The Romney tax cut.

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

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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Ryan & Subsidiarity

Last week, in my Sunday School class, the substitute teacher argued that those who linked “liberation theology” with communism were wealthy landowners hoping to tar legitimate complaints of the poor with that brush. The sermon quoted Fr. Martin: “Congressman Ryan or any of us can say of a budget plan that slashes supplemental funding for basic economic needs to those in poverty, that it’s a Democrat plan or Republican plan, but no one can ever say that a plan with such likely repercussions is consistent with Church teaching or is a plan Jesus would endorse or approve.” Clearly, that church voice agrees with the letter from some of the Georgetown faculty.

To my mind, Ryan has the better argument. For one thing, he is more descriptive than self-righteous. In both speech and questions, Ryan respects human dignity & human nature – why subsidiarity works. More importantly, he is honest: productivity of all helps all, free lunches aren’t really free, and we have taken from our children to make our lives easy. Implicit is a sense few acts have more questionable ethics than forcing charitable contributions from others or infantilizing those we help.

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Paying Higher Taxes Can Be Very Profitable

(I originally posted this in early 2010–today seems like an appropriate day for a re-post)

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.

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Chicago Tax Day Tea Party, April 16, 2012, Daley Plaza, Noon

FOR IMMEDIATE RELEASE
April 12, 2012

Contact: Eric Kohn
Communications Director, Chicago Tea Party
eric@chicagoteaparty.org
773-209-3435

TAX DAY TEA PARTY PLANNED FOR CHICAGO

CHICAGO Concerned citizens are set to gather at noon on Monday, April 16 at Daley Plaza at 50 W. Washington to protest out of control spending, unsustainable deficits and the unprecedented growth of government. People will come together in downtown Chicago, where the tea party movement began, to hold politicians of both parties accountable, stop runaway spending and defend individual liberty and free markets.

“We are concerned with the direction of our country and our state,” said Chicago Tea Party Communications Director Eric Kohn. “The only solutions being offered from politicians in Washington and Springfield are higher taxes, more spending and massive debt. We will continue to fight for less government, more freedom and fiscal responsibility on tax day and every day through the November election.”

EVENT DETAILS

What: Chicago Tax Day Tea Party
Where: Daley Plaza, 50 W. Washington St., Chicago
When: Noon – 2PM, Monday, April 16

FEATURED SPEAKERS:
U.S. Conressman, Joe Walsh, IL-8th District
Wisconsin Lieutenant Governor Rebecca Kleefisch
Dana Loesch, CNN Contributor, Co-Founder St. Louis Tea Party
Denise Cattoni, State Director, Illinois Tea Party
Joel Pollak, Editor-in-Chief, Breitbart.com
Dan Proft, WLS-AM 890 Host
David From, State Director, Americans for Prosperity Illinois
Contact Eric Kohn at 773-209-3435 for press availability with the speakers.

There will be shirts for sale at the 4th annual Tax Day Tea Party Rally, including the above design from Bob Black.