benefits include- organizing/ negotiating health insurance, group dental, STD, LTD, life, etc.

    The plan the Democrats came up with, with Gruber’s help, was to make the government the funding entity and pay the insurance companies to run the program. That way everybody is happy, except, of course, the taxpayer. The taxpayer does not like tax increases which would be needed to pay the bills. Therefore the taxpayer has to be fooled.

    The excise tax on high-cost health plans was among the many fees and taxes proposed as offsets to help slow the rate of growth of health costs, particularly premium growth, and finance the nationwide expansion of health coverage. When the Affordable Care Act was signed into law in March 2010, its coverage provisions were estimated to cost more than $900 billion over the next decade, from 2010 to 2019, and were to be paid for by fees and taxes on both individuals and businesses. At the time the health reform bill passed, the excise tax on high-cost plans was estimated to raise roughly $32 billion in revenue over the next decade, or by 2019.

    Without the taxes to pay the bills, the whole plan collapses. At its base, Obamacare is Medicaid for everyone. The employer mandate has been, contrary to the text of the law, postponed as the flaws in implementation appear. If it were to be enforced, there would be a revolution. Basically, Obamacare will destroy the health care plans of the 85% of the population who are satisfied with what they have to enroll everyone in a new program that approximates what Medicaid does. The reason for this is that our betters in Washington have decided that we spend too much on health care. That may even be true. One way to deal with this would be to use a market-based approach that resembles how health care was paid for 60 years ago. I have previously discussed how this worked and how it might be restored.

    Today, the vast majority of Americans get health insurance as a benefit from their employer. How this developed has been discussed at length and began during World War Two. In 2008, John McCain proposed a possible way to disconnect employment, alleged to create “Job Lock” but he lost the election. A hostile analysis of his proposal is here. The McCain campaign’s description is here.

    What became Obamacare is the work of the Democrat staff of Congress when the Democrats had filibuster proof majorities in both houses. The election of Scott Brown in a reaction to the impending passage of the health plan forced them to rush the bill through without amendments before Brown was sworn in January 2010.

    The taxes to fund Obamacare were hidden as “fines and penalties” until exposed by the Supreme Court in its 2012 decision on the constitutionality of Obamacare. All penalties are now taxes. The largest are on employer-funded plans.

    The funding from employee plans is called “The Cadillac Tax which is an excise tax on employer plans that exceed the benefits of Medicaid. The “exchange plans” are increasingly looking like Medicaid, especially in the narrow networks of providers, as doctors are now called.

    As health coverage expands to tens of millions of Americans–through Medicaid expansion in states and the new state health insurance exchanges that will soon begin selling individual health coverage–some Americans with employer-sponsored health coverage are seeing their benefits decrease.

    One of the most significant, and controversial, provisions of the Affordable Care Act is the new excise tax on high-cost health plans proposed to both slow the rate of growth of health costs and finance the expansion of health coverage. The provision is often called the “Cadillac” tax because it targets so-called Cadillac health plans that provide workers the most generous level of health benefits. These high-end health plans’ premiums are paid for mostly by employers. They also have low, if any, deductibles and little cost sharing for employees.

    If this is ever implemented, the Medicaid-for-all nature of Obamacare will become obvious. That’s why it will not happen. The fundamental premise behind Obamacare is not viable. That is why it will fail and the numbers do not add up.

    Gruber can’t say this. All he can do is obfuscate.

    Posted in Elections, Health Care, Law Enforcement, Leftism, Medicine, Taxes | 22 Comments »

    Quote of the Day

    Posted by Jonathan on 2nd December 2014 (All posts by )

    Richard Epstein, The flawed 75% tax solution from Hollande and Piketty:

    The basic question is why would anyone assume that major shifts in tax rates should have only relatively modest effects on the production of wealth. No one would say that about a cut in market wages of over 50 percent. So why assume otherwise in a tax context?

    Posted in Big Government, Economics & Finance, France, Leftism, Political Philosophy, Quotations, Taxes | 6 Comments »

    Governor Sam Brownback has a copy of America 3.0 in his Office

    Posted by Lexington Green on 14th August 2014 (All posts by )

    Governor Sam Brownback has come in for a lot of flack for his tax cuts in Kansas.

    The usual unholy alliance of Democrats and so called moderate Republicans, meaning they spend almost like Democrats but not quite, is against Brownback on this effort.

