Tag Archives: economics

Business Taxes

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Richard Rubin, of The Wall Street Journal, thinks reforming these is not a straightforward proposition. To an extent, he’s right, as business and personal income taxes have become increasingly intertwined with each successive tax reform since Reagan.

The links between corporate and individual taxation inevitably lock policy makers in intractable disputes about popular deductions and the question that divides the parties most bitterly: is the US collecting enough money from wealthy individuals?

But this entangling, or more correctly, the concern about the entangling, simply overcomplexifies the problem.

It’s an easy thing to do conceptually, if political will is lacking, to reform business taxes. Keep in mind a single, core fact: businesses don’t pay very much of their tax bills already. Business taxes are just another cost center, whose value in large part is paid by the business’ customers in the form of higher prices that are set to recover, at the least, a significant fraction of that cost. Customers pay much of those business taxes.

The framing provides the answer. Cut through the Gordian business/personal income tax knot by eliminating the business tax altogether. This, aside from eliminating the tax pass-along to already taxed individuals, also eliminates disputes about popular deductions, credits, and so on: they go away with the taxes.

This also removes the non sequitur of whether business taxes are hitting the wealthy sufficiently. That question becomes focused on the personal taxes where it belongs and thereby brought into sharper relief.

Budgets

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President Barack Obama (D) sent up his budget proposal Tuesday, carefully timed to be buried under the news coverage of the New Hampshire primaries. $4 trillion worth of proposals. It’s replete with the Left’s dreams of tax increases—including a one-third tax on oil (at current prices: a $10/barrel tax with oil now going for $30) and an acceleration of the Left’s tax war on successful Americans—and associated spending claptrap (gotta spend those taxes, after all) like more spending on college subsidies such as Pell Grants, incentives for States to expand Medicaid programs, increased subsidies for the Left’s goals, expanding budgets for the Department of Education, Department of Energy, Department of Labor, and on and on. This Obama Budget expands the current half-trillion dollar deficit, because gotta spend more than tax revenue, too.

Oh, yeah: that oil tax is intended, in part, to subsidize “energy sources of the future.” Read that as increased subsidies for “green” energy sources, subsidies the Left thinks are necessary because “green” energy sources can’t compete in a free market, and that’s just not fair. Along those lines, though, here’s a “subsidy” that would pay off in spades and produce potsful of green energy: drastically reduce regulatory and permitting restrictions, and so the associated costs, on building nuclear power plants. We even have a spent fuel storage facility built and ready to go in Nevada; we just have to get government out of the way of that, too. Fat chance on either one, though, under this administration.

No, what Congress needs to do, what Congress has both the sole authority to do—to pass a budget and then pass the several appropriations bills to give effect to the budget—and the power to do with Republican majorities in both houses, is ignore Obama’s budgeting nonsense. A proper step in that direction is this:

Congressional Republicans last week announced they wouldn’t invite the White House’s budget chief to testify on the administration’s proposals, breaking with longstanding protocol.

Instead, Congress simply should pass a proper budget, and it should take the one passed last fall and pass the appropriations bills that properly reduce tax rates, expand defense spending, and reduce spending everywhere else so as to produce a net surplus within those lowered tax rates. And within those bills, specify that the surplus must go first to paying down the debt.

Keep in mind, too, two things. One is the meaning of the budget passed last fall. Nothing in it prevents Congress from passing the appropriation bills outlined just above. Budget bills set outer bounds of spending; they do not set required minimum levels of spending.

The other is so-called “discretionary spending.” “Discretionary spending” is carefully defined to be spending that Congress is authorized to manage year by year; the definition is designed to exclude spending on things like welfare, Social Security, Medicare; and these exclusions amount to roughly two-thirds of Federal spending. This is a cynically perpetuated fiction. It’s all discretionary spending. It’s all fully within Congress’ spending authority to manage on a year by year basis. Every single dollar of it.

The more dollars left in Americans’ hands through lower tax rates, the less government competes with the private economy for goods and services through spending, the better off Americans will be through the resulting economic activity and rising prosperity. And the faster our nation will be able to pay down—and off—its national debt.

