Tag Archives: political economy

A Couple of Questions

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Former President and Republican Presidential candidate Donald Trump says he wants to “once again turn America into the manufacturing superpower of the world,” and that a couple of the ways he’d achieve that would be to reduce the corporate tax rate to 15% for those companies that make their products in the US and by applying tariffs on foreign-made goods.

One question concerns how strictly he’d apply that tax break criterion—or how strictly Congress would allow him to. Would making their products in the US include or exclude companies who assemble their products in the US, but do so from components or subassemblies that are imported? If implemented in some form, would the exclusion include components or subassemblies that are made in USMCA members Mexico and Canada?

The subassembly bit especially would impact the several car companies that assemble their vehicles in the US, but these are far from the only companies that do that. Which brings up another question: what about those international companies headquartered in other nations but that assemble/manufacture in US factories products for sale in the US. Would the 15% tax apply to the US component of those businesses? To the whole foreign-domiciled company?

How would the tariffs apply to the components imported for final product assembly? How would the tariffs apply to those foreign-headquartered companies that bring in components for final assembly in the US and sale in the US?

Answers need not block either of the two proposals, but they do need to be worked out.

The Good and the Bad

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Chevron Corporation wants to keep operating in Venezuela. That’s not an unalloyed good thing for the US, independently of what would be good or bad for Chevron. Neither is it an unalloyed bad thing for the US, independently of what would be good or bad for Chevron.

The long and the short of these are these. The bad for the US is that Chevron’s oil production, and presumably sales, would provide revenue that a Maduro regime badly needs.

The good thing for the US is that Chevron’s oil production and putative sales would serve as an important impediment, albeit not a barrier, to the People’s Republic of China moving in and exploiting that oil for its own purposes.

It’s the balance between the two that’s hard to gauge.

The Professors Have a Thought

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Charles Silver, Civil Procedure Professor at University of Texas Austin’s School of Law, and David Hyman, Professor of Health Law & Policy at Georgetown Law, have an idea on how to improve Medicare, and it doesn’t even include cutting Medicare or raising taxes. Here’s their straightforward solution:

Rather than pay providers, Congress should give Medicare money directly to enrollees, as it does with Social Security. The government should deposit each enrollee’s subsidy into a health savings account, letting seniors decide what they need and how much they are willing to pay. By reducing the government’s role, this reform would eliminate most forms of healthcare fraud, waste, and abuse immediately, saving hundreds of billions of dollars.
The reform would also significantly improve healthcare. When patients pay for it directly—as they do for cosmetic surgery, Lasik, over-the-counter medications, and other elective procedures not covered by insurance—things work well.

Such a move likely would increase the number and range of doctors available to seniors, also. Large numbers of doctors, for a variety of reasons, currently won’t take patients who are on Medicare. Among those reasons are Medicare’s reimbursements to doctors being so low that many doctors lose money on Medicare patients, and Medicare’s slow rate of payments. With patients paying their doctors directly, albeit with Medicare dollars, those doctors would be paid promptly and wouldn’t have to worry about taking a loss on the appointment.

Letting people be responsible for their own decisions. What a concept.

The professors’ thought is a very good one.

Misunderstanding

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It’s surprising that so many so-called journalists misunderstand, but it’s a widespread failure, and it includes too many economists, as well. For good or ill, there is a loophole in the 2018 tax law that’s providing windfalls for American companies.

The loophole is a mismatch of critical dates between that law’s Section 245A and Section 78. The former lets US companies bring home their foreign profits without paying US taxes, with an effective date of 1 January 2018; the latter was intended to prevent inappropriate tax breaks in the old international tax system, with an effective date of 31 December 2017. Those 24 hours are a loophole far beyond the size of a single day. Three companies, for instance, are claiming—and one has already won in court—tax refunds:

[Varian Medical Systems won its case for] $150 million in deductions. The electronics manufacturer Kyocera and the food distributor Sysco have similar court cases pending, each involving more than $100 million in deductions.

Others are putting together their own refund filings that, in their aggregate will be worth several tens if not hundreds of millions of dollars more.

The misunderstanding is not about the Congressional gridlock blocking reconciliation of those two dates, as the writer of the Wall Street Journal article went on about, even though she got it right in her lede.

That [loophole] is now allowing big companies to save tens or hundreds of millions of dollars that otherwise would have gone to the government.

The misunderstanding—an understanding which goes to the core of our tax system and its and its constitutionally mandated purpose—is this:

The Varian case highlights how gridlock in Congress can cost the public….

No. Leaving money in the hands of our private economy, or returning money to those hands, is not a cost to the public—we American citizens and our enterprises are that public—but a benefit to the public, to us. Leaving the money or refunding it does reduce the amount of money accruing to Government, but that also could be a benefit to the public by restricting the money available to government to misspend. That latter, though, puts the onus on us in the public to elect politicians who will honor that restriction by not borrowing to spend more than government takes in and by not raising taxes to match excess spending.

Then there’s this:

A recent ruling by the Supreme Court will put more emphasis on the literal text of laws….

Literal text of the laws: the text of a law is what Congress intended the law to say, else Congress would have passed a different law saying something different.

And that’s as it should be, since the American system of governance restricts legislation to Congress and judicial action to the limits of those laws’ text. Judge Emin Toro, writing in his ruling on the Varian case, was quite clear on this:

Congress “spoke clearly” when it selected the mismatched effective dates. “Appeals to policy and Congress’s overarching purpose cannot overcome these choices[.]”

Activist judges—and that’s the only kind that presumes to legislate from the bench, that presumes to Know Better than the rest of us what a law should be—are broadly held as Truth Sayers by the Left and its Progressive-Democratic Party. These unelected representatives judges writing law rather than ruling within it are the bane of American liberty.

Kamala Harris’ Tax Policies

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And misallocation of those tax collections. Progressive-Democratic Party Presidential candidate Kamala Harris wants to raise taxes on Americans and our corporations by some $5 trillion over the next decade and cut other taxes by more than $4 trillion. Or so she claims, especially regarding the latter. The former can be taken as gospel; raising taxes, especially on those Evil Rich Americans, is what Party does.

Under her plan, taxes would go up sharply on some high-income households, and top marginal tax rates would reach their highest point since 1986. The wealthiest investors and company founders would encounter sizable s that they don’t face under current law.

That capital-gains tax bill is made the more sizable by her plan to tax capital gains that haven’t been realized—i.e., gains that don’t exist.

Her claim to not have any tax increases on households making under $400,000 is shown to be a sham promise by her decision to ignore the effect her corporate tax increase to 28% and her increase in the diktated [sic] minimum corporate tax to 21% would have on middle-income workers and shareholders. The impact includes that tax on phantom capital gains that Harris wants to impose on us middle class workers who own shares of companies in our own, however miniscule, portfolios.

Left unanswered, so far, is what Harris intends to do with those tax revenues. Her silence here stands against the backdrop of the Biden-Harris administration’s years long cuts, in real terms, to funding for our defense establishment, leaving us the weakest we’ve been in decades at the moment of greatest national security danger we’ve faced in decades.

This tax policy also is one of the reasons Harris floated her price controls proposal—to try to distract us from the policies she’s serious about slipping past, a squirrel maneuver which a compliant press is actively aiding her with its concentration on price control proposals while minimizing coverage of the rest of her ideas.