    A recent article in the Wall Street Journal entitled Why Liberals Hate Kansas: Sam Brownback’s tax cuts must be discredited before they succeed provides a more believable picture of what is happening. There is the usual nonsense about purportedly savage cuts to educational spending, that actually increased, etc. RTWT.

    As the WSJ notes:

    Mr. Brownback has led the movement for tax reform, which has been taken up by Republicans in Oklahoma, Missouri, Ohio, North Carolina and Wisconsin. Liberals are trying to stop the trend from spreading by predicting catastrophe. They’re afraid people may soon be asking what’s right with Kansas.

    Meanwhile, a reliable source tells me the picture above is from Governor Brownback’s office.

    I am pleased to see he has a copy of America 3.0: Rebooting American Prosperity in the 21st Century-Why America’s Greatest Days Are Yet to Come.

    I hope our vision of a renewed America helps to encourage him to stay the course on the tax cuts and tax simplification.

    Be strong, Governor. You are on the right track.

    Posted in America 3.0, Politics, Taxes | 1 Comment »

    What next for health reform ?

    Posted by Michael Kennedy on 26th July 2014 (All posts by )

    It looks to me that the Supreme Court will have little justification for continuing the Obamacare program as it exists. The Halbig decision should kill it off. It is clear that the IRS subsidies to federal exchange subscribers are illegal.

    The only statement anyone has found in the legislative history that addresses this point comes from the Act’s lead author, who affirmed that Congress did intend to withhold tax credits in federal Exchanges. During a September 23, 2009, mark-up of his bill, which ultimately became the PPACA, Senate Finance Committee chairman Max Baucus (D-MT) refused to consider a Republican amendment regarding medical malpractice on the grounds it fell outside the Committee’s jurisdiction. Sen. John Ensign (R-NV) protested, asking how Baucus’ bill could do other things that lie outside the Committee’s jurisdiction, like direct states to create Exchanges. Baucus responded the bill creates tax credits, which are within its jurisdiction, and makes eligibility for those tax credits conditional on states creating Exchanges. Conditional necessarily means that Baucus intended to withhold tax credits in states that did not create their own Exchanges.

    I just don’t see how the Court can ignore that history. The political left has been on a rant about Congressional intent since the decision was announced.

    Read the rest of this entry »

    Posted in Economics & Finance, Health Care, Leftism, Medicine, Politics, Taxes | 10 Comments »

    Incentives and Economics

    Posted by Carl from Chicago on 14th July 2014 (All posts by )

    A few years ago I went to Norway and had a great time. In this post I described how expensive everything was in Norway due to their highly valued currency (tied to oil riches) combined with the relentless decline of the US dollar (tied to ZIRP and other dubious economic moves). In the simplest terms, a fast food meal or a beer in Norway cost over $20 USD which is complete madness.

    Business Insider discussed the Scandinavian economic experiment, where high taxes are applied to goods and services in order to fund a vast social safety net. From the article:

    In Norway, a burger and fries at a fast food joint will set you back $23. A six-pack of warm grocery-store beer is nearly $30.
    These hefty price tags are due, in part, to high wages for low-skilled service jobs. But high taxes play a role too.
    Most products have a 25 percent value-added tax, which means that $5.50 of the cost of that burger goes to fund Norway’s generous social programs.
    As a visitor, you get little for the added price. But, as a resident, your daily spending helps to fund an expansive package of benefits, including health care, child care, high-quality education, pensions, and unemployment insurance.

    Some are now proposing this high-cost method, with large taxes embedded in everyday prices, as a solution to the inequity in incomes and wealth that is discussed widely in politics and economics today.

    From the perspective of someone who is highly interested in economics and tax policy, my two rules of thumb are:
    1) that the tax policy raise the money that it intends to raise
    2) that the tax policy not significantly distort economic activity

    Any society that implements high taxes such as Norway needs a comprehensive surveillance model in order to collect these taxes. It is difficult to avoid taxes that are broadly assessed on fast food, for instance, because each corporate location will set up cash registers and controls to remit these taxes onto the state. The same types of processes can be installed in liquor stores, formal bars and nightclubs, grocery stores, and restaurants.

