Taxes

The Beer Index

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Pity the UK government. Like most, they have had a great deal of trouble closing the gap between money spent and tax revenue. And, like most, they have scrambled to raise taxes in order to increase the amount of money coming in.

One of the items hardest hit with rising tax rates in Great Britain is beer.

The powers-that-be have enacted a “beer duty escalator“, which automatically raises the tax on beer by 2% over inflation every single year. According to the article behind the last link, the average beer drinker in the UK now pays £177 every year just in taxes alone. The average pub owner must shell out £66,000 per year in beer taxes, above and beyond the overhead costs that come from running any small business. And, thanks to the automatic increases, every year is going to be worse than the last.

As any economist who hasn’t drunk deep of the Liberal kool-aide will tell you in a heartbeat, adding frivolous costs to any commodity will result in limiting demand. Beer sales in the UK have plummeted, while close to a score of pubs across the island nation have been going out of business every week.

Just think of all those people who were dependent on the family business, now out of work and on the dole. I don’t have the numbers to tell for sure, but it wouldn’t surprise me in the least to find out that any jump in revenues realized by the beer duty have been more than offset by the increased number of people who now rely on public assistance.

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Take Home Candy – A Halloween Tax Parable

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This was supposed to go up yesterday but apparently I forgot to hit the “publish” button. *Sigh*


Joe Biden and the debate

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A clownish Joe Biden mugged, groaned and interrupted Paul Ryan for 90 minutes last night. It was an odd spectacle but, apparently, just what the Democrats wanted. He lied about the Libya story and now Bill and Hillary Clinton may be thinking rebellion. Biden strongly suggested that the State Department was to blame for the murders because they did not ask for more security, in spite of the testimony before Congress the day before. If Hillary thinks she sees the bus coming, she may jump ship and it won’t be pretty.

With tensions between President Obama and the Clintons at a new high, former President Bill Clinton is moving fast to develop a contingency plan for how his wife, Secretary of State Hillary Clinton, should react if Obama attempts to tie the Benghazi fiasco around her neck, according to author Ed Klein.

Biden also lied about Iran and their nuclear ambitions. He dismissed the danger of doing nothing. He said they do not have a “delivery system.” They have a delivery system named Hezbollah. Iran may not have an intercontinental ballistic missile that can reach the US, yet. If Iran were to choose to attack the US, a container ship and a US port are much more likely to be involved than a new missile. Certainly, Israel is within reach as are the countries of Europe. Saudi Arabia is within reach. The Sunni-Shia rivalry is sufficient motive but the other reasons should not be ignored. Iran is ruled by a sect of suicidal maniacs.

Ryan capably described the Romney-Ryan tax proposals and his Medicare plan. I expected the abortion question and I thought it was well handled. Biden, of course, lied about the administration’s rules for health insurance coverage of contraception and abortion. That is not a big issue for me as I am pro-choice but the dishonesty is annoying. The “47% issue” and Ryan’s mention of a “30% who are takers” will not bother many people who agree and the offended are likely Obama voters no matter what happens.

It will be interesting to see what the result will be. The left, of course, is excited by the nasty tone Biden adopted.

On their $5 trillion tax cut, Romney/Ryan really need to either start naming the loopholes they’d close to pay for it or just admit they can’t make it revenue neutral without whacking the middle class. The VP was appropriately relentless on this point. Even I’m starting to feel sorry for them every time someone brings up this little flaw in their plan. I suspect I’m not alone in realizing that this country simply can’t afford to elect people promising a tax cut of this magnitude who, when it comes to paying for it, essentially say “trust us, we’ll find a bipartisan solution.”

The “$Five trillion tax cut” has been thoroughly debunked, including Stephanie Cutter’s retreat from the claim.

But, as I pointed out, Gov. Romney has already taken capital gains and dividends-for example-off the table. Now, here’s the revealing part: Larry said, and I know many in the investment community, including Mitt, feel exactly the same way, “I don’t consider those loopholes.”

So, here is a lefty who wants to raise taxes on investment income and capital gains. I don’t see enough responses pointing out that this income has already been taxed as ordinary income. Mitt Romney and most investors had salary income, taxed at the rates of the time, which they saved and invested. The capital gains and dividend income is income that was already taxed once. The left simply does not understand this.

Ryan kept his cool and Biden played the fool. Ann Althouse was impressed as I believe many women were impressed.

As I said, I’m tired of the yelling. I found the debate really hard to watch, but I kept watching because I was committed to live-blogging. Even still, I got catatonic. There was a point when I didn’t write anything for 20 minutes and then I said:
Biden has been yelling at Martha Raddatz for the last 15 minutes (as the subject is war). It’s so inappropriate!

