Tax Misallocation

The misallocation, this time, is not in the way our tax monies are being spent.

It’s in what our money is not being spent on in lieu of paying those taxes in the first place.

According to a 2018 Bureau of Labor Statistics survey—before the 2017 tax reform bill had been able to percolate into our economy in any serious way—we Americans spent more on the taxes Government exacts from us than we did on food, clothing, and health care combined.

That survey found the average American unit, which consists of both shared and single households, spent an average of $9,000 on federal income taxes last year. Americans also spent an average of $5,000 on social security, more than $2,000 on state and local taxes, and another $2,000 for property taxes.

That’s $3,000 more than we spent on those aggregated necessities.

Aside from a low, flat personal income tax without the exceptions froo-froo currently present, as suggested for corporate taxes (see nearby),  the next tax reform target needs to be on Social Security—whose Trust Fund will be exhausted in a few years, leaving the stark choice of raising payroll taxes (or increasing taxation from other sources) to cover the shortfall, or lowering the payouts to fit within the existing (payroll) tax structure—a roughly 30% reduction in payout for each recipient.

That reform, as I’ve written before, needs to be an elimination of the payroll tax altogether—more wage money left in the hands of the earner, which is especially important for those earning the lowest wages—and privatizing both Social Security and Medicare, and making the payouts for the future benefit of the saver and his family rather than immediate payout to utter strangers. That will leave the saver responsible for his own money and, with his skin on the line, he’ll do a far better job of managing those monies than even the most well-intentioned collection of government bureaucrats ever can.

Oh, yeah: privatization also would eliminate the employer’s payroll tax bite, leaving him more money for R&D, marketing,…

Byzantine Taxing

Many companies, sitting on billions of dollars of tax credits, want to be able to cash them in promptly.

For example:

Duke has been unable to use all the corporate-research and renewable-energy credits it accumulated because it has been using accelerated tax deductions for capital investments to lower its taxable income, said Dwight Jacobs, the company’s chief accounting officer. That bumped it up against tax-code rules that limit tax credits, leaving $1.8 billion in unused credits on Duke’s books. Under the proposal, the company could get that within months instead of years.
The proposal “would give us more cash today and that would cause us to avoid borrowing money that we would otherwise have to borrow,” said Mr Jacobs.

And

Under the tax code, companies can claim credits for activities encouraged by the government. Among the largest are credits for conducting corporate research, funding low-income housing, and producing renewable energy….
Unlike deductions, which lower taxable income, credits reduce a company’s tax bill directly. But there are limits. Companies can generally offset only 75% of the taxes they owe by using credits. Any leftover credits can be used for one previous year or up to 20 years in the future.

Sound complicated? That’s the point. This isn’t a matter of helping out Duke, et al., with a particular section of the tax code. This is a matter of a too-complicated tax code.

We need, badly, to simplify it. A single, low rate, with no deductions, subsidies, credits, or other froo-froo would be suitably simple.

Better, would be eliminating corporate taxes altogether. In the end, the taxes a business pays are just costs passed on to customers in the form of higher prices; the taxed business doesn’t itself pay very much of its tax liability.

Either move would be doubly beneficial: more money left in the company’s coffers for R&D, marketing, capital improvement, jobs, wage increases from the reduced/eliminated taxes. More money also would be left in the company’s coffers for R&D, marketing,… from the reduced/eliminated tax compliance costs.

And all of that adds up to lowered prices for the company’s customers.

Foolishness

The United Teachers Los Angeles union put out a paper earlier this month, and among the union’s claims is this one”

Police violence is a leading cause of death and trauma for Black people, and is a serious public health and moral issue.

Wow.

There are thousands of blacks killed or traumatized and families traumatized by other blacks every year. Police violence causes more black deaths and trauma than that?

Thousands of black babies murdered in the womb every year. Police violence causes more black deaths and trauma than that?

The UTLA is insulting the intelligence of all of us with this…foolishness. The UTLA is especially demonstrating its soft bigotry of low expectations with this insult to the intelligence of blacks.

The UTLA doesn’t care a fig about the welfare of blacks or of black children or of any of our children or of any of us. The union just wants money.

Full stop.

An Efficient Labor Market

A writer, published in Wall Street Journal‘s Letters, responded to the idea that emphasis on education credentials over actual experience averred that the emphasis isn’t at all misplaced.

It’s more likely that there is a limited number of high-wage jobs available and that the market has efficiently set the wage based on the supply/demand curves.

This is a remarkably ill-informed claim, assuming as it does that we actually have an efficient market in labor.

Such a market cannot exist, though, in an environment where unions have monopoly power over labor in the industries in which they operate, nor can it exist in an economy with such widespread minimum wage mandates.

Since both of those exist, we are even farther from an efficient market for labor.

Becoming Happy

It’s what Thomas Jefferson said a while ago:

If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must become happy.

If the people become happy, though, they—we—would have little need for so large a government. And that would put a lot of bureaucrats, and most importantly, politicians out of business.

That is what today’s Progressive-Democrats and too many establishment Republicans fear, even above fearing failing our nation—being unnecessary.