    In a less-homogeneous society such as the USA, we already have major problems with tax evasion on cigarettes and likely liquor, and these are in responses to our sales taxes. The problems would be compounded if we placed value added taxes on all goods at a higher level and on services such as restaurants, hair care, etc… Smuggling would become rampant and informal or barter methodologies would increase in size and scope. These sorts of costs would have to be applied across the USA or some areas would become uncompetitive and see an out-migration of economic activity, starting with incremental additions (no one has opened a new manufacturing plant in Illinois in years, for instance) and eventually leading to the lock, stock and barrel out migration of existing industries (such as the exodus of car manufacturing out of the Midwest and California to the American South).

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    Posted in Big Government, Economics & Finance, Public Finance, Taxes | 33 Comments »

    Picketty’s Introduction

    Posted by TM Lutas on 9th June 2014 (All posts by )

    Thomas Piketty has written a monster of a book, Capital in the Twenty-First Century. I find myself in strange agreement with Brad DeLong, that the collective conservative response is weak. I had a patch of time that left me twiddling my thumbs waiting for some pretty long database operations to finish over the past four days. So I went and decided to fisk the book. I just finished the introduction. It took four posts, Part I, Part II, Part III, Part IV and overran the spare time I had available from a database import and indexing task by about 12 hours.

    Now I know why the criticism is so weak. Piketty is a target rich environment and doing a line by line analysis is simply exhausting. But it’s the only way to be sure.

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    Posted in Book Notes, Business, Economics & Finance, Public Finance, Society, Taxes, USA | 18 Comments »

    Income inequality: Social justice or crony capitalism?

    Posted by Kevin Villani on 26th April 2014 (All posts by )

    The political movement Occupy Wall Street has shaped the tax and spending proposals of the Obama administration’s budget and political debate on the premise that our capitalist economic system is rigged to favor the top-earning “one percenters.” But income inequality can result either from capitalism or politics, each for better or worse.

    Historically, political elites focused on enriching themselves at the expense of the general public: In 1773 patriots threw the tea into Boston Harbor of the East India Tea Company, granted a “royal charter” in 1600. The U.S. system was founded not just on the principles of democracy but on limited government complementing private market capitalism that encouraged individuals to “pursue happiness” — accumulate wealth — on merit rather than political connections. Support for the less fortunate was provided by family members, religious and other charitable organizations.

    Believing (wrongly) that class envy against the new economic elites — innovative entrepreneurs — would cause revolution, Karl Marx offered the socialist alternative “from each according to his ability, to each according to his need” with politics supplanting merit. Despite totalitarian methods universally employed by governments seriously pursuing the socialist model leading to the murder of tens of millions, one historian recently concluded that communism reduced workers “to shiftless, work-shy alcoholics.”

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    Posted in Big Government, Crony Capitalism, Economics & Finance, History, Political Philosophy, Public Finance, Taxes | 15 Comments »

    Paying Higher Taxes Can be Very Profitable (rerun)

    Posted by David Foster on 11th April 2014 (All posts by )

    (Originally posted in January 2010–now an April perennial)

    Chevy Chase, MD, is an affluent suburb of Washington DC. Median household income is over $200K, and a significant percentage of households have incomes that are much, much higher. Stores located in Chevy Chase include Tiffany & Co, Ralph Lauren, Christian Dior, Versace, Jimmy Choo, Nieman Marcus, Saks Fifth Avenue, and Saks-Jandel.

    PowerLine observed that during the 2008 election season, yards in Chevy Chase were thick with Obama signs–and wonders how these people are now feeling about the prospect of sharp tax increases for people in their income brackets.

    The PowerLine guys are very astute, but I think they’re missing a key point on this one. There are substantial groups of people who stand to benefit financially from the policies of the Obama/Pelosi/Reid triumvirate, and these benefits can greatly outweigh the costs of any additional taxes that these policies require them to pay. Many of the residents of Chevy Chase–a very high percentage of whom get their income directly or indirectly from government activities–fall into this category.

    Consider, for starters, direct employment by the government. Most Americans still probably think of government work as low-paid, but this is much less true than it used to be. According to this, 19% of civil servants now make $100K or more. A significant number of federal employees are now making more than $170,000. And, of course, the more the role of government is expanded, the more such jobs will be created, and the better will be the prospects for further pay increases.

    If one member of a couple is a federal employee making $100K and the other is making $150K, that would be sufficient to allow them to live in Chevy Chase and occasionally partake of the shopping and restaurants. But to make the serious money required to really enjoy the Chevy Chase lifestyle, it’s best to look beyond direct government employment and pursue careers which indirectly but closely benefit from government activity…which are part of the “extended government,” to coin a phrase.

