Tag Archives: economics

Taxes and Congress

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The 113th Congress, in its last days, has passed and sent to President Barack Obama for signature (or veto) a bill extending expired tax breaks through the end of this year. It’s retroactive because the expiration occurred at the end of last year. And the extension is good only for a couple more weeks. The breaks are an amalgam of exemptions that

benefit big corporations and small businesses, as well as struggling homeowners and people who live in states without a state income tax.

A couple things about this. First, notice that phrase “tax breaks.” These represent special carve outs for selected businesses and selected individual Americans, and they’re a mix of crony capitalism and social engineering.

The other thing is the end-of-year decision making regarding the tax code. This isn’t unique to this Congress; Congresses have been pulling this stunt for decades.

If we had real tax reform, say a tax code that eschewed social engineering, that had a single, low, flat rate without loopholes, carve outs, subsidies, credits, and so on, and that everyone with an income paid, there’d be no need—no opportunity—for this late year, late night, wrangling. And there’d be no need for tax breaks, loopholes, carve outs, subsidies, credits, and so on.

This also would both reduce the breadth of influence of special interests and reduce the availability of our tax code—and our tax money—for government-determined social engineering.

This is a thing the 114th Congress should take up with some urgency—”on day one.” It’s highly likely that Obama would veto real tax reform, but that in itself would be not so bad. At worst, that would help shape the 2016 elections and clarify differences between those who understand and respect the wisdom of American citizens and those who think government must be involved in our lives for our own good.

This is a test of both camps.

Congress’ Productivity

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Gerald Seib had an interesting piece in a recent Wall Street Journal, not so much for what he said as for the mindset from which he said it. To wit:

We have learned in recent days that both President Barack Obama and Republican leaders in Congress seem to want to pull their parties together in the middle to get some things done in Washington.

To many in the capital, this is a long overdue development. But it also raises a question: What if the leaders get to the middle and find there’s nobody there to join them?

Well, not nobody, exactly, but fewer people than there used to be, and not enough to make the middle a consistently productive place.

Notice that: to be productive, Congress has to get things done.

Congress already has gotten too many things done, and it’s allowed the Executive Branch, through compliant funding, to get too many things done.

It passed Obamacare and Dodd-Frank to the very great detriment of millions of Americans—Americans who lost their preferred health insurance plans, who lost access to their preferred doctors, all for the privilege of paying higher premiums—and to the very great detriment of American businesses, who face overregulation and excessive taxes and so are reluctant to expand their operations, to hire, to repatriate the trillions of dollars they hold overseas.

It has taken control of States’ aid the poor through the addiction of Medicare grants, placing the States’ programs under effective Federal control.

It has rejected efforts to reform either our Social Security system, which will empty its trust fund in just four or five more Presidential election cycles, or our Medicare system, which will run out of money even sooner (to those addicts’ and their citizens’ detriment).

It has allowed the Executive Branch to explode consumer energy prices and degrade our power grid with carbon regulation, even though this same Congress rejected the measures legislatively, by continuing to fund an EPA that’s enacting these things regulatorily.

It has allowed the Executive Branch to encourage American businesses to hire millions of illegal aliens by offering the businesses tax credits to do so, with the labor force participation rate of our citizens at historic lows.

It has allowed the Executive Branch to attempt to seize control of our education system through a network of subsidies, grants, and regulation.

The list is legion; these are just a few examples.

No.

To be productive, Congress must undo most, if not all, of that, and then it must make use of the opportunity to be quiet and stop legislating.

Why Would Anyone Want To Do Business with the Illinois Government?

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A bit less polemic (but only a bit); however, the Illinois government is being openly dishonest in its business dealings.

The Land of Lincoln has accrued a $111 billion unfunded liability for government workers’ pensions—up 75% from five years ago. There is an additional $56 billion of unfunded debt to cover health benefits for the state’s retirees. Illinois today is already spending more of its general fund on pensions than on K-12 education. One in four tax dollars pays for its retired workers’ benefits. Last year the state had to defer paying $7 billion owed to contractors. All this after Democrats in 2011 raised income taxes and corporate taxes by 67% and 30%, respectively.

How can any business expect to get paid by a government so far into debt with so little means of raising the money to pay it? How can the Illinois government incur additional (contractual) obligations with private (or other) businesses, knowing as it must know, that it has no hope of meeting its current obligations under its current tax and spend régime?

The only legitimate way, the only moral way, to unilaterally alter a contract is through bankruptcy. Like Stockton, CA, and Detroit, MI, and others have had the integrity to do. But states can’t do bankruptcy. Illinois (in the present case) can only cut spending (except now, for their debt); counterintuitively (to Democrats, anyway), reduce tax rates; and otherwise get out of the way of Illinois citizens and those citizens’ private sector economy.

“Green” Energy, Competition, and Consumers

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Technologies that can’t compete in the market place aren’t ready for market, nor are they ready for our consumption. Subsidizing these not-ready techs is one way of plusing them up. Another way is to penalize their competition for being too successful.

The New York Times tells this tale, albeit carefully buried in the nether regions of Katharine Seelye’s article. Overarching all of this is this:

New England [Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont] already pays the highest electricity rates of any region in the 48 contiguous states because it has no fossil fuels of its own and has to import all of its oil, gas, and coal.

That’s not strictly true; the Marcellus Shale holds more natural gas than you can shake a…drill…at, and a significant fraction of that lies under western New York. New York, though, is throwing every road block they can think of in the way of extracting the natural gas, which would give the Northeast a nearby, if not local, source of natural gas.

There are two items of interest that backdrop this. One is the spiking energy prices in the Northeast. For instance,

[f]or October, [a small business owner] had paid $376. For November, with virtually no change in his volume of work and without having turned up the thermostat in his two-room shop, his bill came to $788, a staggering increase of 110%.

The other is the lack of infrastructure: there are all of five pipeline systems in the region, with seven new systems proposed.

The six states’ governors had agreed to a regional solution to this, involving building those additional pipelines.

However.

Just last August,

the Massachusetts Legislature rejected the plan, saying in part that cheap energy would flood the market and thwart attempts to advance wind and solar projects. That halted the whole effort.

That halted the whole effort.

But, it’s OK. Progressives and “environmentalists” have your back. And they have sharpened their knives.

 

h/t Power Line

Do We Want To Do Business with Racist Europe?

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That’s a bit polemic, but this is an important matter.

Leicester City Council in England last month voted to boycott goods made in Israeli settlements in the West Bank. All services run by the council will be free of any product or technology made in any of the settlements. The motion “condemns the Government of Israel for its continuing illegal occupation of Palestine’s East Jerusalem and the West Bank” and resolves “to boycott any produce originating from illegal Israeli settlements.”

And more “Zionistfrei:”

Pro-Palestinian campaigners lobbied the town’s [Kinvara, Ireland] retailers, restaurants and cafes to expunge from their premises anything produced in Israel. All the businesses agreed, meaning Kinvara is now, in the eyes of anti-Israel agitators, morally pure. It is held up as a model town by numerous European backers of the Boycott, Divestment and Sanctions, or BDS, movement.

And

[T]he French city of Lille in October ripped up its twinning accord with the Israeli city of Safed.

And on and on.

Never mind that the Palestinian Unity Government is sworn to the destruction of Israel, and Iran has as its paramount national goal the erasure of Israel from the map. Their “product or technology” are jake in Leicester City, Great Britain, and elsewhere in Europe.

Shades of Europe’s Judenfrei of the last century.