Hillary Clinton’s Wall Street Speeches

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She was for releasing the transcripts before she was against it. The fact is, there could well be contractual requirements for not releasing them. However, I discount that because if such contract clauses existed, she’d cite them. Her latest weasel-worded excuse for not releasing is this, instead, in response to a George Stephanopoulos question about why she’d not yet:

Yeah, you know, here’s another thing I want to say. Let everybody who’s ever given a speech to any private group under any circumstances release them. We’ll all release them at the same time. You know, I don’t mind being the subject in Republican debates, the subject in the Democratic primary. That kind of goes with the territory.…

Couple things about this. One is the typical Clintonian (and others’) tactic of releasing the bad news within a deluge of good news, other bad news, and utterly irrelevant news. Everyone releasing at the same time would bury whatever embarrassing or outright bad stuff might be in the Clintons’ Wall Street speeches.

The other thing is this: why not show the way and be the first to release the transcripts? Because that would be taking the high road.

The Cost of Schengen

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The Schengen Agreement is a 1985 European Economic Community treaty, carried over into the European Union as the Schengen Convention, which essentially did away with border controls along the borders between participating nations. Today, those nations are the EU member nations. Schengen had, and continues to have, considerable economic benefits beginning with smoother, delay-free travel across borders for people, goods, and services; citizens of one nation being able to work in another nation; reduced costs of border policing; and on and on.

Given the explosion in refugees, and others, from the Middle East, those “refugees'” misbehaviors and outright criminality (see the rapes in Germany and Sweden), and other “refugees'” outright terrorism (see Paris), there now is a move to drastically modify or eliminate Schengen and reinstitute national border controls. Of course the EU leadership is objecting, and part of its objection is a claimed cost.

The French government’s economic planning agency, France Stratégie, estimated in a report released this week that the reintroduction of permanent border controls within the EU would cost the bloc €110 billion, and make the EU economy 0.8% smaller within a decade.

The cost to the EU may prove to be what France Stratégie estimates it will be. However, that’s the wrong measure and the wrong responsible body. It’s the individual nations that are at risk: it wasn’t French women being raped in Germany or Sweden, it wasn’t Italian citizens butchered by terrorists in Paris.

Neither is the EU as a whole doing anything—and it doesn’t intend to do anything beyond hectoring Turkey and Greece about their southward-facing borders—to protect the citizens of the member nations from the depredations and butcheries of the terrorists and thugs mixed in with the flood of refugees. The EU isn’t even prepared to help its member nations deal with the floods that have already arrived in those members.

The decision by particular nations to suspend (or, in extremity, to withdraw from) Schengen must be respected as those nations move to better safeguard their people. Moreover, the costs of doing so plainly are national costs, not EU costs.

[T]he Association of German Chambers of Commerce and Industry (DIHK) estimated that border controls would cost Germany €10 billion a year.

Perhaps it would be that much. However, this cost must be weighed against the cost of the damage done via insecure borders.

In the end, too, the putative EU costs aren’t worth the worry. A 0.8% move in the EU’s €14.3 trillion GDP “within a decade” is economic measurement noise.

Two Mistakes

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One is by the Department of Education, and one is by “some college presidents.”

Under Secretary of Education Ted Mitchell said he wants accreditors to “do more to address substandard and underperforming institutions” by focusing their efforts on weak schools while reviewing elite schools less rigorously.

Sure. Because the Harvards and Dartmouths of college-dom are such paragons of free speech, diversity of ideas, and quality teaching. Never mind that elite school elite professors spend more of their time doing government-funded research than they spend in the classroom doing actual teaching.

The “college presidents'” mistake is this:

[S]ome college presidents worry that judging schools by things like graduation rates could mean that high-risk students will have less access to higher education.

If these schools have poor graduation rates, to what education have their students had access? These college presidents are conflating access to higher education institutions with access to higher education. Apparently, they don’t take their own institutions’ Logic 101 courses seriously. Or those courses are poorly taught.

Left unaddressed by both is another matter, described by a college president who’s willing to be named. John Bassett, President of Heritage University, is on the right track.

I think you need a better measuring stick than how many diplomas you hand out. I think you have to be very careful of unintended consequences. If you focus on graduation rates, then you incentivize schools to target wealthy and middle-class kids and not go after anybody else.

Focusing on graduation rates also drives fudging standards in order to prop up graduation rates. There’s no higher education for students there, either.

Here’s a thought; bear with me, apparently I’m on new ground here. How about focusing on rates of employment in their chosen major field for graduating students in a period (say, six months to five years) following graduation?

Graduating students who do well and become employed will identify a number of useful trends for the schools who graduated them and the Federal government that hectors the schools: the schools are teaching well, the schools are teaching marketable skills, and the schools are producing graduates less likely to default on their student loans because they have actual jobs and an income that enables them to pay their debts.