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    Posted in Big Government, Taxes | 2 Comments »

    The Depression may be here.

    Posted by Michael Kennedy on 4th February 2014 (All posts by )

    I have believed for some time that we were entering another Depression. I have previously posted about it.

    The Great Depression did not really get going until the Roosevelt Administration got its anti-business agenda enacted after 1932. The 1929 crash was a single event, much like the 2008 panic. It took major errors in economic policy to make matters worse. Some were made by Hoover, who was a “progressive” but they continued under Roosevelt.

    I posted that statement earlier and it got a rather vigorous rebuttal. I still believe it, however. I think a depression is coming soon. What is more, I am not the only one. Or even only one of two.

    The second article preceded the election of 2012 but is still valid.

    When employment hit an air pocket in December, most analysts brushed off the dreadful jobs number as an anomaly, or a function of the weather. They chose to believe Ben Bernanke rather than their lying eyes. It’s hard to ignore a second signal that the U.S. economy is dead in the water, though: on Monday the Institute for Supply Management reported the steepest drop in manufacturing orders since December 1980:

    fredgraph

    In January, only 51% of manufacturers reported a rise in new orders, vs. 64% in December. Not only did the U.S. economy stop hiring in December, with just 74,000 workers added to payrolls; it stopped ordering new equipment. The drop in orders is something that only has occurred during recessions (denoted by the shaded blue portions of the chart). The Commerce Department earlier reported a sharp drop in December orders for durable goods. In current dollars, durable goods orders are unchanged from a year ago, which is to say they are lower after inflation.

    So, the economy stopped hiring, even at the poor pace the past five years have seen, but business also stopped buying.

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    Posted in Big Government, Britain, Business, Health Care, Obama, Politics, Taxes, Tea Party, Urban Issues | 33 Comments »

    The Minimum Wage Debate and Tax Incentives

    Posted by Carl from Chicago on 30th November 2013 (All posts by )

    Originally when I started over at Chicago Boyz I used to write regularly about tax policy. I haven’t written as much lately on that topic because the news has been completely dispiriting… at every turn it seems that the Federal, State and Local governments have taken positions to make the system more complex, confusing, and dysfunctional.

    The goal of a tax policy should be to:
    1. Achieve the revenue goals that they set out to meet
    2. Do so in a way that has causes the least amount of distortions to the economy

    Recently the idea of “fixing” our tax policies and incentives, for me at least, is aligned with recent discussions on the idea of raising the minimum wage. The minimum wage is $7.25 / hour, although this varies with state and local laws as summarized here. A suburb in Seattle, near the Seattle-Tacoma airport (Sea-Tac), recently passed an ordinance to raise the minimum wage to $15 / hour. This ordinance is a bit more clever than most, since the airport is unlikely to close or take significant actions due to the immense capital costs and constraints associated with doing so, and has a strong public element (politicians can just try to pass the costs on to air travelers).

    These same discussions come up in Chicago, as fast food workers also have had some (small) demonstrations to try to raise the minimum wage to $15 / hour. While their campaign has sputtered out, it will likely re-surface and be championed by our governor.

    The obvious difficulty with raising the minimum wage is that employers are not sitting ducks. There are many low wage workers in River North, for instance, working in bars, restaurants, cleaning services, and in various security related occupations (virtually every building has a set of doormen). If you doubled the minimum wage, for instance, all of these businesses and institutions would immediately embark on a host of labor saving initiatives and automation efforts. I am not an expert in these sorts of automation experts but can imagine people being replaced by computers, call centers handling service, and moving to self-service for customers in other instances. It is highly unlikely that they would just attempt to pass on the price increases and keep the same level of staffing; that would be economic suicide, especially with their competitors scrambling to reduce their labor expenses. Efforts that could not be automated would rise in price, which would likewise discourage consumption, until an equilibrium was reached.
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    Posted in Big Government, Taxes | 9 Comments »

    Archive Post – Military Rites, Practices & Legends: BX & Commissary Privileges

    Posted by Sgt. Mom on 1st October 2013 (All posts by )

    (An archive post from [gasp] 2004, wherein I attempted to explain and demystify certain military practices and establishments to a strictly civilian readership. I was reminded of this series, as one of the chief effects of the fed-gov shut-down is that just about all of the military commissaries at stateside bases will be closed from about midday today. The resulting effect on the retiree and active duty population at stateside bases probably will be rather minor, especially for those bases in or near larger cities, since Walmart, Target, Costco, Sam’s Club and local grocery chains provide alternative sources.)