The previous post had been:
The stress level is rising. Biden is so angry. Why is he yelling? Ryan needs nerves of steel not to lose his cool. I’m impressed that Ryan, when he gets his turn, is able to speak in an even, natural voice. It’s hard to concentrate on the policy itself, because the emotional static is so strong.

That shows how I felt: pain. So here’s my question. Ratings were down, I see, but when were the ratings taken? In the beginning? How did the ratings drop off over the course of the 90 minutes?

I have seen many comments about people, especially women, turning off the debate because of Biden’s rudeness and blustering. The ratings were down and the question is when were the ratings surveyed ? Of course, last night was also a big sports night. I think Ryan did better than the initial impressions suggest.

If Obama uses the Biden debate tactic as a model for next Tuesday, the election may well be over.

The Romney tax cut.

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Today, the Sunday morning TV shows on politics demonstrated the response of the Obama campaign to Romney’s debate win last week. Paul Krugman, who looks more and more like a political cheerleader and less like an economist, led the charge. The topic was the “five trillion dollar tax cut.”

The Obama campaign is already backing away from this claim, but let’s consider it.

This “five trillion dollar tax cut” figure is arrived at by taking his statement that he will cut rates by 20% and limit deductions. Multiple the total tax revenue per year by 20% and you get five trillion. This same reform was done in 1986 and the result was a 15 year economic boom. The results are discussed here.

Twenty years ago today (2006), President Ronald Reagan signed into law the broadest revision of the federal income tax in history. The Tax Reform Act of 1986 — the biggest and most controversial legislative story of its time — had lawmakers, lobbyists and journalists in Washington in an uproar for two years. Despite nearly dying several times, the measure eventually passed, producing a simpler code with fewer tax breaks and significantly lower rates. The changes affected every family and business in the nation.

Of course the Congress undid it over the ensuing years. We all expected that. What about Romney’s plan ?

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Economic Policy Advice From 1377 AD

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Ibn Khaldun, the great Muslim historian, in his Introduction to History:

Taxation and the reason for low and high tax revenues

It should be known that at the beginning of a dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.

The same reason for this is that when the dynasty follows the way of Islam, it imposes only such taxes as are stipulated by the religious law, such as charity taxes, the land tax, and the poll tax. Theses have fixed limits that cannot be exceeded.

When the dynasty follows the ways of group feeling and (political) superiority, it necessary has at first a desert attitude, as has been mentioned before. The desert attitude requires kindness, reverence, humility, respect for the property of other people, and disinclination to appropriate it, except in rare instances. Therefore, the individual, the individual imposts and assessments, which together constitute the tax revenue, are low. When tax assessment and imposts upon the subjects are low, the latter have the energy and desire to do things. Cultural enterprises grow and increase, because the low taxes bring satisfaction. When cultural enterprises grow, the number of individual imposts and assessments mounts. In consequence, the tax revenue, which is in sum total of (the individual assessment), increase.

When the dynasty continues in power and their rulers follow each other in succession, they become sophisticated. The Bedouin attitude and simplicity lose their significance, and the Bedouin qualities of moderation and restraint disappear. Royal authority with its tyranny and sedentary culture that stimulates sophistication, make their appearance. The people of the dynasty then acquire qualities of character related to cleverness. Their customs and needs become more varied because of the prosperity and luxury in which they are immersed. As a result, the individual imposts and assessments upon the subjects, agricultural labourers, farmers and all the other tax payers, increase. Every individual impost and assessment is greatly increased, in order to obtain a higher tax revenue. Customs duties are placed upon articles of commerce and (levied) at the city gates. Then, gradual increases in the amount of the assessments succeed each other regularly, in correspondence with the gradual increase in the luxury customs and many needs of the dynasty and the spending required in connection with them. Eventually, the taxes will weigh heavily upon the subjects and overburden them. Heavy taxes become an obligation and tradition, because the increase took place gradually, and no one knows specifically who increase them or levied them. They lie upon the subjects like an obligation and tradition.

The assessments increase beyond the limits of equity. The result is that the interest of the subjects in cultural enterprise disappears, since they compare expenditure and taxes with their income and gain and see little profit they make, they loose all hope. Therefore, many of them refrain from all cultural activity. The result is that the total tax revenue goes down, as individual assessment go down. Often when decrease is noticed, the amounts of individual imposts are increased. This is considered a means of compensating for the decrease. Finally, individual imposts and assessments reach their limit. It would be of no avail to increase them further. The costs of all cultural enterprise are now too high, the taxes are too heavy, and the profits anticipated fail to materialize. Finally, civilization is destroyed, because the incentive for cultural activity is gone. It is the dynasty that suffers from the situation, because its profits from cultural activity.

If one understands this, he will realize that the strongest incentive for cultural activity is to lower as much as possible the amounts of individual imposts levied upon persons capable of undertaking cultural enterprises. In this manner, such persons will be psychologically disposed to undertake them, because they can be confident of making a profit from them.

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