    The main attraction of these privileges – access to the military base Commissary and Exchange – lies mostly in the fact that such access is forbidden to the usual run of civilians, and so they tend to think of them as vast Aladdin’s caves of riches and materiel things, to which they do not have the magic key! Alas, while I am fairly sure that the gold-plated bases in the military pantheon probably are pretty well stocked with the luxury goods, and may very well resemble Aladdin’s cave, at the ordinary level they are as Cpl. Blondie observed “full of stuff you don’t need.”
    When I was giving the school-kiddy tours at Mather AFB, to kids who had never been on a military base before, I would have the school-bus driver take a circuitous loop around the base, and point out the various establishments: “A base is just like a city or a town– this is the Headquarters building, it’s like the Mayor’s office and the City Hall, over there is the housing area, where everyone lives with their families. There is even an elementary school for the kids. That is our grocery store, only we call it the commissary. We even have our own gas station… this is the Exchange, it is just like a small department store, with a little bit of everything…”
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    Posted in Business, Current Events, Customer Service, Military Affairs, Personal Finance, Personal Narrative, Taxes | 10 Comments »

    Robert Reich Movie “Inequality for All”

    Posted by Carl from Chicago on 28th September 2013 (All posts by )

    I saw the movie “Inequality for All” starring Robert Reich, the former labor secretary for Bill Clinton and a very short guy (he’s 4′ 11″) who is pretty personable and funny. Reich uses his day job as a university professor while teaching a class to illustrate his thoughts on inequality from the movie.

    In the movie he attempts to link:
    – decline in average wages, in “real” terms (adjusted for inflation)
    – growth in the highest wages (the top 1%)
    – with various factors, including globalization, automation, declines in unions, and the financial bubble
    – income inequality with lower marginal tax rates on the rich

    There are certainly some concepts in here than anyone can agree with. It would be good if more people in the USA earned a higher salary, had better educations, and were more productive.

    In the movie he mentions Warren Buffett, who famously pays a lower marginal tax rate than everyone else in his office, which is due to the fact that he receives long term capital gains and dividend income which are taxed at a lower rate. This is grist for the “raise taxes on the wealthy” discussion, as Buffett plays the likable old man. However, what he fails to mention is that Warren Buffett is the very candidate that the ESTATE TAX is designed to catch… rather than nickel and dime him every year on his assets as they rise in value (and cause friction and force him to sell them off to meet the tax bill), the estate tax would be levied on the super rich and it would effectively make up for the lower marginal rate during his lifetime by taxing increases on his wealth at a rate of 40%, for all amounts greater than about $5M. However, Warren Buffett is choosing to “evade” these taxes by setting up trusts and / or giving it away to his favorite causes; if Warren couldn’t avoid his estate tax through these loopholes (the same way you or I can’t avoid the payroll or sales taxes) then 40% of his $60B estate ($24B) would go to the Federal government, to fund the “investments in people” that Robert Reich is so passionate about. Funny that Reich didn’t call that out (didn’t follow his narrative, apparently).

    Another element he fails to mention is the growth in illegal immigration in the USA, and the havoc that this causes with unskilled labor (as they are willing to work for far less). It is funny because two professions he specifically mentions, meat packing and short order cooks, are magnets for immigrants and their arrival is a direct cause for falling wages in these fields. Not surprisingly, Reich didn’t want to alienate a core Democratic group.

    There is a rich “pillow manufacturer” who makes $10M+ / year who also describes how ridiculous it is in his opinion that his marginal rate isn’t higher. That same entrepreneur says that he invests in “funds of funds” and due to this he makes money without creating any jobs. That is quite a statement – what do you think those hedge funds invest in? They invest in commodities, stocks, real estate and debt (I’m assuming). When you are an investor and you provide money for stock and debt you are supporting companies that, in turn, hire staff. I can’t believe that Reich let this comment slide, but since it was what Reich wanted to hear, why interject?

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    Posted in Academia, Big Government, Economics & Finance, Taxes | 27 Comments »

    Are We More or Less Free Than We Were in 1975?

    Posted by Lexington Green on 4th September 2013 (All posts by )

    I recently sent this link to some friends, which lists “10 Things You Could Do in 1975 That You Can’t Do Now.” The list included:

    2. You could buy cough syrup without showing an ID

    4. You could buy a gun without showing an ID
     
    5. You could pull as much cash out of your bank account without the bank filing a report with the government
     
    6. You could get a job without having to prove you were an American

    9. You could open a stock brokerage account without having to explain where the money came from

    10. You could open a Swiss bank account with ease. All Swiss banks were willing and happy to open accounts for Americans

    I opined: “We are FAR less free than we used to be. The “War on Drugs” is a major cause, but general government encroachment for its own sake is behind most of it.”

    My friend Singapore Pundit responded:

    [Lex], I have to challenge your theory that we are “FAR less” than free we use to be. Here is a short list of things from the 70’s which we are free from today: The military draft; 70% marginal tax rates on income; airline price regulation by the federal government; forced busing of school children; gas rationing by the federal government (Nixon); legalized monopoly of telecommunications; US gov. restricted travel to China, Vietnam, Russia and east Europe; banned importation of books based on ideology; tariffs on goods from Canada and Mexico; federal government price controls (Nixon); 25% of workers in unions (now it’s 7%). Here are somethings we have today versus the 70’s which I would argue make us freer: charter schools; home schooling; the internet and access by it to free information; 401K; more right-to-work states; right to vote for citizens over 18.

    I had to concede these were all good things.

    So, on net, are we freer or less free?

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    Posted in Civil Liberties, History, Taxes, USA | 39 Comments »

    Chicago “TIFs”

    Posted by Carl from Chicago on 31st July 2013 (All posts by )

    In Chicago a “TIF” stands for “Tax Increment Financing”. Here is a link to the City of Chicago web site which explains how a site qualifies as a TIF. Basically a TIF limits the amount of property tax the city can collect at the location and in effect gives the owner / developer a big tax break. There are many reasons listed by the city as to why a location might qualify but supposedly it is used to eliminate “blighting factors”.

    The Chicago Reader has written a series of articles about how TIF’s are used to reward already rich developers with tax breaks. The Sun Times wrote one this week:

    It’s time for another serious look at the pros and cons of Tax Increment Financing in Chicago — a tiff over TIF — the controversial economic development program that’s supposed to revitalize struggling neighborhoods by offering financial incentives to potential investors.

    The “sweeteners” come from property taxes that, to a large extent, might otherwise be spent on education, housing, parks, libraries, and public safety.

    That’s defensible when there’s enough tax revenue to go around, but it’s problematic in lean times, like now, when Chicago is closing schools, firing teachers, reducing library hours and trying to fight violent crime with fewer police officers.

    Another concern is that many TIF “districts” are in affluent areas, especially in and around downtown, which violates the intent of the state law that created the program in 1977 to revitalize “blighted” communities.

    Here is a project that is being built under a TIF; this is for a $29M park alongside the Chicago River at Canal and Lake Street. the “River Point TIF” is obviously located in an area that doesn’t appear to be tied to much blight…

    While it is likely that politically connected developers and clout-heavy individuals are tied to this process, on the other hand this is one of the few ways the city actually and concretely assists businesses that generate all of the economic value for them. Businesses pay very high property taxes in Cook County / the Loop and then the tax breaks fall back to the selective few that run through this process. It is a very opaque process and there is limited information available on the TIF accounts and funding.

    Cross posted at LITGM

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    Posted in Chicagoania, Taxes | 1 Comment »

    Illinois Will End up Like Detroit if It Does Not Change Course

    Posted by Lexington Green on 30th July 2013 (All posts by )

    Detroit was once the greatest city of the modern world. Automobiles were the cutting edge of technology in the first half of the twentieth century. Talent and genius flocked to Detroit. Innovators in engineering, technology, design, finance, marketing, and management created a concentration of economic dynamism and creativity unlike anything the world had yet seen. Detroit was the Silicon Valley of its day, except its products were made of tangible metal, rubber, and glass. The auto industry transformed America into a land of mobility and personal freedom beyond the dreams of earlier generations. Henry Ford said, “History is bunk.” He meant the old limits could be blown away, and ordinary people could have a better life than they had ever dreamed of before.

    (The rest is here.)

    Posted in America 3.0, Big Government, Conservatism, Economics & Finance, History, Illinois Politics, Leftism, Political Philosophy, Politics, Society, Taxes, Transportation, Unions, Urban Issues, USA | 22 Comments »